China, India or Vietnam: Where Should You Source and Manufacture?
There are many places around the world to source and manufacture goods for your business. Where you should so depend on a range of factors. China is regarded as the world’s manufacturing heartland (it’s why our sourcing company is based out of Guangzhou), but there are also benefits to sourcing and manufacturing in other countries such as India and Vietnam.
Below, we’ve outlined a list of considerations you’ll need to take into account when choosing to source and manufacture your product in either China, India, or Vietnam. By understanding the dynamics that arise out of these three countries, you’ll be in a better position to decide the most cost-effective sourcing operation for your business.
1. Location of available manufacturers
There is no point in choosing China as your go-to source for product creation if no factory in China manufactures that product. The same goes for India and Vietnam.
If this is your sole consideration, the easy choice is China. China is well-known for its diversity of product manufacturing: they’ll make anything. It’s very easy to find a manufacturer in China for just about any type of good, which explains why the country is known as the global manufacturing centre. You won’t just find one manufacturer– you’ll more than likely find dozens or possibly hundreds of manufacturers who can make the good you’re after.
A quick search on Alibaba, for instance, will reveal that Chinese suppliers dominate the market. If you type “shirt fabric” into Alibaba’s search engine, you’ll find over 9,000,000 potential suppliers in China but only a small 233 for Vietnam. None appear in India. Similarly, if you type in “lunch box”, you’ll come across 39,200 Chinese suppliers but only 175 in India and 97 in Vietnam. Neither India nor Vietnam can offer the sheer amount of diversity that China can offer.
However, this doesn’t mean you should pass off Vietnam or India. Vietnam is the manufacturing hub for some of the world’s largest companies. In 2010, for instance, Vietnam became the main supplier of Nike footwear, accounting for about 37% of production (behind China, a close 34%). In 2018, this figure grew to 47% (whilst China was left to manufacture only 26%). Vietnam’s primary exports include broadcasting equipment, textiles and mobile phones.
India is also a central manufacturing point for many countries. They boast exports in refined petroleum, diamonds, packaged medicaments, jewelry and rice. Indeed, India’s exports are largely dominated by minerals and chemical products (such as fertilizers, soaps and pharmaceuticals). The Indian pharmaceutical sector is booming, supplying over half of the global demand for a range of vaccines and a quarter of all medicines for the United Kingdom.
2. Requirement for skilled and experienced labour
Another factor to take into account is whether you can find the skilled and experienced labour needed to manufacture your goods.
China, with its 780 million+ strong workforces, has a wealth of experience and technical know-how when it comes to manufacturing particular goods. If looking at Vietnam or India, by contrast, you’ll need to be careful when selecting a manufacturer if the product you’re sourcing requires some degree of specialised ability. This is especially the case if the manufacturer is only new, as they may lack the requisite experience required for the task. Global manufacturing has indeed surged towards Vietnam – with not enough skilled workers to meet the demand.
Statistics reveal that China is again a more attractive option. According to the 2017 Global Human Capital Report developed by the World Economic Forum, Vietnam ranked only #120 out of 130 when it came to “know-how”. India ranked #79, whilst China took the lead at #44. New statistics released in 2020 in the Human Development Report (HDR) by the United Nations showed that only one in five Indians in the labour force are “skilled”, is ranked #129 among 162 countries.
Of course, you’ll need to assess each manufacturer as you find them on a case-by-case basis.
3. Quality of infrastructure and logistics
China is an appealing choice when looking at the quality of its infrastructure and its sophisticated logistics. China boasts seven of the 10 most busiest shipping ports (including the Port of Tianjin, the Port of Guangzhou and of course the Port of Shanghai). It also has a sophisticated rail network and is scheduled to build 10,000 km of railway lines connecting major city checkpoints over the next five years.
Vietnam and India, by contrast, lag behind when it comes to infrastructure, transport and logistics. Vietnam has quite an underdeveloped infrastructure landscape, whilst a large portion of India’s road network is unpaved. China’s high-speed rails can travel as fast as 250 kilometres per hour, whilst freight trains in India can really only travel up to 25 kilometres per hour (although this is planned to change). Indeed, despite India’s growth, S&P Global report that its weak infrastructure has meant it has been incapable of meeting the economy’s needs.
According to the 2018 Logistical Performance Index published by the World Bank (which ranks countries according to the quality of their trade logistics), China ranks #26 while Vietnam is down at #39 and India is further down at #44.
But again, this does not mean Vietnam and India are automatic write-offs. Vietnam is one of the fastest developing countries in Asia and is one of the only countries in South East Asia that remained economically strong during COVID-19. Its growth is robust, and the country invests much more than the global average in its infrastructure. India also plans to spend US$1.4 trillion on infrastructure across 2019-2023.
4. Labour costs
You’ll also need to consider labour costs when choosing between the three countries. In this department, Vietnam and India are more competitive than China.
Minimum wages differ across China depending on the province, so you’ll need to know the specific hourly pay requirements for labourers. In 2020, the minimum wage in Beijing was 24 RMB per hour (approximately US$3.70 per hour) whilst it ranged between 14-16.4 RMB in Guangdong and 16-18 RMB in Shaanxi.
Minimum wages in Vietnam and India, however, tend to be cheaper. The cost on average of employing a factory worker in Vietnam is about a third cheaper than in China.
At The Sourcing Co, we specialise in all things sourcing and manufacturing. With headquarters in China, we’ve established sales offices in Vietnam and Australia and partnered with ethically accredited manufacturing partners in Indonesia, China and Vietnam.
As a one-stop sourcing company in the Asia-Pacific, we’ve acquired the unrivalled ability to choose the right locations to source and manufacture your goods in the most cost-effective way for your business.