Transforming China In Crisis And Making Breakout

In November 20th, Guangzhou Railway Station square was bustling. Liu Jianchang, 32, and several townsfolk sat in a few newspapers, waiting for a train to Wuhan several hours later, surrounded by large bags of luggage.

Liu, from Xiantao, Hubei, has been working in shoe factories in Zhongshan, Guangdong, for the past 3 years. At the end of last year, it was the busiest time of the year, and no overtime work was done. But this year, less than September, the factory did not work. The boss of Hongkong decided to close the factory half a month ago. Since it was only two months away from the new year, Liu decided to go home first after settling his wages. And his two countrymen, because the factory "live less and less, wages are getting lower and lower, and then do not have any meaning", also decided to quit home.

Liu Kaiming, director of the Shenzhen Institute of contemporary social observation, seems to have made a rational decision by Liu Jianchang. "The average business is sending the salary at the end of next month, so even if you find a job, you may not get any money until then, and the train ticket is very tight at that time, so it's better to go back now."

In recent months, in the Yangtze River Delta and the Pearl River Delta, like Liu Jianchang, the number of migrant workers who set foot on their way home in advance is few. According to the latest figures released by the Hubei Federation of trade unions, the number of migrant workers returning home in Hubei has increased to 700 thousand, accounting for 6.8% of the total number of migrant workers. Among the recent reflux workers, more than 33 people, 47% of them were closed down, shut down and closed down for business, accounting for more than 9 people, or 13% of them, because of the land transfer and other reasons, about 110 thousand people accounted for 15%.

With the tide of migrant workers returning home, it is the collapse of enterprises. The national development and Reform Commission only announced that in the first half of this year, a total of over 6.7 SMEs were closed down. Wang Zhiguang, vice president of Dongguan Toy Association, believes that there are still more than 3800 toy enterprises operating, but in another two years, only 2000 can survive, and the other more than 1800 toy companies will go bankrupt. For a time, there was panic. Despite the fact that officials at all levels have come up with rumours and appealed to people to increase their confidence, the news of the collapse of large enterprises from time to time, the decline of GDP growth rate and the national stimulus package have all worried about China's economy, especially manufacturing.

After nearly 30 years of great development, China's manufacturing industry is facing an unprecedented difficult situation. How to get out of difficulties and achieve breakthroughs is a major issue related to the overall economic outlook and the future development mode.

　　 Is it the fault of the financial crisis?

Many people believe that the US financial crisis has caused the collapse of Chinese enterprises. In fact, the crisis of China's manufacturing industry began to emerge in the early 2004.

At that time, there was an unprecedented "shortage of migrant workers" in China's large population, and many enterprises in the Pearl River Delta and Yangtze River Delta could not recruit enough manpower. This is obviously a wake-up call for China's manufacturing. After experiencing initial confusion, most enterprises were forced to raise wages to enhance attractiveness, and the increase in statutory minimum wage also increased the cost of employment.

In recent years, the appeal for industrial transformation has been endless. At the national level, a series of measures have been introduced to restrict export processing enterprises with low added value and high pollution in terms of environmental protection, energy and land. In July 1, 2007, 553 items of "high energy consumption, high pollution and resource-based" export tax rebates were cancelled, and the export tax rebate rate of 2268 items that easily caused trade frictions was reduced. In July 23rd, the Ministry of Commerce and the General Administration of Customs announced a number of new processing trade restriction catalogues, accounting for 15% of all customs commodity codes. The catalogue stipulates that the bank margin account will be managed in real terms from August 23, 2007. This led directly to the strong rebound of the Hong Kong funded enterprises. They sent the representatives of the Hongkong Industry Federation to Beijing for joint application to suspend their execution. At that time, there was continuous news of enterprise failure.

The biggest impact on export processing enterprises is the appreciation of the renminbi. Since the reform of the RMB exchange rate in 2005, the RMB has appreciated by about 20% against the US dollar. This increases the price of products exported to the United States, while the processing fees paid in US dollars are reduced. This makes many enterprises profit from the original large profits, or even lose money and go bankrupt.

From the above, because of the rising cost, the predicament of Chinese export processing enterprises has already appeared, and has been deteriorating under the action of a series of internal and external factors. But rising costs do not necessarily lead to factory closures. The cost of Nike shoes is also rising. Why not go bankrupt?

The core problem is that China's export processing enterprises are at the lowest end of the industrial chain and have no pricing power. Made in China is just ordinary shoes, or just for Nike and other famous brand foundry. In this field, China is faced with competition from many countries, and prices are naturally not going to go. Low profit and poor ability to resist risks, the external environment will be affected if there is any trouble. The cost analysis of an apple iPod product by researchers at University of California shows that the contribution of Chinese workers to less than $3 in its retail price of $299 is the concept and design that creates its true value.

"China is the world factory" and "foreigners use Chinese products". These words are often hung on the lips of many people. However, Chinese products used by foreigners are mostly those lacking in technical content such as shoes and clothes. So far, China's equipment investment 2/3 also relies on imports, of which 100% of optical fiber manufacturing equipment, 85% of integrated circuit chip manufacturing equipment, 80% of petrochemical equipment, 70% of car industrial equipment, CNC machine tools, textile machinery, offset printing equipment rely on imports.