The Year Of Turbulence Is Very Difficult And Hurt. China'S Manufacturing Industry Is Facing The Pain Of Life And Death.

For most closed entrepreneurs, this year's traditional thinking of production and management may need a radical change.

Those who are indifferent to the exchange rate and the international market rethink the strategy of running in China, and begin to think about how to integrate China into their global strategy and so on. CEO

There is no doubt that China has gradually become the main breeding base for product innovation and business model innovation.

The past year has been a disastrous year for most Chinese traditional manufacturing players.

Labor, land and electricity prices have risen at a two digit rate.

For most closed entrepreneurs, the traditional idea of production and management may need to be radically changed.

China is changing its cost and monetary structure, driving CEO who are indifferent to the exchange rate and the international market to rethink the strategy of domestic operation and begin to think about how to integrate China into its global strategy and so on.

There is no doubt that China has gradually become the main breeding base for product innovation and business model innovation.

The role of "world factory" China in the process of globalization may be changing gradually.

However, in the process of shifting the value chain, Chinese enterprises bear the pressure of manufacturing costs as well as the increase in wage costs and appreciation of the renminbi and other factors. They also need to bear the pressure of limiting the profits and other important factors such as operational optimization.

　　人民幣究竟值多少美元？

The RMB exchange rate is undervalued, and the unfair price advantage to Chinese exporters is being sharply reduced.

Over the past 6 months, the yuan has appreciated 6.7% against the dollar.

Economists expect that the renminbi will rise by 10% to 15% against the US dollar in 2008.

With the rising cost of labor and raw materials in China, more and more export companies are avoiding the use of the US dollar or trying to offset the devaluation of the US dollar.

How much is the renminbi worth?

In the past year, for most enterprises, the issue of exchange rate which was rarely mentioned before has been taken seriously.

Liang Bai, director of the Hongkong economic and Trade Office in Guangdong, predicted that in the next two years, the 80 thousand processing trade oriented enterprises in the Pearl River Delta will face a life and death decision.

He appealed to Hong Kong enterprises to pform, upgrade or pfer as soon as possible, and the sooner they act, the better.

A large number of processing trade enterprises can not be lower than the profits caused by exchange rate erosion.

The highest peak period of ceramic capital in Foshan has reached more than 10000 ceramic production lines, leaving less than 1000 after being moved and closed. This year, more than 100 production lines will be forced to shut down again.

Through a banana forest, some crowded Matchbox houses were gathered on the corner of the field. A white line crossed the square boxes, which were connected with the towns.

To some extent, these roads are like a long chain track, and Zhang Xiao Jin, a 35 year old, is not such a noticeable link on this chain track.

Zhang relies on making complex plastic moulds for nearby shoe factories. He clearly feels the slump in Dongguan's manufacturing industry.

He was a tall, strong young man with an inch in his black folder Kerrey.

His 10 workers climbed out of bed at 6 o'clock and loaded all kinds of molds in wooden box boxes onto the truck.

"10:30 tomorrow morning," Zhang said yesterday.

But a telephone call from Changan town at 8 o'clock sent Zhang into a deep silence - the other side demanded to maintain the previous price, and hoped to postpone the payment for a month.

Zhang raised the price by 30%, cash, where he was in a daze, yawning constantly, all the faces were tired of lack of sleep.

"Certainly not, business can not be done", his tone is helpless but tough.

When he found that the argument was useless, he retired inside the house and stood alone on the roof and looked at the town of Changan smoking. The roof of the house was washed with broken pieces of steel. Beside the steel crumbs stood a piece of aluminum plate, which used red paint to write mold processing and Zhang's cell phone number.

Due to the impact of the US subprime mortgage crisis, the purchasing power of the United States has declined, and the demand for footwear products with higher grades has dropped markedly. The footwear industry in Dongguan is the first to bear the brunt.

The landmark event in the collapse of the business is nothing more than the collapse of the Taiwanese shoe companies.

In December 20, 2007, the Taiwanese capital Chang Deng Footwear Company, which has nearly 4000 employees, announced that it had stopped operating, and subsequently paid about 40000000 yuan of economic compensation for its employees. This caused a great stir in the local industry, and even triggered the subsequent effect of other business failures.

Since October last year, a large number of traditional enterprises such as shoemaking and furniture have been withdrawn. What's more, in the first three quarters of 2007, hundreds of shoe factories in Dongguan went bankrupt, and there were many Taiwanese businessmen in Dongguan.

The customers of the bankrupt enterprises began to pfer their orders to Wenzhou shoe enterprises. Because of the unoptimistic environment, some Wenzhou footwear enterprises also had to accept orders from the US customers which were not willing to accept some low price and few profit margins because of the needs of the enterprises.

"The raw material has gone up too much."

Zhang said that a similar situation reminded him of the year in 2003 when metal prices surged forward because he could not digest the pace of huge raw materials, and he had to switch to production for a year.

And this year the trend is more ferocious - the pressure of capital turnover of enterprises has greatly increased.

At the current metal price, the bill which used to cost 300 thousand yuan to turn around is now about 500000 yuan.

Because of lack of funds, Zhang can only reduce inventories and adopt "small batch and multiple" purchase methods, but lower inventory often fails to guarantee stable production of enterprises, and pportation costs are also "overspending", and he still needs to feed workers.

He has just increased the price of his products by 10%, and sales have dropped by half.

Many local mold processing enterprises can not afford to cut production or even stop production.

Zhang didn't move. He persuaded the wife of three children to take care of all the cash.

An unavoidable problem is that when thousands of competitors produce the same product, how can you build up their competitiveness, the answer is always direct but helpless - low enough price.

