We’re at what I think is a pivot point for Chinese manufacturing. A number of factors are coalescing toward change, and the global economic blackout might just push things over the edge. 

For years, manufacturers in the U.S. and abroad have ordered a steady stream of goods from China’s voluminous product catalog, all the while swallowing the associated risk — speed to market, quality assurance, intellectual property breaches. One of the headings in a new AMR Research report, “Supply Chain Risk 2009-2009,” states it plainly: “China is the world capital of supply chain risk.” While the authors temper that assessment by noting that it may be inevitable, since China is enormously popular for outsourced production, the risk profile is well-established. The report continues:

China stands completely alone as a source of risk for IP infringement. It also leads prominently on both internal and supplier quality failures as well as security breaches. The message to companies with significant shareholder value resting on patents, designs, brand image, or other pure IP is that China may not be worth the risk.

That decision seems to be on hold, for now. Recessions have a way of turning people, companies, and countries insular, and, as such, you haven’t heard much about the China question lately. We all have our own troubles to deal with. Even in an interdependent world marketplace, most states are left to tug on their own bootstraps, with varying degrees of desperation and efficiency.

Like its counterparts around the globe, the Chinese government has dipped into its gi-normous wallet to fund the country’s recovery through stimulus spending, lending  vast reserves of money in an effort to resuscitate commerce. What I don’t see is a concurrent focus on changing China’s fundamentals, including improving quality and protecting intellectual property. If left unattended, those risks eventually will overshadow the allure of cost savings.

I’ve always thought of low-cost manufacturing destinations in the same vein as heavyweight boxers — no one holds the title for long. Is it time for China to relinquish the belt? If so, to whom?

Let us know what you think — add a comment below.

— Chris Chiappinelli, Editor, ManagingAutomation.com

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