Profits Have Shrunk Dramatically, And Manufacturing In Dongguan Has Quietly Turned Around.

In the call for pformation and upgrading of manufacturing industry in the Pearl River Delta, Dongguan's small and medium-sized manufacturing enterprises, which are mainly Taiwanese businessmen and Hong Kong businessmen, are living in increasingly difficult circumstances.

Not long ago, in the survey report on investment environment and risk of mainland China released in 2007 by Taiwan electric and electronic industry association, the traditional manufacturing base "the Pearl River Delta" was abandoned, and many Taiwanese businessmen cast their eyes on the "Yangtze River Delta".

Although the relocation of a large number of manufacturing enterprises in the Pearl River Delta region has also caused concern about the "hollowing out of the industry", the upgrading of "made in China" is an inevitable trend.

In December 13, 2007, after a few days of intense heat, Dongguan was suddenly cold.

At 6 o'clock in the afternoon, it was already dark, and the Huang Shunlong, who was sent to visit the factory at Shenzhen Baoan Airport, was driven back from Hongkong to Dongguan by Mazda, a company driver, driving by Mazda.

He worked with his friends at the hammer metal products factory, located in Dongguan's Dao Jiao Town, with more than 200 employees.

Soon after crossing the tunnel, the boundary of Dongguan was clear, but on the other side of the high-speed road, the direction of Shenzhen and Hongkong was blocked by huge truck trucks.

"Tomorrow is Friday, everyone will rush to deliver tomorrow, and it will be more blocked."

Huang Shunlong said to himself.

Since he first set foot on the land of Dongguan 15 years ago, it has become indissoluble with this road. At that time, this route from Shenzhen to Dongguan, at the same distance, would cost 4 to 5 times now.

Over the past 15 years, the road has been continuously renovated from a low-grade highway that has been bumpy. Until it becomes the busiest highway in Dongguan and Shenzhen and Hong Kong, the huge container truck is loaded with goods and goes uninterrupted back and forth. It repeatedly weighs and replaces the highway.

The scenery on both sides of the road has been constantly changing.

Huang Shunlong still remembered the season when he first came to Dongguan 15 years ago. It was in midsummer, and the harvest of lychee was also this road. On both sides there were ups and downs of green hills and luxuriant lychee forests.

Later on, the story of the foolish old man began to take place. Some small hills began to be shovelled by man, and replaced by a factory building. The dormitories just like the dove houses matched with the factory buildings soon filled with all kinds of accent migrant workers. Those factories soon began to sleep day and night. The lights were bright and the machines were roaring. Almost every workshop was built, and the windows of the dormitory building would be covered with clothes and tens of thousands of flags.

The hot and prosperous days continue, and the changes are still taking place. About two years ago, some of the lamps in the factories and dormitories went out.

"Last year, what I heard is that 5 shoe factories in Dongguan and around 1000 people have lost over."

Liu Jiahong, a factory owner from Taiwan, said.

About 5 years ago, he began to invest in Dongguan's Houjie town to set up his own Tai Ding plastic products factory. Most of his orders came from countries such as Europe, America and Japan.

Liu Jiahong and Huang Shunlong are good friends. Their factories are very close. They are all small and medium-sized.

In Dongguan, their spare time life is really not good. Two people can only get together to drink and chat in their spare time.

Liu Jiahong graduated from the communication department of Fu Jen University in Taiwan, but entered a manufacturing industry with profound tradition in Taiwan. More than 10 years ago, he stepped on the land of Dongguan as "Taiwan dry" and worked for Taiwanese businessmen who had set up factories in Dongguan at that time.

Liu Jiahong, who was his own boss, took the lead in tasting the change of the environment: "we earned some money, but we missed the golden age."

Earlier than Liu Jiahong and others, the first batch of Taiwanese businessmen and Hong Kong businessmen who set up factories in the mainland were the first to dig the gold in this market. "At that time, the profit rate was 10 times more than that of now."

Liu Jiahong said.

The sharp contraction of profits from sighing stems from raw material costs, labor costs, gradually worsening competition environment, and macro policies and exchange rates.

