Economic Half-Hour: Where Is The Way Of China'S Manufacturing Industry Going To The Crossroads?

Barrett, chairman of Intel, the global manufacturing giant (photo source: CCTV)

Today we continue our series of reports, "the Chinese economy in their eyes". From foreign invested enterprises, capital markets, CPI to oil prices in China, we invited many heavyweight people in the international financial and political circles to conduct in-depth analysis of many hot issues in the first half of the year. We hope that their observations will help us to see the current situation of China's economy in a more internationalized and globalized way.

Our topic today is the most proud gold medal in China's economy: made in China. In many countries, Chinese manufacturing is almost synonymous with cheap and cheap products. Many of China's clothing, shoes and hats, toys and small household appliances occupy half of the global market. However, many manufacturing enterprises seem to have come to a crossroads overnight. Survival or death has become a difficult choice for them.

　　 Chinese manufacturing enterprises are facing great pressure to survive.

Once, cheap labor costs, preferential policies and strong processing capabilities made China become the backbone of the world's manufacturing industry. However, in recent years, China's manufacturing industry has suffered many setbacks.

　 Quality problems, frequent recall

Deng Jinkun is the general manager of Guangdong Dongguan original pleasure toy company. As an early toy factory in Dongguan, his company once owned more than 60 products and sold well in Denmark, the United States, Russia and other countries. However, this is the company that he has worked hard for more than 20 years, but he failed a few months ago because of the difficulty in capital turnover.

Deng Jinkun, general manager of Dongguan original pleasure toy company: "then there was no way to do it. I couldn't do it. There was no money, nothing. Later, my sons and daughters said," don't do it. Forget it. That's all. I even sold the real estate. "

The direct reason for the bankruptcy of the fun toy company is the recall of the world's largest toy dealer, the US Mattel Inc. The recall caused by the falling of some toy magnets and the excessive lead content of the coatings involved 21 million products. Hundreds of toy enterprises were affected by the wave. Guangdong is the largest toy production base in the world. Dongguan's toy output accounts for about 60% of the whole Guangdong, but the current situation is that some enterprises have been unable to operate because of the sharp reduction in orders and the breakup of capital chain.

Xiao Senlin, chairman of Dongguan hid toys factory, said: "just last week, at least 5 large toy enterprises in Dongguan were closing down."

After the recall, the Chinese government has cleaned up all the toy export enterprises in Guangdong, and hundreds of enterprises whose products have hidden dangers or contain hazardous substances or quality are suspended and even cancelled their production licenses. This event has set a wake-up call for all toy manufacturers in China who are pursuing low prices.

　　 Costs rise, business is tough.

Not only is the toy manufacturing industry, many are in different industries but belong to labor-intensive and low value added manufacturing enterprises. The living conditions are also worrying. Wenzhou's water head town is known as "China skin capital". There are only more than 500 leather making enterprises in the whole town, and the annual output value of leather is about 3000000000 Yuan. Leather products play an important role in the economic development of the whole water head town. However, in the past two years, many tanning enterprises have abandoned their old businesses.

Wenzhou Baoli leather factory staff on duty: "the boss is in Shanxi coal mine, not here, the boss went to Shanxi."

The management of Feng Li leather factory in Shui tou told reporters that the price of raw materials they had bought this year rose from thirty or forty yuan to eighty yuan per piece, double the number of last year, and the wages of workers increased by nearly 30%, all of which made the factory cost rise rapidly and profits dropped sharply.

Huang Kaifeng, general manager of Wenzhou Pingyang Feng Li Leather Co., Ltd.: "it's good to earn a quarter of a piece of leather like we made a leather skin. We only earn one or two yuan for a sheet of leather and one or two yuan for the cost of 100 yuan."

In fact, not only is tanning enterprises, but with the rising cost of raw materials and human resources, the manufacturing industry in Wenzhou is undergoing an unprecedented test.

Zhou Dewen, President of Wenzhou SME Promotion Association, said: "twenty percent of enterprises are in a state of shutdown or semi shutdown."

Similarly, in the town of Daling mountain, Dongguan, Guangdong, which is known as "the first town of Chinese furniture export", most furniture export enterprises have been struggling because of the rising price of raw materials and the lowering of export tax rebates.

Zhu Fozhang, chairman of Yuanda furniture, "now there is a saying that the more we do, the more we lose."

　　 dollar Devaluation, subprime mortgage crisis

Guangdong and Zhejiang are the most concentrated provinces in China's export enterprises. Their current situation reflects to a large extent the embarrassment faced by the entire Chinese manufacturing industry. In the Canton Fair known as "China's first time", we are able to experience the decline of Chinese made products.

　　 mailyard Li Keguo, general manager of import and export trading company: "like last year's Spring Festival fair, we had about $twenty million to sign the bill, so I reckon it might be one thousand to $4 million this year."

Over the years, Chinese manufacturers have been lowering their supply prices in accordance with the requirements of purchasers from various countries. They have almost fallen back to the bottom, especially in the foreign purchases caused by the appreciation of the renminbi, the depreciation of the US dollar and the subprime mortgage crisis in the United States. A large number of Chinese export enterprises are experiencing a collective setback. At the Canton Fair, only two textile yarns, weaving fabrics and products were sold, and the turnover decreased by 6% and 24.4% respectively compared with the previous Canton Fair.

