US Service Companies Rearrange To Cope With Rising Labor Costs In China

The growth of manufacturing output in the United States and the large scale enterprises in the United States shrink the manufacturing front, which is closely related to the relocation of foreign factories to local production.

Recently, building equipment, furniture,

Chinese labor force

Just-style, the famous textile and apparel website in America, recently published an article entitled "China's two revolution in productivity".

The article points out that it is no secret that China's wages are rising. In fact, according to the Chinese government, the average wage of Chinese workers will rise by at least 80% by 2015.

At the same time, productivity will also increase, and garment production is expected to double in the next 5 years.

Therefore, the apparel companies in the United States need to redesign their production layout to cope with the rising labor costs in China.

"Not only Westerners expect wages to rise in China, but the next 5 year plan by the Chinese government has also revealed that" the wages of Chinese workers will rise by at least 80% in 2015, "he said.

In early May, the Boston Consulting Group (BCG) issued a forecast that the labor costs of China's manufacturing industry will continue to rise, and the trend of labor cost inflation is expected to slow down in 2015.

Related spokesman said, "the cost of production after China's wage adjustment will begin to be in line with the United States, and the level of productivity is comparable to that of the United States.

After that, the United States will have to increase investment in manufacturing industry in order to maintain its market competitiveness.

In order to promote the revival of the manufacturing industry in the United States, it is inseparable from government subsidies and support, especially in the labor-intensive industries such as clothing and textiles.

To promote the reconstruction of manufacturing industry in the southern state of Mississippi, the local government has launched a series of multiple incentive projects, including loans, subsidies, bonds and tax relief, which can provide appropriate preferential conditions in accordance with the special needs of enterprises.

Moreover, the US government has made efforts to attract foreign businessmen to invest in the textile industry.

Recently, the United States began building some taxpayer funded capital intensive textile factories.

Last year, Brazil Santana allocated $100 million to create a denim factory in Texas. After a long negotiation, Santana finally received US official sponsorship.

The efforts made by the US government to promote the development of manufacturing industry have also been effective.

According to the latest data from the ISM, in June, the US manufacturing sector achieved a 23 month expansion for 25 consecutive months.

Compared with 53.5% in May, the manufacturing index (PMI) rose to 55.3% in June, up 1.8 percentage points (the index above 50% indicates that the manufacturing sector is expanding).

The ISM index also shows that the manufacturing sector is also expanding its recruitment scale. The employment index increased by 1.7 percentage points in June to 59.9%.

Local expansion or relocation to other countries

In addition to returning to local production, American manufacturers have their own second plans.

Boston Consulting Group stressed that if China's wage rise is faster than that of other parts of Asia, the US producers will shift their production to poorer countries, which may be 80% or more labor cost than China.

At present, the US enterprises are making final adjustments and trade-offs. In the future, whether the US chooses to "pfer" or "return to the nest", the US manufacturing industry has moved out of China.

In the 2007 fiscal year, the foundries in China produced 35% of the Nike brand footwear products for Nike, and Vietnam, Indonesia and Thailand produced 35%, 31%, 21% and 12% Nike brand footwear products respectively.

By the 2010 fiscal year, the proportion of Vietnam's representative factories rose to 37%, while China accounted for second of the 34% share, while the proportion of Indonesia and Thailand accounted for 23% and 2% respectively.

"Vietnam made" has replaced the "made in China" with its cost advantage, and has become the world's largest sports shoes production base of Nike brand.

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The relocation of Nike's production base is a typical representative of the strategic restructuring of American manufacturers.

With the increase of wage level and employment opportunities brought by the labour market, China's economy is developing from exports to consumption.

The appreciation of the renminbi has also reduced the profit margins of manufacturers' low price products, such as footwear and clothing products.

Under such circumstances, American manufacturers have to take a long view to ensure their own profits.

As MarioMoreno, an American economist, said, the rise in labor costs in China prompted us manufacturing to start running away.

According to the statistics of the US Department of Commerce, Asia's investment in China has increased from the source of investment, and the US investment in China has fallen considerably.

In the month of 1~6 this year, 10 new countries and regions in Asia invested in 10850 new businesses, an increase of 9.83% over the same period last year. The actual amount of investment in foreign capital amounted to 52 billion 530 million US dollars, up 23.88% over the same period last year.

The United States invested 727 newly established enterprises in China, down 5.09% from the same period last year, and the actual amount of investment in foreign capital was $1 billion 679 million, down 22.32% from the same period last year.

Signs of a rebound in manufacturing and tightened investment in China indicate that the real economy of the United States is being revitalized, and that the "re industrialization" strategy of the United States is in force.

With the rise of comparative advantage in the United States, the trend of manufacturing industry returning to the mainland will continue to strengthen.

China's manufacturing status is hard to shake.

Although it seems that the trend of US manufacturing reflux is firm at present, some economists point out that the reflux intensity has not reached a level worthy of attention.

According to the recent US container import data, China made 45% of the total imports in the first quarter of 2011, a percentage point lower than that in the first quarter of 2010.

China has so far remained the largest supplier of container goods in the United States, and this position has not yet been shaken.

Industry insiders believe that there are two reasons for the return of US manufacturing industry.

One is that the labor cost gap between China and the United States is still very large. According to the exchange rate conversion, the labor cost of the United States is about 6 times that of China. This is a huge gap. It is not easy for the manufacturing industry to return to the United States to cross the gap.

Another point is that China's market capacity is huge and its consumption capacity is growing rapidly. It is the consensus of many manufacturers to make the production base as close to the consumer market as possible.

On the other hand, in the US market, China's textile market share is about 20%~30%, while other Southeast Asian countries account for less than 10% of the market share. At present, only some orders have shifted. Compared with China, the export of textile products in Southeast Asia has increased rapidly, but the base and scale are still limited.

From the data of textile and garment export this year, the export growth rate of Chinese textile enterprises has slowed down, but the export price has increased. This indicates that the overall manufacturing capacity and product level of China's textile industry are improving.

In the process, the United States will choose to pfer some low-end products from China to Southeast Asian countries, and the mid-range products will remain in China.