However, for many Taiwanese and Hong Kong businessmen who set up small and medium-sized factories in Dongguan, there is no resentment in their minds. They can no longer enjoy such a relaxed environment as 10 years ago, including low rent, three tax reduction and five exemption.

Their situation is even somewhat embarrassed, which is reflected in the change of labor force first.

With the high labor force, the wages of ordinary manufacturing workers doubled in 3 years, and monthly wages rose from around 600 yuan to more than 1000 yuan.

At the same time, the quality of the labour force is much worse than before. Once, thirty or forty workers were recruited, and about 5% lost after 1 years. Now the ratio is just the opposite. Almost 95% of the workers will be lost.

Interestingly, the qualifications of these workers are generally higher than those in the early years, but they are more unable to bear the hardships and loneliness. They will choose whether there are Internet cafes or Cara OK entertainment facilities near the factory as a job choice.

However, even if the above conditions are satisfied, recruitment is still very difficult. In the streets of Dongguan, red banners hung in the height of their own factories can be seen everywhere in factories.

The gradual strengthening of the renminbi makes these factories engaged in foreign trade processing face high exchange rate losses.

15 years ago, 100 Yuan Hong Kong dollar could be exchanged for 140 yuan, and now the ratio of RMB to Hong Kong dollar is 10 to 9.95.

"RMB is now a strong currency, but for us, more than 80% of the goods are exported.

Last month, I lost 1 million 200 thousand yuan on an order because of exchange rate changes.

And I heard that the final target of the RMB exchange rate against the US dollar is 5 to 1.

Liu Jiahong said.

Huang Shunlong added: "there is competition from those small factories."

Around the factories they run, there are many new village houses with very local characteristics. These small buildings, which are small in size, are very thin and tall. They hide a lot of small workshops that are engaged in the manufacturing industry. They are usually family owned, and they rush through small orders through various channels.

Their doors were wide open, and some of them in oil stained clothes were busy beside the rusty machines.

Because of the existence of these small workshops, manufacturing enterprises in Dongguan often face some unreasonable bargain holders who cut the price below the cost.

Huang Shunlong said, "3 months ago, an ordering company cut the price of a metal badge to less than 1 yuan. I told him that I could not do it, because it was really not enough cost, and I had to make at least one piece three.

At that time, merchants and I said, "you don't do anyone."

But what's interesting is that the order came back to him soon after, because the customer sent the order to the small workshop at a low price. The small workshop turned the original copper plating process into iron plated gold. After the product was sent to the European and American market, there was a fading quality problem and it was returned.

The ordering company had to turn back to find factories with many years of experience in international orders and relatively standardized management.

In addition, the surge of land rent, the increase of various fees and the new labor law, which will come into force in January 1, 2008, have increased the pressure of survival of these small and medium-sized enterprises.

During the peak period of summer power consumption, the power consumption of the peak load also caused them distress. Power failure could not be produced, and orders were not waiting for others. Some enterprises bought generators for this purpose, but when they took the oil tanks to the streets, they could not buy diesel oil.

Reincarnation "this is also no way to do it, we are labor intensive enterprises after all, are relatively low-level manufacturing enterprises."

Liu Jiahong said helplessly.

Including him, Taiwanese and Hong Kong businessmen engaged in small and medium scale manufacturing in Dongguan know that they are only in the middle of another manufacturing circle.

The small and medium scale manufacturing industry in Dongguan is dominated by Taiwanese businessmen.

Taiwan's local industry has always been dominated by manufacturing industry. Before 1970s, Taiwan's processing industry was mainly exported to the outside world. It was also dominated by labor intensive, energy intensive, pollution intensive textiles and rubber processing. These industries grew rapidly, but the problems were obvious.

By 1980s, the cost of labor in Taiwan island has surged. Employing a skilled manufacturing worker, enterprises need to pay a monthly cost of NT $20 thousand, equivalent to about 5000 yuan.

At that time, when the factory was set up in the mainland, the monthly salary of a worker was only about 500 yuan, and only one labor force could save 10 times the cost.

From the beginning of 1970s, Taiwan began to promote the upgrading of manufacturing industry. While continuing to develop and export processing industries, it began to promote the second import substitution industry, and capital and technology intensive industries began to rise.

