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Exporters Leave China but Find Rising Costs Elsewhere

Workers ride on the back of a transport truck at the end of the work day in a garment manufacturing district in Phnom Penh, Cambodia, on July 1, 2013
Workers ride on the back of a transport truck at the end of the work day in a garment manufacturing district in Phnom Penh, Cambodia, on July 1, 2013Photograph by Will Baxter/Bloomberg

Rising labor costs in southern China have in recent years driven manufacturers to set up shop elsewhere in search of cheaper labor—Bangladesh, Indonesia, Vietnam, and Cambodia, among other countries. The transition hasn’t always been easy—nor are the labor cost savings necessarily long-lived.

“It’s easy to underestimate the political and economic risks of moving manufacturing” away from China, says Shaun Rein, managing director at China Market Research Group in Shanghai and the author of the recent book The End of Cheap China. “Workers across Asia are starting to demand their rights—workers are saying, ‘we want higher salaries and better environments.’ In a very short time, the costs of producing in these countries will double or triple.”