MEET THE 21ST CENTURY'S NEW EXPORT LEADER
(First published by StreetAuthority Network. Written by JOSEPH HOGUE.)
China doesn't want your manufacturing dollars anymore. It's set out on a five-year plan to shift its economy away from an export model to one based on consumption.
That's good -- because the business world may not want China anymore, either. Wages in the world's second-largest economy have been climbing an average of 12% a year. The 25% increase in the value of the country's currency in the past decade has made exports even more expensive.
In fact, Harold Sirkin of The Boston Consulting Group says that by 2015, net labor costs for manufacturing could be the same in China as in the United States. And that's before you add in the cost of shipping goods halfway around the world.
We here at StreetAuthority are always looking for trillion-dollar themes, those changes with the weight of nine zeros that will drive the markets. The $2.05 trillion in exports that China produced in 2012 may just be finding a new home -- and they' may have found it in a country you 'might not expect.
This country has about a third the population of the United States and not even a tenth that of China's. It also has had decades-long problems with drug cartels and government corruption. But it also has a quarter of the transportation costs as goods exported from China and a boom in natural resources that makes the energy to run plants extremely cheap.
One Nation's Loss Is Another's Gain
A 2011 survey by MFG.com, the world's largest online manufacturing marketplace, found that 21% of North American manufacturers surveyed planned on bringing production into or closer to the United States and that 38% planned to do so in the near future.
While some of these plants may be coming back to the United States, the evidence clearly shows which country is poised to own economic growth in the next decade. Mexico has been grabbing a larger share of U.S. imports, from 11% in 2005 to more than 16% in 2012.
The country already exports more manufactured products than the rest of Latin America combined. Mexico's economy grew by 3.9% last year, and foreign direct investment is hitting record highs as manufacturers return.
About 25% of California-based global transportation and logistics provider D.W. Morgan's high-tech clients are relocating production to Mexico.
If you still need proof of Mexico's dramatic turnaround, net immigration to the United States has dropped to zero, according to the Pew Hispanic Center. Mexico shares a border with the world's largest economy -- yet its own economy is so good that a median disposable income six times higher cannot induce Mexicans to emigrate.
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