Border Assembly San Diego Newsletter

Reuter's China Economics Editor asks . . .

A series of suicides, worker strikes, and heightened media attention, prompts Alan Wheatley, Reuter's China Economics Editor, to question the viability of China as the manufacturing option it once was. The journalist cites rapid increases in pay - with some industry experts predicting a 15-20% rise throughout the country by year's end, and one manufacturing giant already raising wages 66% - new labor laws that strengthen workers' rights but also increase costs, and pressure from foreign interests to allow the Yuan to continue rising. While arguably not bad enough for Chinese and foreign-owned firms manufacturing in China to close their gates, there is much interest and already strong movement of facilities to other parts of Asia and beyond.

"Demographers agree that China's working-age population will peak around 2015-2016. Surplus labor will therefore shrink, even as farmers continue to leave the land for better-paying urban jobs." - Alan Wheatley, China Economics Editor

"As China's price advantage is eroded," Wheatley writes, "the incentive will grow for international companies to move part of their production out of Asia altogether, both to save on transport costs and to be able to supply consumer markets more quickly." The analyst continues, "Even if supply and demand put a lid on wages again next year, the spate of wage increases may be a harbinger of a turning point in the Chinese economy", and China as a manufacturing option. Time will tell, but with wages steady and working conditions in maquiladoras run by responsible companies like Border Assembly conducive to workers' well-being and productivity, interest in manufacturing in Mexico, even by Chinese companies as, is sure to continue.

By the numbers: The Economic Importance of Mexico to the U.S., and Vice Versa

22	Number of U.S. states that call Mexico their number one or number two destination for exports
4	Number of U.S. states that share a border with Mexico
31	Number of states in Mexico (plus one federal district)
92.8	Percentage of Mexicans that can read and write
80	Approximate percentage of Mexico's $230 billion in global exports produced U.S. store shelves
44	Number of countries Mexico has free trade agreements with

BorderTalk: What is the "Pitex Program?"

In Spanish, it's called la "Programa de Importación Temporal para la Exportación," and in English, the "Temporary Importation Program for Exportation," which is pretty self-explanatory, and andvantageous for American firms manufacturing in Mexico under a corporate shelter program (which designates them as a Mexican company without the complications of handling all labor, administration and legal issues themselves). Under the law, Mexican firms can import equipment, parts, and raw materials on a conditional basis without paying import duties.

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