The Collapse Of Shoe Enterprises Swept The Pearl River Delta

Recently, foreign media reported that a large number of Chinese processing enterprises were closing down.

Reporter survey found that the traditional manufacturing industry in Pearl River Delta is at a crossroads of life and death. Influenced by factors such as exchange rate, export tax rebate and various costs rising, many enterprises have already made very small profits. Some weaker enterprises have been bankrupt one after another, and the industry is reshuffling.

The traditional industries in the Pearl River Delta began to appear in a large number of bankruptcies, layoffs and scale reduction.

At this time, the foreign-funded enterprises in Hong Kong and Taiwan also have the intention to leave the Pearl River Delta, and the intention of escaping is forming a surge.

The industry has predicted that if the Pearl River Delta's foreign trade policy and investment environment did not improve, the Domino fled from abroad would appear in the first few months after 2008, and it will start in one or two years.

He was the first shoe factory to break down in the Pearl River Delta, and he witnessed the rise and fall of the footwear industry in the Pearl River Delta in the past 13 years.

In 1990, Mr. Zhou, who was bare handed, went to Guangdong from abroad.

Before the reform and opening up in Guangdong, the footwear industry had dominated the industry for many years.

So in 1995, Mr. Zhou opened a shoe factory in Guangzhou.

At that time, "time makes heroes", and everything can make money.

Mr. Zhou's shoe factory once had a good view: the products sold to all provinces and exported to all countries in the world, not only have their own trademarks, but also brands like red dragonfly and di Lu have come to the OEM production.

"But in recent years," heroes are on the horizon ". Now the shoe industry is harder to do than the financial turmoil in 1997.

In January 12th, Mr. Zhou told the weekly journalist with great emotion that "the cost is too high, and the shoe factories in the Pearl River Delta have already failed a lot."

Mr. Zhou made a calculation to reporters: "rough calculations, the same raw materials, the same pair of shoes, compared to 1999 ~2002, labor costs rose by 50%, raw material costs increased by 25%~30%.

The cost is now 2/3~4/5 higher than before.

Because of the EU's anti-dumping, the export volume of shoes has been greatly reduced. "Many export shoes have been sold domestically, and there are not enough money for them. Many shoe factories have to close down under vicious competition."

In recent years, the small and medium-sized shoe factories in the Pearl River Delta have also added a fatal wound which is not known to outsiders.

"Shoe factories usually make mouth business through foreign trade companies. Before 2002, foreign trade companies paid cash on delivery, but in recent years, after shoes export, shoes factories get money from foreign trade companies, the shortest time is 1~3 months, the longest is 6 months."

Mr. Zhou said, because the foreign trade company postponed payment, after the shoe factory completed an order, the shoe factory had to stop working. After receiving this account, it would take the next production order. "Now there is a lot of money to make a shoe factory, otherwise the capital will not flow."

According to the statistics of the Asian Footwear Association at the end of last year, more than 1000 of the more than 5000 shoe enterprises in Guangdong were closed down.

"The shoe factory that now closures is mainly a shoe factory of 300~800 people."

Mr. Zhou said, 300~800 shoes factory, big, small, small output, but the factory's operation, entertainment and other expenses are not small, no big shoe factory monopoly, nor small shoe factory's flexible light, they are easy to go bankrupt first.

"The next step is to close down the shoe factory which is under 300 people, and the small shoe factory will go bankrupt one day."

Mr. Zhou said, "my shoe factory doesn't know when to do it. If you can do it, you have to close it."

Taking into account the fate of shoe factories, he shifted the focus of his work to software companies, and before he broke down, he would find a good way for himself.

Mr. Zhou, the three famine of the shoe factory, believes that the big shoe factory is not going to fail.

But the big shoe factory, which Mr. Zhou envied, also has its own pain.

"Our biggest difficulty is that we have no electricity, and we have to cut power for 3 days a week."

In January 10th, Guo Jiajie, director of a shoe factory in Foshan, a South China Sea exporting shoe manufacturer, told reporters that frequent blackouts made the shoe factories often unable to function properly.

At 16:45, when the reporter visited, the shoe factory went out of power again.

We can only rely on diesel engines to generate electricity, and the Pearl River Delta is also prone to "oil shortage" from time to time.

Besides, the shortage of migrant workers is also a big problem for big shoe factories.

Guo Jiajie said that there are still some workers in the factory.

In fact, if we want to retain workers from other provinces, we must raise wages, and the cost will naturally increase.

Labor shortage, electricity shortage and oil shortage have long pressed the production enterprises in the Pearl River Delta.

In recent years, two new mountains have been added: RMB appreciation and export tax rebate.

RMB appreciation is an invisible edge.

In 2007, the RMB exchange rate against the US dollar has appreciated 6%.

The rising price of shoes can not keep up with the appreciation of the exchange rate. The rest depends on the digestion inside the enterprise and the profit is declining.

Besides, since June 18, 2007, the export tax rebates for footwear have been reduced from 13% to 11%, and the profits of enterprises have decreased by two points at a draught.

Anti dumping, export tax rebate reduction, RMB appreciation and delaying payment.

The number of hurdles in the PRD industry is very sad.