Many low-grade, labor-intensive manufacturing industries that have been accumulated for many years also come from the initial demand for low cost labor force to start large-scale output.

After the reform and opening up, the Pearl River Delta region in the mainland, with low labor costs, preferential investment conditions, and homologous cultural similarities, almost become their first choice.

This is just another similar cycle of manufacturing.

Because the labor-intensive manufacturing industry is chasing the primitive nature of low cost labor, Dongguan's small and medium-sized manufacturing industry is facing a choice.

Industry circle, at the same time, affects the fate of human circulation.

Houjie Town in Dongguan is the most concentrated place in Taiwan.

These Taiwanese are divided into four categories: Taiwan businessmen, Taiwan cadres, Taiwan labor and Taiwan Strait.

Taiwanese businessmen naturally refer to the factory owners who invest in this industry; Taiwan stem refers to Taiwanese people who work for Taiwanese enterprises. They usually engage in management positions in Taiwan funded factories; Taylor refers to Taiwan workers.

They are engaged in relatively low-level, labour oriented work.

In addition, there is a special group -- "Taiwan current".

They are collectively referred to as the three kinds of people who have been out of business. These Taiwanese are left on the ground because of business failures and so on.

Tai Chi often has the opportunity to upgrade to Taiwanese businessmen. Liu Jiahong is the case. After working for some time in the early stage of Taiwan funded factories, he accumulated resources, experience and capital to turn himself into a factory.

In the early days of the gold age, Taiwanese businessmen who invested in factories had already earned a lot of money and converted to capital intensive industries such as real estate.

The growth and replacement of people brought about the more fragmented manufacturing industry. Taiwan's business grew into small and medium-sized Taiwanese businessmen because of the accumulation of experience and capital. After working in the factories, the mainland workers learned some skills, and some people called their relatives and opened smaller processing workshops.

In this cycle, competition becomes more complicated.

Transformation Huang Shunlong is considering moving, moving factories to cheaper Vietnam, or simply closing factories to open restaurants in Beijing.

Liu Jiahong was wondering whether he wanted to break away from the manufacturing sector and become a trader.

No matter what choices they make, challenges are great.

If we move to Vietnam, though we can get preferential policies and low labor costs, the lack of upstream and downstream chains will soon be faced with production matching problems.

"Last month, Wang Yongqing invited all the upstream and downstream links to go to Vietnam to explore the market."

Huang Shunlong paid close attention to every move of the manufacturers.

He believes that if Vietnam is really shaping the upstream and downstream chains of the manufacturing industry, the manufacturing industry in Dongguan will have the possibility of scale migration.

If we upgrade to a trader, we will face the risk of quality control in order to send orders to small factories. Most of the orders in Dongguan's manufacturing industry come from Europe, America and Japan. Customers from these countries are often very demanding about quality, environmental protection and so on. A small quality problem may lose a long-term customer.

Liu Jiahong said: "ordering businesses often prefer to talk directly with manufacturers, because it is easier to control quality and minimize costs.

If I do not make it myself, the former customers will be on a large scale, and only Japanese customers will be relatively stable, because their characteristics are more valued than people's credit.

Huang Shunlong now prefers to move the factory to Huizhou, Guangdong, which is cheaper than Dongguan and is closer to the suppliers of raw materials.

The distance is not far away, but it costs about 1 million yuan.

And Liu Jiahong did more to take a day to see the wait-and-see attitude of the day.

Last year, he went to Hunan to study with friends. But he felt that compared with Dongguan, Hunan was located inland. If the factory was set up, the cost of pportation would be prohibitive.

It was Huang Yongan, a Taiwanese businessman who made decisions earlier than they did. He worked in Ming Jie mould Co., Ltd. in Houjie Town, Dongguan.

Before, he has been engaged in mold manufacturing related to shoe industry. In the increasingly competitive environment, he and his partner made decisions on entering the automotive sheet metal industry in the first half of this year, and increased capital by tens of millions of dollars.

After more than 10 years of development in Dongguan, he did not want to easily abandon the foundation he had accumulated over the years.