Comparing China’s Business Costs With Asian Competitors

In this final part of this China-Asia comparison series, we take a look at the differences in business costs between China and its Asian competitors. Operational costs in China can vary significantly within the country, yet savings in lower wages can be offset by increases in logistics overheads. Even within China there is plenty of scope for shopping around and comparing overheads.  When adding the entire region of Asia into the mix, there is a huge amount of research and digging around to do to get to any meaningful comparisons – let alone the actual cost of getting that data in the first place. Asia is a big area, and finding out the real costs of business is a daunting task. Its something very few, if any, China based consultants are able to manage.

Nonetheless, as China’s business costs continue to rise, it becomes necessary to examine and compare the cost of business with alternatives. Costs in emerging Asia tend on average to be one-third to one-quarter of those now charged in China, accordingly the motivation to get busy with the scissors and start finding some solutions to China’s rising prices is an increasing trend. Of course, cost savings need to be measured against cost areas that may eat into or even entirely delete any alternative location benefits. Hidden costs such as production sustainability, infrastructure, energy supplies and quality control all need to be factored into the cost equation.  

However, at Dezan Shira & Associates we have been pro-active the past eight years in developing the practice out of China and deeper into Asia. Our Indian and Vietnam facilities have grown and developed extensively during that time, and we have also acquired a network of firms that gives us an additional and significant presence in Indonesia, Malaysia, the Philippines and Thailand. This strength of geographical spread means we are almost unique amongst China practices in being able to reach out and obtain first hand knowledge of other Asian markets that compete with China. It also means we are impartial when it comes to China. As Chairman of our firm I don’t mind where we get paid for our services – in China or in India or in Vietnam – as long as we do. That means we can be more honest about what is happening and where. We have no locational favoritism.  

To this end over the years we have been extremely busy in developing our pan-Asian intelligence and knowledge. This expertise is provided both on China Briefing, but also our respective Asia Briefing, ASEAN Briefing, India Briefing and Vietnam Briefing websites, all supported by our own offices in each of these regions and countries. A complimentary subscription that includes weekly updates to all of these can be obtained here. 

We also provide technical updates through our various magazines. So when it comes to comparing costs, there’s really only one library to look at – that of our publications, each supported by the relevant Dezan Shira & Associates office on the ground. I highlight some of the pertinent issues that matter when it comes to China-Asia cost comparisons as follows:

The 2015 Asia Sourcing Guide
In this issue of Asia Briefing, we explain how and why the Asian sourcing market is changing, compare wage overheads throughout Asia, including average wages in China, India and across ASEAN, and look at where certain types of products are being manufactured and exported. We discuss the impact of ASEAN’s Free Trade Agreements with China and India, and highlight the options available for establishing a sourcing model in three locations: Vietnam, China, and India. Finally, our Expert Commentary examines the differences in quality control in each of these markets.

The 2015 Asia Tax Comparator
This popular issue contains full and updated details of tax rates across Asia and compares these. Included are corporate income taxes, individual income taxes, VAT, dividend taxes and other related business taxes. The countries featured are China, Hong Kong, all the ASEAN members of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, as well as India.

Operational Costs of Business in Inland China
In this important issue of China Briefing, we take a look at the numbers behind the stats – how do minimum wage and welfare payments, standard factory rental prices, and standard container transportation costs vary across China? Using the Shanghai and Shenzhen ports as a delivery point, we provide the basics of each inland provincial capital’s infrastructure, economy, and development zones. Included are Shanxi, Anhui, Jiangxi, Henan, Hubei, and Hunan, as well as Chongqing and Chengdu.

Indian Taxes for Foreign-invested Entities 
In this issue of India Briefing, we provide an overview of India’s business taxes, including India’s double taxation avoidance agreements, and then discuss corporate income tax and related taxes, individual income tax rates and deductions. Finally, we discuss India’s tax reforms.

Vietnam’s Taxes & Foreign Exchange Controls
In this issue of Vietnam Briefing, we discuss the issues of tax and foreign exchange control. Tax finalization is compulsory for foreign invested enterprises in Vietnam, so we look a little deeper into the procedures for corporate income tax and personal income tax, including documentation, deductable expenses, carrying losses forward, and allocation between headquarters and subsidiaries. We also discuss the two value-added tax calculation methods – the credit method and the direct method – and the invoice, filing, and refund requirements for each.

There is a huge amount of intelligence now required to make corporate decisions about how to develop your Asian manufacturing capacity. While 15 years ago it could mainly focus on relatively simply equations factoring in the production cost in the home country and say Guangdong, today this search for matching the best available operational costs with the most appropriate infrastructure is an industry in its own right. In truth, there is no “right or wrong” answer, it depends instead upon specific business models unique to each company and the industry they are in. That said, the search for manufacturing and sourcing good quality products at reasonable overheads will remain an on-going trend that will keep analysts busy for years.

We hope that readers will remain up to date via the intelligence provided through our various publications – and if more specific information is needed – just ask our firm. 

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