Early Warning Of Foundry Enterprises In Pearl River Delta: Sharp Drop In Orders In Garment Industry At High Cost

The "shortage of orders" is making the foundry enterprises in the Pearl River Delta feel unprecedented pressure.

"In the past 11 and December, when Christmas orders were shipped, the factories were making hot bricks to make the mold for the second years.

In the past, factories in the Pearl River Delta had to rush for Christmas orders, but this year, some orders were not collected after completion.

The Guangdong foreign trade statistics released by the customs and Trade Bureau of Guangdong in 2011 showed that the processing of Guangdong province has been processed since the second half of this year.

In the view of the industry, the decline in orders due to the depressed market economy in Europe and the United States, coupled with the gradual loss of the low cost advantage of China's manufacturing industry itself, has resulted in the pfer of a large number of low-end orders. The PRD factories may face serious orders shortage in the future, and enterprises will also face a round of shuffling.

Apparel industry orders sharply reduced

"The main problem of enterprises now is less orders."

Li Peng, secretary-general of the Asian Footwear Association, told reporters that the traditional manufacturing industries such as clothing in Pearl River Delta are facing orders shortage.

Hong Qihui, general manager of Dongguan run Tian clothing company and honorary president of Hongkong small and Medium Enterprises Association, said that in June and July this year, the order was not much. In October, after the Christmas order was shipped, the shortage of factory orders was directly reflected in the production.

If some enterprises fail to start up, some small businesses fail because they have no single business to do.

"There are orders at least to maintain the basic operation of the factory, and now there is no order to let enterprises fall into despair."

The current signs indicate that the order next year is not optimistic.

"In the past, factories could replenish 3~4 new products every year, but this year we reported 4 new products to customers, and only one product was ordered."

Xue Xiaowei said.

In the past year, after the Christmas order was shipped, the factories in the Pearl River Delta were in hot pursuit of the mould for next year's orders, so that they could be put into production after the end of the year.

But this year's factory situation is that some factories have no orders, and some factories have the intention to get orders, but the preparatory work has been postponed since foreign buyers let the factory not do the previous mold work.

A large trader in Hongkong Li Feng [14.32 -4.53%] group, a clothing buyer for the US market, also complained to reporters. "At the end of November, the orders we received were significantly reduced, and the volume of orders per order was not as large as before."

And one of the Christmas gifts procurement base, China Yiwu Commodity City [7.98 5.70% shares research report] Wu Bocheng, general manager of the group also said, "now the market long list, the large number of large quantities reduced, used to be tens of thousands of dollars, now more than ten thousand US dollars accounted for 10%, ten thousand below US $90%, before is six months, a year's list, now only three months to half a year's list, this is our production organization caused considerable difficulties."

The shrinkage of orders has made domestic factories more prudent in quotations.

"At present, it is impossible to raise quotations in the absence of orders. We can not pfer labor, raw materials and other costs to customers, and the profit margins of orders are continuously compressed."

One industry insider said.

Hong Qihui believes that the situation facing enterprises is more serious than the financial crisis in 2008.

"The last financial crisis broke out in the United States, and the US government quickly took measures. In 2009, the market began to pick up and orders gradually resumed.

But this time there are serious debt problems in the two major markets in Europe and the United States. The industry is pessimistic that it is likely to recover in 3~4 years.

Order pfer under high cost

Another problem that can not be ignored is order pfer.

"Recently MATTEL has gone to the Latin American market to find factories."

Xue Xiaowei told reporters that this inevitably led to the pfer of toy orders.

The MATTEL market in the US is the largest market for toys in the world.

In fact, a few years ago, the strategy of foreign buyers was not to put eggs in one basket. China was no longer the only buyer country. They began to train suppliers in Bangladesh and Kampuchea.

Nowadays, the trend of order pfer is very obvious.

"Before we have some suppliers in China, but because of the rising labor costs and raw material prices in recent years, our business has been pferred to Bangladesh, Philippines, Indonesia and other countries this year.

Almost all orders in the US market are like this.

Li Feng Group clothing buyers told reporters that his department mainly for the United States, WAL-MART and other super stores supply, focusing on medium products.

