Worries Of "World Shoe Factory"

"With the aggravation of all kinds of unfavorable factors for export, the most difficult time for footwear enterprises to make processing trade is 5, 6 and July of this year".

Gao Zhu, who has been exporting shoes for many years and once held the presidents of the Hongkong footwear industry association, predicted this.

At that time, a lot of difficult business failures were expected.

Gao also pointed out that with the further intensification of RMB appreciation, American subprime lending and tightening policies on processing trade, the export crisis of processing trade enterprises will continue to expand and expand.

It is the most direct way to export factories that choose to reduce factory size or suspend business temporarily.

Gao also pointed out that improving the added value of export products and making private brands for domestic market is certainly the brightest way, but the time and capital needed are not achieved in the short term.

It is understood that not only the footwear industry, clothing, furniture, toys and other traditional processing trade industries, the choice to temporarily suspend business and reduce production scale, almost all these enterprises in order to cope with the shrinking of exports.

Processing enterprises to choose such a way to deal with difficulties is helpless, but also a negative move.

The person in charge of the association of Hong Kong businessmen is an evaluation.

At the beginning of this year, China Textile Industry Association's research also showed that in the background of rising cost of raw materials and manpower, the depreciation of the US dollar, and the decline of the US economy, it is expected that in 2008, 1/3 export oriented small and medium-sized textile enterprises will be closed down in China.

Shoe factory closures come down to three reasons.

The root cause of the closure of some shoe factories in coastal areas is that the products of these shoe factories are completely competitive and have no pricing power.

The shoes of famous brands are no longer completely competitive products, but products with some monopolistic characteristics.

Once a product has monopoly property, it can have pricing power.

As the cost goes up, prices can rise, and customers will be able to buy them correctly.

To get pricing power, we must rely on creating our own world famous brand.

This is the biggest revelation to us from the collapse of shoe factories in the PRD.

During the past two years, we heard the negative news from the famous manufacturing base, the Pearl River Delta, and recently saw the news of the collapse of thousands of shoe factories in the Pearl River Delta.

It is said that many shoe factories there are ready to move out.

As a result, many people are worried and actively seeking countermeasures to rebuild the footwear industry in the Pearl River Delta region.

Shoe factories generally attributed the failure to three reasons: appreciation of the renminbi, rising labor costs and the implementation of the labor contract law.

The appreciation of the renminbi is indeed one of the direct reasons for the closure of the factory, but the appreciation of the renminbi is against the US dollar, and has been devaluing against the euro.

The shoes exported to the Pearl River Delta will not only export to the US, but also export to Europe. The export to the United States should drop too much for Europe.

Besides, there is no way to deal with the risk of exchange rate changes. For example, changing the currency of settlement, using other currencies instead of the US dollar, and foreign exchange swap are all very effective means.

As for the increase in labor costs, it is also a companion of economic development in a country or region.

It is relying on the manufacturing base, the Pearl River Delta and many other places are gradually getting rich, so the land, rent and other price increases are inevitable, resulting in rising living costs. Therefore, the rise of labor costs is the inevitable result of industrial agglomeration.

At the same time, increasing the income of labourers is not only the inevitable requirement of laborers, but also the purpose of economic development.

As for the labor contract law, it is only standardizing the rights and interests that originally belonged to employees, and factories can not run the premise of infringing on the interests of employees.

Therefore, the implementation of the labor contract law is nothing but a fuse to expose the problem of shoe factories ahead of time.

All in all, these reasons add up to the explanation of why production costs have risen.

But rising costs do not necessarily lead to factory closures.

The cost of Nike shoes is also rising. Why not go bankrupt?

If these are not enough to explain the collapse of shoe factories, what is the real reason for the failure of shoe factories?

It is very simple that these shoe factories do not have the pricing power. When RMB appreciation and labor costs rise, and the labor contract law is implemented, shoe factories can not raise the price of products. Once the cost exceeds the price, bankruptcy is inevitable.

The inability to raise prices is determined by the intrinsic attributes of the footwear industry.

The footwear industry is a completely competitive market. In such a market, no enterprise has pricing power. The market price of shoes is the result of the joint action of all shoe factories and consumers all over the world, just as the price of grain is determined by all producers and consumers.

In this sense, there is no difference between shoemaking and food.

All shoe factories can only accept the market price and can not change the price.