According to the information of the footwear association of Asia, apart from part of the closure, there are currently about 25% of Guangdong's factories in Southeast Asia, such as Vietnam, India and Burma, and about 50% of them are located in the provinces of the mainland of China, such as Hunan, Jiangxi, Guangxi and Henan.

In January 11th, a boss of the Taiwan Businessmen Association, who did not want to be named, told reporters that a week ago he went to Dongguan to do an investigation, where a District closed down more than 200 enterprises, and when he conducted an investigation in Zhongshan, he found that although Zhongshan had not yet seen bankruptcy, a large number of factories began to scale down and lay off workers, and some factories cut their number to half.

"I hear the wind is not good, everyone is struggling.

I know of 100 traditional enterprises, it is difficult to have a good one.

He said, "I have many friends who want to sell the factory away from the mainland, even if some big companies, even listed companies, do not want to invest any more."

These people told the weekly reporter that the situation would become more and more serious in a few months.

Once the escape gap is opened, the Domino effect will inevitably be formed.

According to it, many Taiwanese funded enterprises have the intention to move to India, Southeast Asia and other places. "However, there are many difficulties in relocation now, because those areas are not well matched, and the language is not available."

But, after half a year there, we can overcome these problems.

Once someone migrates to Southeast Asia, people will continue to follow. "

He said, "although it is difficult to go out, once you go out, you will never come back."

According to its estimate, the result of such relocation may appear in a few months, and it can be seen in the slowest one or two years.

In fact, apart from the intention of Taiwan funded enterprises to escape, Hongkong enterprises have the same problem.

In recent Hongkong TDC survey, 38% of Hongkong enterprises intend to move their factories from Guangdong to Southeast Asia.

In our country, Taiwan and Hong Kong funded enterprises are the main investors in processing trade in the mainland. According to the joint annual inspection data of foreign investment enterprises in 2006, there are about 6 enterprises in Taiwan and Hong Kong engaged in processing trade, accounting for 65% of the total number of Taiwan, Hong Kong and Macao funded enterprises.

At present, processing trade directly employs 30 million to 40 million people, accounting for 20% of the second industries employed in China.

It is estimated that the number of employment related industries in processing trade is about 50 million to 60 million.

Guangdong is the largest investor in Taiwan and Hong Kong funded enterprises. Once the foreign capital has left a lot, the local economy will suffer fatal trauma.

The fate of the shoe industry is a representative of the traditional industries in the Pearl River Delta.

Many traditional industries such as textiles, toys, electronics, clothing, toys, hardware and so on are also facing the same fate: Guangdong's textile industry has more than 5033 Industrial Enterprises above Designated Size, 1-8 in 2007, and 22.05% in Dongguan; the production cost of toys in Dongguan has increased by 60%, and orders have been reduced substantially; more than 1400 foreign enterprises in the town have dropped sharply to 800 in the past two or three years.

The days of traditional manufacturing are getting more and more sad, and even their strong backing is that foreign trade companies are leaving them.

"The export structure of our foreign trade company is undergoing pformation. So far, the main industry of pformation has not been explored yet, but compared with traditional industries, some high-end industries, such as ships, medical equipment, solar equipment, and so on, have more profit margins."

Du Xu, general manager of Guangdong Light Industry Import and export Limited by Share Ltd, told reporters.

The Guangdong Light Industry Import and export Limited by Share Ltd was once the Guangdong export wind and cloud enterprise.

It traditionally exports furniture, Christmas products, textiles, household appliances and other traditional industries.

However, as the profit margins of these products are getting lower and lower, the benefits of foreign trade companies have also been greatly affected, and they are also undergoing pformation.

"The export margin of traditional industries is 5%~10%, net profit is often only one percentage point, while the gross profit of high-tech products is 10%~15%, and the profit of traditional export products of foreign trade companies is getting lower and lower. We begin to pay more attention to the export of high-tech products."

The labor contract law is a big year for the traditional industries in the Pearl River Delta.

In January 1, 2008, the labor contract law was implemented.

The new law stipulates that after satisfying the requirements of "ten consecutive years of continuous employment" or "two consecutive fixed-term labor contracts", the worker can conclude a "non fixed term labor contract" with the employer and become a permanent employee.

It is probably the last straw in the enterprise to overcome the labor contract law.

Du Xu said: "the labor contract law protects ordinary laborers while protecting lazy workers."

Some of the old workers in the enterprise are not competent enough and have no sense of service. Once the labor contract law becomes a permanent employee, the cost of dismissal is very high and the damage to the enterprise is very great.

"Labor contract law" does not take into account the interests of the owner of the business, which is unreasonable, and now the business owners have become a vulnerable group. "

The Taiwan capital owner said, "after the implementation of the labor contract law, no matter whether the new or old people are ready to do something, some enterprises are heavily indebted."

He analyzed that some old enterprises accounted for 30% of the old employees. Once the labor contract was signed without a fixed term, the burden of the enterprises would be too large, and the old companies would be eliminated.

Under such circumstances, only the new company can survive.

Reporter interviewed found that many people in the economic circles believe that some of the provisions of the labor contract law may be fatal to the future development of China's economy.

"The starting point of the labor contract law is probably right. In order to help the lower income class, to help ordinary workers, including migrant workers, in fact, this law may cause great harm to the enterprises and indirectly damage the local economy, and the final result may be that these ordinary workers are harmed most."

One analyst said.