COMPANIES ARE STARTING TO AVOID LOCATING IN CHINA, according to a report in The Economist:

Although all three companies had different reasons for their decisions, the outcome was the same: they chose to avoid China’s thundering economy in order to put their factories elsewhere in Asia. These companies are not alone. In the calculus of costs, risks, customers and logistics that goes into building global operations, an increasing number of firms are coming to the conclusion that China is not necessarily the best place to make things. . . .

Scott Brixen, an analyst at CLSA Asia-Pacific Markets, a Hong Kong-based investment bank, gives two big reasons why China has not found itself at the top of the list for some new factories: “Rising costs and a natural desire by companies for diversification.”

Both of these make sense to me, and in particular the latter. China’s political stability is not to be taken for granted, and it’s a mistake to put too many eggs in that one basket. (Via Gerald Hibbs). On the price front, I think that China is facing the need to shift from being a low-cost supplier to being more competitive in higher-end areas, a transition that some countries have found difficult, though I think that China is well-situated to negotiate that change.

Of course, some things are booming nonetheless. One billion intimacy kits, stat!