Although the PRD is known as the "world shoe capital", its output accounts for 1/10 of the world's total. However, in terms of total volume, no shoe factory has a large scale to affect the price of a single shoe factory, just as the largest farms in the world are not enough to affect the world grain price.

The core problem is that the shoes in the PRD are not Nike, not Adidas, but shoes that are too common to be produced. Every country can produce if it wants to.

The Pearl River Delta can produce, Vietnam, Israel, Mexico and so on.

In the absence of appreciation of the renminbi, when the labor cost is relatively low, the PRD shoes have advantages over other countries' shoes, that is, the price is cheaper.

But the price advantage is not sustainable.

South Korea was the first country to export shoes in Asia. Later, with the rising labor costs, the price advantage was no longer in place, so it began to shift to Taiwan. Now, the Pearl River Delta has become the center of shoemaking, but it is a repetition of such a shift.

This pfer is irreversible, because once the labor cost is raised, it will be difficult to decline again.

Therefore, the way out of the PRD footwear industry is not going back to the original scale, which is almost impossible.

Instead, forging several world-class brand products, like Nike, on the basis of many years of manufacturing.

The quality of Nike shoes and PRD shoes is not very different, but the price is quite different.

The reason is that Nike has brand influence.

The shoes of famous brands are no longer completely competitive products, but products with some monopolistic characteristics.

Once a product has monopoly property, it can have pricing power.

As the cost goes up, prices can rise, and customers will be able to buy them correctly.

Domino effect services are dragged down.

The processing trade is declining, and the productive service industry in the Pearl River Delta is not able to be independent.

Ding Li, a researcher at the Guangdong Academy of Social Sciences, pointed out that from the first quarter's export situation and the analysis of many factors that affect exports, Guangdong's GDP growth rate this year will be affected by certain shocks. However, the specific impact is not yet accurate.

Qiu Shan, director of the Institute of international economics of the Guangdong Academy of Social Sciences, also expressed the same view. "Under the background of global free trade turning to fair trade, the adjustment of China's foreign trade policy is inevitable.

As a huge trade surplus, processing trade is also inevitable in this process.

Guangdong's foreign trade is mainly caused by processing trade. Currently, the export of processing trade enterprises will be frustrated, which will be directly reflected in the statistics of Guangdong's foreign trade next year.

The sharp drop in export growth is certain for Guangdong's GDP growth this year.

Qiu Shan believes that the biggest impact on Guangdong will come from two aspects.

First of all, it is the impact on investor confidence index. In the future investment process of Guangdong, the situation of processing trade enterprises may affect foreign investors' confidence in investment environment and local economic development.

Secondly, because the industry is conductive, the decline of processing trade brings a large number of floating population, which will bring greater impact to the local production and life style service industry.

The survey conducted by the Hongkong Trade Development Council on Hong Kong funded enterprises engaged in production in the PRD also shows that if the processing trade policy is further tightened, 73.2% of the enterprises will be removed, stopped or contracted.

The worst estimate of TDC is that there will be 1 enterprises shrinking, threatening the 2 million 500 thousand production workers in the Pearl River Delta region, while affecting 70 thousand of the employees in Hong Kong enterprises.

Echoing this is that the Guangdong provincial government promulgated the "2008 provincial government work highlights", speeding up the construction of a modern industrial system has been placed in the most important position.

Moreover, in the 2008 Guangdong provincial budget (Draft), it also showed that in 2008, the total expenditure of the provincial government was 115 billion 622 million yuan, and the expenditure for promoting economic development and industrial restructuring was 4 billion 64 million yuan, accounting for 3.51%.

Wang Yuan analysis, an associate professor of Social Development Research Institute of Peking University, pointed out that Guangdong relied heavily on processing trade in the past, and this road is labor intensive and easy to cause pollution. Therefore, we must seek new development. The new network economy represented by Ma Yun is more in line with Scientific Outlook on Development's concept and to some extent represents a direction of future economy.

So far, no country has yet to rely solely on fully competitive products to become an economic power, but to rely on innovation and creativity to create its own world famous brand, so the same is the case in the United States.

We already have the foundation of creating the world famous brand, the shoe making industry is like this, but it is not always possible to make a famous brand with a foundation. There are still many places where we need to work hard.

This is the biggest revelation to us from the collapse of shoe factories in the PRD.