RAPID wage increases are threatening China's competitiveness, but improved productivity and other advantages mean it will continue to attract investors, analysts say.
Labour costs in China would match those of the United States within four years, catching up with eurozone countries in five years and with Japan in seven, the French bank Natixis forecast in a study last month.
China "will soon no longer be a competitive place for production given the strong rise in the cost of production", the bank said.
It is a view backed by the respected Boston Consulting Group (BCG), which said in a study last August that by around 2015 manufacturing in some parts of the United States would be "just as economical as manufacturing in China".
Examples of major manufacturers leaving China abound — BCG said US technology giant NCR has moved its manufacture of ATMs to a factory in Columbus, Georgia, that will employ 870 workers as of 2014.
Adidas announced recently that it would close its only directly owned factory in China, becoming the latest major brand to shift its manufacturing to cheaper countries, though it maintains a network of 300 Chinese contractors.
Chinese workers making athletic shoes are paid at least 2000 yuan ($300) a month, while their Adidas colleagues in Cambodia only earn the equivalent of $130, the German company said.
Underlining the trend, the salaries of Chinese urban-dwellers rose 13 per cent in the first half of 2012 compared with the same period last year, the government said in mid-July.
Migrant workers, who are among the lowest-paid in the country, saw raises of 14.9 per cent for an average of 2200 yuan a month.
The most significant wage hikes in 2010 and 2011 often came following strikes at Japanese companies such as Toyota and Honda.
Natixis said the increases could spur manufacturers to relocate to South and South-East Asia, where labour costs are much lower, and could also benefit countries such as Egypt and Morocco, or even European ones like Romania and Bulgaria.
However, not all economists believe China will lose its manufacturing edge, thanks in part to improvements in productivity.