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1. What are the cost savings from manufacturing in China?

    On average, the total cost savings from manufacturing in China range from 10% to 35% lower than having the same product produced in the US. This low cost phenomenon is possible because employees in Chinaís city manufacturing enterprises receive a total compensation of $0.95 per hour, while their non-city counterparts average about half that amount at $0.41 per hour. These figures equate to about 3 percent of the average hourly compensation of US manufacturing production workers.

    When gauging the cost reductions, companies should look towards the total labor content (direct and indirect) of a product as the primary driver for China sourcing savings. For a product with a large labor component (i.e., 25 percent or more of the productís cost structure), low Chinese wages will achieve significant cost savings.

    These cost savings is not just a function of Chinaís cheap labor, but also a pro-business environment, a productive workforce, and strong government support for keeping domestic manufacturing operations as inexpensive as possible. Therefore, China seems to represent the most direct path to easy cost cutting.

    Please note that the ultimate savings will depend on the specific industry involved, amount of skill and design involved in the product, amount of labor content in the product and even who your firm will be working with to assist in connecting and building the relationship to the Chinese manufacturer.

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