"In Bangladesh, the price of a garment can be controlled at $1.3, while at least 2 dollars in the country."

He said the cost advantage of domestic factories is gradually losing.

However, at present, toys and other industries with high technology orders remain in China, and factories in Southeast Asia cannot replace China.

In December 8th, at the third (2011) world footwear development forum held in Houjie, Dongguan, the China Leather Association made a report on the development of the world footwear industry and the Chinese footwear industry in the next five years. The report shows that the cost of China's shoe making industry is in great pressure after India and Vietnam.

"35% of the cost of an average product is labor costs, and the cost increases by 20%. The overall cost of the company will rise by about 7%, that is, the profit will drop by 7%. In recent years, the annual labor cost has risen at 20%~30%.

Moreover, there is labor shortage in the PRD, and enterprises can only find people by raising wages.

Hong Qihui said that the cost of labour in factories is under great pressure.

The logic of "the remnant is king"

In the Pearl River Delta foundries survival crisis continues to aggravate, pformation and upgrading by the government and industry continue to mention.

"There has not been a large area of collapse, and everyone is supporting it. Now there is a saying in the industry that the remnant is king, and anyone who has left may have an opportunity."

Li Peng said that the topic of pformation and upgrading has been talked about for five or six years, but the enterprise has not changed much.

One of the ways of pformation is to do the domestic market. Many domestic shoemaking enterprises have tried, but most of them have been defeated. Some enterprises are still paying tuition fees, and there are very few cases from manufacturing to brand success. Even the Secretary General of this association can not lift them.

Xue Xiaowei also admitted that at present, everyone's idea is to maintain the status quo first and then take a look at it.

"Now we can not see where the way out is, but we know that this place (Shenzhen) should not stay long."

In the past, the toy enterprises in Shenzhen had 1800~2000 homes, but there are only about 400 left.

As for domestic sales, he believes that it is time to maintain the status quo instead of burning money.

"Before many companies burned money, but failed.

And the pformation of domestic sales needs a relatively long time, most enterprises may not be able to survive that time.

For Hongkong's powerful financial group, it is also difficult to sell domestic products.

In the face of the shrinking external market, in January 2011, Li Feng set up Li Feng Asia, planning to export from domestic sales to the Asia Pacific region and the Chinese market.

But recently, Feng Guojing, chairman of Hongkong Li Feng Group, held in Guangzhou's Forum on "integration of domestic and foreign trade and circulation channels", that at present, many Hong Kong funded enterprises are willing to sell domestically, and are willing to pay taxes. However, due to complicated calculations, the tax problems of small and medium-sized enterprises in domestic sales have deviated from customs statistics, and small and medium-sized enterprises are often considered to be deliberately evasion of taxes. In order to avoid fines, they prefer to export goods to Hongkong first and then to Hongkong again, which will increase logistics costs and reduce logistics efficiency.

Take toys as an example, China is now the largest toy producer, and 90% of the world's toys are made in China. But for various reasons, Li Feng's toys can not be purchased directly in the toy fight city in the mainland, and it will be exported to Hongkong for re import, which accounts for 15% of the total cost.

"Doing domestic trade and doing foreign trade are two different worlds. When making foreign trade, others give you an order, according to the order, the product is pported to the wharf to complete the task.

But when doing domestic trade, there is no order at first. First, we must invest in our products. In fact, it is not easy to make a product. It is not easy to make a product. If we want to invest in product design, we should make a brand after doing it well, then we should develop and manage a sales channel ourselves. We do not know if we can sell it. If we do well, we will face the risk of plagiarism without intellectual property protection.

Zhang Jiamin, general manager of Li Feng Group Research Center, said.

Jiang Ruxiang, chief consultant of Beijing Sien Business Management Consulting Co., Ltd. believes that although the government has been promoting the pformation and upgrading of manufacturing enterprises, our environment is not suitable for the development of small and medium-sized enterprises.

The government should innovate in the system, such as innovation in the financial system, allow private capital to intervene, innovate in the tax system, such as reducing the tax pressure of innovative enterprises, and more importantly, protect intellectual property rights. Now the phenomenon of cottage is too serious in China.