Nearshoring – Cost & Capital paper lays out the China / Mexico comparison

- April 25, 2012 12:30 PM
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We were sent a research paper the other day, which isn’t unusual, but this one stood out as I (most unusually) read it all the way through in one sitting. Published by US consulting firm Cost & Capital Partners – who I don’t know much about to be honest – it considers “nearshoring” and in particular takes a detailed look at the comparative position of China and Mexico as outsourcing destinations.

It is focused on a US based audience, so Mexico of course will be a less attractive option for most European firms. But the points it makes about China are highly relevant, and I certainly learnt a lot – for instance, I had no idea that China uses VAT rates and rebates, which it adjusts regularly, to encourage or discourage production of different items based on their long term industrial strategy. Clearly, that can have a major effect on sourcing decisions.

While Mexico is not a big location for us in Europe, I suspect many of the arguments in the paper could be applied to Eastern Europe – it would be interesting to see a similar comparison between China and, say, Poland or even somewhere outside the EU such as Ukraine.

Anyway, it is a very good paper, well worth reading if you have any interest in China, global or low cost country sourcing generally. You can download it (free) here.

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Comments

  • Michael Hutchison:

    Nice find! Especially relevant given the continued appreciation of the RMB (especially with the widened bracket versus the dollar).

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