It’s generally accepted that Australian manufacturers can’t compete with cheap Chinese imports. But is that actually the case? I would argue that it doesn’t have to be.
Many companies that import from China and elsewhere do so because they believe that’s the only way to be competitive. The reality is that they haven’t fully explored sourcing locally. If they really did their homework they’d find that locally manufactured products can compete on the global stage.
Here are three reasons that “made in China” is not always the cheaper alternative it’s made out to be.
The first reason is that with imports you need to add the cost of international shipping and customs. In normal times this adds about 35 per cent to the cost of imported goods.
But of course, these are not normal times.
With current disruptions and delays to international transport, shipping costs can add as much as 50 per cent to the cost of imports. Add in volatile foreign exchange rates, and suddenly the challenges of importing start to outweigh the benefits.
The second downside to importing over manufacturing locally is in the way overseas products are sourced. Most small and medium Australian retailers and online sellers who import from China go through “middlemen” – agents, distributors or wholesalers who take their cut.
Often these middlemen represent themselves as manufacturers (just to confuse things), so the Australian importer is not even aware that they are paying an unnecessary loading.
This is a common ruse on sites like Alibaba, and at Chinese wholesale fairs like Canton and Yiwu. Australian businesses that think they are getting a bargain are actually paying as much as 100 per cent more for Chinese-made goods.
And thirdly, the gap between labour costs in China and Australian is shrinking. Recent research shows that Chinese labour rates have more than doubled in the last eight years. Compare that to Australia, where average labour rates have been growing by a mere 0.5 per cent per annum over the same timeframe.
What that means is that China is no longer the cheapest alternative, particularly when sourcing high-quality products.
All of that adds up to good news for Australian small businesses – whether they be manufacturers, retailers or online sellers. It means that they can compete with Chinese imports while manufacturing and sourcing locally if they work smart.
Steve Eagle, Co-founder, How To Buy Australian Made