Lately, we’ve been seeing many of the construction materials companies we work with outsourcing their manufacturing operations to China. Although it can lower costs, it’s a troubling trend in some ways.
The Good: Lower Costs
The reasons for outsourcing are straightforward. It lowers costs. China’s a giant, economically dynamic country that’s just to the north of us. We can outsource our manufacturing to China without a huge increase in transportation costs. Because it’s a less developed country than Australia, manufacturing costs in China are lower. China also has a wealth of natural resources and a huge labour base. When manufacturing moves to China, the cost of the goods tends to go down.
The Bad: Issues with Quality and Consistency?
The cost goes down, but does the quality decrease, too? For the past few decades, China has been evolving from an economically backward, largely agrarian country to a manufacturing powerhouse. Their goods used to have a reputation for low quality, but that is less and less the case. Goods manufactured in China generally work as advertised, and some Chinese materials are absolutely top of the line. However, as quality improves and China’s economy develops, we expect see higher prices.
Another area of concern is China’s poor regulation of its industries. It has weaker environmental and health protection laws than Australia, and weaker enforcement of the laws that are in place. In general, it’s not the best place to go for non-toxic goods that have been produced in an environmentally friendly manner by well protected workers. However, there are exceptions to that rule. Not every Chinese manufacturer is the same.
When manufacturing is outsourced to China, Australian workers lose their jobs, factories close and money bleeds out of local economies. When Australians become poorer, the demand for all kinds of services, including construction, decreases. Hurting the local economy ultimately hurts demand. We’ve seen the effects of outsourcing before, and we know what to expect long-term. It’s not pretty. What are we left with in the end? A powerful, well developed China that charges as much for its goods as we would IF the Australian industries still existed. That’s not the outcome we want to see.
Maximising Local Material
Australia’s comparatively expensive manufacturing industry is bound by regulations and labour laws, but those laws exist for a reason. In Australia, we’ve got better worker protection and better environmental regulation of our manufacturing industries than the Chinese. Our factories are safe places to work and our laws protect workers from poor treatment and unreasonable demands.