Yang Wensun, chairman of Meyer group: "it has been several years continuously, and this annual exchange rate, tax rebate and bank interest rate increase, the cost of labor force may lose nearly twenty million yuan a year in our group."

He Jieming, senior director of McKinsey, the world's top consulting firm (photo source: CCTV)

　 What is the way to win in China?

With the increase of labor costs, the rise of the RMB exchange rate, the increase of bank interest rates and the adjustment of export policies, the great changes have taken place this year. The manufacturing enterprises are facing tremendous pressure of survival. Without the huge contribution made by China, there will be no Chinese economy today. Is there any way to crack the difficulties made in China at present? In addition to low cost and sufficient labor force, what are the winning ways of Chinese manufacturing? With these questions, I interviewed Mr. Barrett, chairman of Intel, a global manufacturing giant.

Dr. Craig Berit joined Intel in 1974 and became the fourth president of Intel in 1997. He became chairman of the board of directors of Intel in 2005. During the 15 years, he visited China 14 times. 7 of them focused on education and the promotion of China's rural informatization. This made him gradually understand China and was understood by the Chinese. After this year's Wenchuan earthquake in Sichuan, May, he went to the disaster area to consolate students and help the disaster area return to normal education as soon as possible, which further narrowed the distance between Barrett and China.

Reporter: "our recent" economic half-hour "has done a series of programs, including all walks of life in China, from leather to furniture, and even to making shoes, etc. many of these enterprises in China are facing the danger of bankruptcy. Many people say that China's manufacturing industry as such a production base, the price advantage of the world factory has no longer exist. Many enterprises, for example, automobile manufacturers say that in Latin America, in Latin America, in Vietnam, the cost of labor has already been lower than that of China, and China has no longer enjoyed this advantage. Now I don't know what Mr. Barrett thinks.

Barrett, chairman of the board of directors of Intel, said: "then the problems facing China are similar to those of the United States. The industry must be upgraded. Our manufacturing industry must have higher added value. This means that we need more R & D capabilities and intellectual property rights. We should carry out more high-end manufacturing, not just low-end manufacturing, but I think the low-end manufacturing industry is transferred to Vietnam, which is definitely not a bad thing."

Reporter: "this is both a challenge and an opportunity. China can take this opportunity to complete an industrial upgrading. How did Intel survive these difficulties when Intel faced the manufacturing crisis?"

Barrett: "we never solve problems through savings.

　　 Toy manufacturing, brand breakout

While many toy manufacturers in Dongguan have not breathed their breath from the impact of the MATTEL incident, the Kazakhstan toy factory, as usual, is making full efforts to produce. Chairman Xiao Senlin told reporters that his factory had not suffered any loss in MATTEL incident because he had already broken away from the OEM mode as early as more than a year ago.

Xiao Senlin, chairman of the hone generation toy factory in Dongguan, Guangdong: "we have so many exhibition rooms here, all of which are developed and designed by ourselves. This is our own brand. We have about more than 1000 varieties here. Our products can not only export, but also sell more than 1000 franchisees and stores in China."

After changing from the processing to the independent brand, the operation of the company has not only stopped relying on others, but placed all its hopes on the orders of foreign purchasers. The cost and profit structure has also undergone tremendous changes. Although the factory buildings are smaller than before, the workers are less than before, but the profits created by them have increased significantly.

Xiao Senlin: "our one thousand orders are worth the past thirty thousand."

　　 Heavy machinery innovation breakthrough

In China's heavy machinery manufacturing industry, because of the lack of manufacturing capacity in China, the huge excavator has always relied on imports, and each importing one excavator costs more than one hundred million yuan. However, the leading enterprises of heavy machinery enterprises in China Taiyuan Heavy Industries After a long period of unremitting efforts, China's first 20 cubic super large mining excavator was successfully developed at the end of 2005, breaking the history of over 20 years of foreign similar products monopolizing large mines in China.

"That is very happy, it is a great victory. In this way, we say that in China's market, the monopoly of domestic enterprises of large excavators has been broken, and we have become one of the three manufacturers and three enterprises of the world's large excavators."

Gao Zhijun, chairman of Taiyuan heavy industry, seems to have benefited from their pursuit of innovation. In order to encourage innovation, in recent years, 10 million yuan has been rewarded every year for researchers who have made outstanding contributions, and there will be special rewards for major projects.

"Our new products now account for 50% of the sales revenue every year, but our development costs are high. We now account for 4.9% of our sales revenue, which is relatively high in the whole country, and our country has an average of only 1.5."

Huge investment in research and innovation has also created huge wealth for Taiyuan heavy industry. Now, large scale mining excavators are already one of the leading products. The domestic market share is over 95%, and the products are exported to Pakistan, Vietnam, Peru, India and other countries and regions.

　　 What do foreign economists think of breakout in China?

There is a Chinese saying that water flows downwards and people go up high.