Relocation Of Small And Medium Sized Textile Enterprises In Zhejiang

Li Hongcai (a pseudonym) is the owner of a small and medium-sized textile enterprise in Zhejiang. Recently, he is considering moving the factory to Kampuchea. He said frankly: "the cost of textile industry has been rising continuously in recent years, and the overcapacity of the industry is serious, the price of products has not risen, and the profits of enterprises have been declining. If we do not find a way out, we will have to wait for death."

"Our company mainly deals in knitting T-shirts, that is, buying knitted fabrics from others and processing them into T-shirts. The products are mainly exported to overseas countries. Fabric cost is about 70% and labor cost is 20%. " Li Hongcai said that since 2005, the annual growth rate of labor costs has reached two digits, which has more than doubled. Over the past three years, the profit has declined from 3 to 5 percentage points a year. At present, labor costs are still rising rigidly, and enterprises can barely manage their own capital.

According to him, over the past two years, the surrounding peers have moved factories to cheaper countries such as Kampuchea, Bangladesh and Vietnam. overseas investment The risk has not been moved yet, but at the moment, it is more and more difficult for enterprises to operate, so we have to consider this matter carefully.

The results of a spring survey conducted by the China Federation of textile industry show that since 2011, the labor cost has increased by 12.6%, the total cost has increased by 10.8%, and the profit margin has dropped by 2.5 percentage points. The current plight of the textile industry is more serious than that of the 2008 international financial crisis. In some areas, business operations have been difficult or even shut down. " Rising cost The reason for this is that the demand from abroad is shrinking. In addition, orders are being transferred to countries such as Kampuchea. Li Hongcai said.

In order to reduce labor costs, Li Hongcai's factory relocation has two main directions: one is China's Midwest, the other is Kampuchea. After consulting colleagues, he basically gave up the previous plan. "The cost of employment in the Midwest is less than 2/3 of that in Zhejiang, but it is still more than twice that of Kampuchea," he said. In addition, if we move to the Midwest, the cost of shipping products abroad will be even higher. "

In addition to reducing labor costs, Li Hongcai's other major driving force for moving the factory to Kampuchea is the tariff policy. "Kampuchea, Bangladesh and other countries are the least developed countries listed by the United Nations (micro-blog). Their textiles export to the EU, Canada and Japan can be exempt from tariff, and the tax rate is 11%. Priority is given to moving to Kampuchea, mainly because of the relatively good relationship between Kampuchea and China and relatively small investment risk. Vietnam is also good, but in the past two years there have been more enterprises transferred there, and the labor force is relatively scarce. "

Despite the temptation of low cost, Li Hongcai still hesitated. "Labor productivity there is low. If workers feel unsatisfied, they will also organize strikes and cause losses to business operations. All these risks must be considered. " However, in 2005, people in Shenzhou company in Kampuchea who started factories in Ningbo told the China Securities Daily (micro-blog) reporter that the overall cost of production in Kampuchea is still lower than that in China. If we consider the decline in production efficiency, the local labor cost is equivalent to the central and western parts of the country.

Yang Shibin, Deputy Secretary General of China Textile Industry Federation, said that domestic knitting clothing enterprises showed obvious momentum in transferring production capacity outwards. Bangladesh has become the second largest exporter of knitwear in addition to China, and exports are about 1/3 of China's. The most important transfer of textile productivity to these areas is Japan, and the most important consideration is manpower cost and tariff policy.

Insiders worry that China Textile industry Transferring overseas may result in the hollowing of domestic industries, and the Midwest may lose opportunities for development because it fails to undertake these industries. People of China clothing association said that the comparative advantages of different regions are different. The transfer to Kampuchea and other places is relatively low-end production capacity. There are also enterprises in the central and western parts of China, and the quality of their products is even higher. For example, Henan's policy of undertaking industrial transfer is relatively good, and some textile and garment enterprises have gone there.

A domestic fabric listed company had planned to set up a factory in Southeast Asia, but after examining it, it finally decided to terminate the plan. According to the company's personage, textile enterprises should still have advantages in the high-end manufacturing sector if they want to allocate resources globally, and enterprises can shift costs to the downstream. Although the cost of labor in Southeast Asian countries is low, there is a lack of skilled personnel, inadequate industrial support, weak infrastructure and incomplete industrial chain. At least 3-5 years, the massive shift of the textile industry will not happen.