"Strangulation on price is like cutting meat, but I can't do anything about it."

Zhang Xiaojin said.

　　“世界工廠”的體制性弱點

Zhang lived in Dongguan for 10 years and witnessed how to become a factory in the world.

Although institutional weaknesses are becoming increasingly evident in Dongguan's business models, most people do not see them. They have been living under the pressure of similar economic models for more than 20 years.

Whether or not we need innovative products and brands, whether we need better ideas and more reasonable organization and management level are almost ignored.

Unlike most Wenzhou people, most factories have brand names.

Zhang himself is only graduated from junior high school.

Even if he stops working, Zhang often drives to Changan town to hide behind the local billboards. The first floor is still a noisy and dizzying foreign trade company.

You only need to go to several shops, and then recruit a few skilled skilled workers, in an hour, you can pick all the spare parts in the components that you have gathered, and then you can assemble them in your own yard.

Zhang stayed at the factory for a long time every day, working as hard as his workers.

He lives upstairs, downstairs is a second-hand lathe bought by a bankrupt, and the workers live in a room separated from the lathe. He has accumulated many years in this industry, and customers are everywhere in Changan town. Here, as long as you have good quality, credit, low price and timely delivery, you can't miss buyers. To a large extent, Zhang is the victim of vicious competition.

Like Zhang, there are more than 3000 similar competitors in the town. They press the cost to the extreme. People produce the same things by relationship, quality and credit. They produce the same things with near pparent prices and technology.

The prices of major raw materials such as copper and petroleum based plastic products increased exponentially.

After the implementation of the new labor law, labor costs plus raw materials are rising. Only these two enterprises need to increase the production cost by 80%, while the brand has no premium. Some factories can only close down.

The center of the world factory is about 30 thousand of the total number of enterprises in Dongguan. Taiwan capital and Hong Kong capital account for about half of Dongguan's enterprises, and Taiwan's capital accounts for about 8000.

A Taiwanese businessman who has set up factories in the field told reporters that about 2 of Dongguan's Taiwan funded enterprises have disappeared in Dongguan recently.

After a series of significant exchange rate appreciation, China's rising costs may mean that the world's factory will soon become a major export destination for inflation.

After continuous export price declines, China's price as an unparalleled benchmark purchase price began to rise at the end of 2005.

Although the year-on-year growth has been relatively moderate, the recent call for higher prices is more urgent than ever.

A survey of Hong Kong businessmen in the Pearl River Delta region by the Hongkong Federation of industry shows that 37.3% of the 8 Hong Kong enterprises in the Pearl River Delta are planning to move all or part of their production capacity away from the PRD, and more than 63% of them plan to move out of Guangdong.

There are many kinds of vanishing, some are leaving suddenly, some are going to Vietnam to set up factories, some are turning to the mainland, and staying in Dongguan, local enterprises are trying to pform, make brands and turn to domestic sales.

But this requires strong strength and time to support, and some small and medium-sized Taiwan funded enterprises, which are small in scale and cheap in labor cost, will not survive this severe winter.

The occurrence of occasional fleeing of money probably started from the second half of 2007 and has been going on forever.

"The era of deflation from China to the world is coming to an end."

Morgan, chairman of China Securities Department at JP Morgan in Hongkong, said last year, "manufacturers are raising their average selling price. They believe they can pass on any future (cost) rise" in Morgan Jing.

Over the past 5 years, the profit margins of many manufacturers have been severely squeezed, but pricing power has returned to many industries due to industry integration, environmental protection and safety record of small manufacturers, and natural wastage.

　　中國不再是最廉價的生產者

A joint study conducted by Booz Allen Hamilton and The American Chamber of Commerce Shanghai in Shanghai found that China's importance as a purely low-cost and export oriented production base will gradually diminished.

The study points out that China's entry into its own global supply chain has more competitive advantages than that of China, which only regards China as a low-cost and export oriented production base.

More than half of the enterprises surveyed by foreign-invested enterprises and foreign joint ventures in China believe that China is losing its competitive advantage as a manufacturing base compared with other countries with lower cost.

Nearly 20% of the companies surveyed are considering relocating their production base in China to countries such as Vietnam and India.

Some new investors no longer regard China as the best target based on the following natural considerations: the growth of fees and the natural tendency of companies to pursue diversified investments.

In a survey conducted by the American Chamber of Commerce, more than half of the 54% surveyed companies believe that China is losing its competitiveness compared with other low-cost countries.

70% the main reason for the decline in competitiveness was the appreciation of the renminbi, while 52% of the companies pointed to rising wage costs.

The wages of white-collar managers and blue collar workers rose by 9.1% and 7.6% respectively.

33% according to the companies surveyed, another reason for China's loss of competitiveness is employee turnover.

So far, the eastern coastal region of China has produced the most efficient factory organization in the world, which has won the world's highest price advantage and absolute low price, especially in the Yangtze River Delta of Shanghai and its surrounding areas and the Pearl River Delta region near Hongkong.

But investment in these areas has increased rapidly.

The amount of factory lease and office land is soaring, the shortage of industrial land and the cost of various facilities are increasing. The most important thing is the rising wages and the rising prices of industrial products after the implementation of the labor law.

Although the number of workers working from the mainland to the coastal areas is large, the number of workers has increased by two digits per annum over the past few years, and management has been growing faster.

But China is increasingly being harmed by its past successes. This kind of industrial mode based on low technology and low added value makes it difficult to cultivate and recruit skilled personnel, from financial executives to managers who understand international production technologies such as "Six Sigma management theory" and "lean production".

Because