2007-12-13
For almost 30 years, Nordic companies have moved production abroad. The fall of socialism has had great impact. Even China has become more open to private enterprise – something called "market economy with socialist overtones".
No matter how you feel about these overtones today, the process caused China to undergo unbelievably rapid economic growth and become something of a workshop for the world and an engine in the world economy.
This rapid growth, however, was not without its problems. Thus far, the Chinese have consciously chosen rapid growth over sustainable development. But, we have now reached a point where the Chinese government must take responsibility for its environment. There are also other factors in China that together will increase production costs for the foreign companies.
Shortage of competence
In some regions of the country, China's workforce has already become (too) expensive and some industries are therefore moving on to places such as Indo-China. In addition to a certain level of unemployment, China is also fighting against a shortage of competence (particularly in management positions) that is difficult to resolve. Chinese returning from studies abroad can in no way cover this shortage. The nature of Chinese education is simply not designed to keep up with the incredibly rapid development, which has now become a bottleneck. All this makes labour more expensive.
But, the most looming threat for profitability calculations comes from the gigantic level of environmental destruction in the country. The products manufactured cheaply for the whole world are then exported. The environmental problems, however, remain and continue to grow. The Chinese authorities can no longer be allowed to turn a blind eye to this. They will be forced to take away tax reliefs from foreign companies (this will also help their own industry to develop) and start charging environmental taxes to polluting industries. We're not talking about pocket change. Someone must begin paying for the environment right away. The fair thing is to go to the source – including if the source is domestic.
Environmentally hazardous waste right out into the rivers
In China, the technology and material used is often less environmentally friendly than that used in Europe. To make things worse, environmentally hazardous waste and other industrial waste all to often ends up right in the rivers. All of these shortcomings cost money to remedy. When a foreign company is performing product calculations, they can no longer ignore the actual environmental cost for products manufactured in Asia (this line of reasoning also applies to countries other than China). When you add the environmental cost for an extremely long sea voyage, the calculation becomes totally different. Many companies are slowly beginning to look at production calculations with different eyes, factoring in a previously overlooked but actual environmental cost. Producing closer to the European customers with shorter lead times and better delivery reliability is not necessarily more expensive - if you take the environmental costs and effects into consideration. Some companies with a proactive environmental vision have already realized this and have brought their production back to Europe.