Let's add these up and try and get some sense and meaning into the figures. We have taken some reasonable basic averages of costings between the main first tier manufacturing hubs of Beijing, Shanghai and Guangzhou, being land and salary, which are typically the two largest portions of a manufacturing enterprises expense, usually eating up about 70% of all operating costs, although of course this can and does vary.
The remaining 30% is often somewhat industry-specific and we leave this portion open for your specific analysis. Operational overheads such as utilities also vary, however not to a huge extent between first and second tier cities, accordingly we have disregarded them from this survey. However, concentrating on the two most significant manufacturing overheads – albeit as a mean average, does allow us to fix at least a line in the sand to try and weigh up the pros and cons of investing in Central China. Averages are just that – and it must be pointed out that in reality you can expect about a 30% swing in costs either way depending upon location, specific investment circumstances and the power of negotiation.
To get at what this could mean for an investor, we’ve assumed an average small scale foreign invested enterprise as an example, and for the sake of calculating a reasonable export amount, suggested an auto component manufacturer as this industry is relatively commonplace and is China wide. We have assumed a factory unit size of 2,500 sq meters and 100 staff to base our cost analysis on. A factory like that with such a product could typically export about 10 containers a week. Taking the figures we have thus far, and converting them to USD for ease, (rate of 8 RMB to 1 USD) we can reach the following assumptions :
