What Causes Foreign Businesses Such As Footwear To "Move"?

Under the influence of RMB appreciation, low export tax rebate rate, the implementation of the new labor contract law and insufficient power supply, some enterprises began to pfer from the coastal areas like Guangdong and Shandong to the neighboring countries such as the mainland and Vietnam. In the long run, the pfer of low value-added enterprises is conducive to upgrading the local industrial structure, but the large-scale relocation of enterprises may also have a negative impact on the local economy.

There are two dissonant notes between New Year's day and Spring Festival.

One is the ice and snow disaster that does not happen in 50 years, so that millions of people who go home to celebrate the new year are stranded on the road. The other is that the media are widely rumored that Han enterprises "evacuated" Shandong and thousands of shoe enterprises "evacuated" Guangdong.

What is the "move" of a foreign company?

What is the impact on exports?

Recently, we conducted field research in Guangdong.

Why do foreign enterprises move? According to our understanding, the reasons for the withdrawal of foreign enterprises can be roughly summed up in four aspects.

First, the appreciation of Renminbi has brought great pressure to enterprises.

Since the reform, the appreciation of RMB has accelerated year by year. In 2007, the appreciation of RMB against the US dollar was close to 6.5%, which resulted in a company with an annual export volume of US $about 12000000, and the annual income from foreign exchange settlement should be reduced by about 3 million 100 thousand yuan.

An appreciation of 6% is equivalent to a three percentage point reduction in profits.

The most difficult ones are those with only 2-3% profit margins. They are bound to close or move out.

Although Renminbi denominated pricing is a good way to avoid the risk of RMB appreciation, only a few companies can do so.

Some companies even require exports to the European market, and merchants still demand the US dollar instead of the euro.

Two, the export tax rebate factor should not be underestimated.

For example, in July 1, 2007, the export tax rebate rate of power outlet products decreased from 13% to 9%, and from 9% to 5% of plastic products.

Similarly, a company with an annual export volume of US $about 12000000 will have to reduce the tax rebate amount of about 2 million 40 thousand yuan.

Some enterprises reflected that the export tax rebate in the past could largely offset the tax revenue imported from the raw materials. However, with the continuous reduction of the tax rebate rate, the tax rebate was not enough to offset the import tax, so the actual tax burden of enterprises increased.

The three is the implementation of the new labor contract law.

This is one of the main factors that directly trigger the relocation of foreign enterprises and the closure of domestic enterprises.

Enterprises generally reflect that only one item will increase labor cost by more than 25%, while labor cost will increase or even exceed 50% in the labor-intensive shoemaking industry.

對于新法的影響，企業的情形五花八門，林林總總，比如，新法實施后，法定節假日加班要以高于平時工資若干倍的標準支付；加班工資是制造業員工收入的重要部分，不加班的員工月工資一般是700元左右，而加班的月工資都在1200元以上，新法實施后，員工不能再超規定時間工作，因此，有的員工為了多掙錢，開始在兩家工廠上班；新法規定用人單位自用工之日起即與勞動者建立勞動關系，這對季節性加工企業影響較大，企業失去了用工的靈活性；企業與員工的地位不平等，當前仍有部分員工用假身份證從工，一旦員工離職，公司可能聯系不上他，無法追究其責任，對于無故逃班等現象，也無法直接解雇員工，然而公司地址都是固定的，即使員工在外上網、出事，企業也要負責，導致管理者、經營者壓力很大；有企業之所以“棄廠而逃”，也因為企業按照新法要

The employees' compensation is far more than the value of the assets such as machinery and equipment, so it is not as good as "abandoning the factory". The original 100 people may only pay 30-40 people's social insurance, but now they have to pay one hundred percent. The percentage of the company's employees paying social security is 70% for the company and 30% for the employees, but if the employees return to their ancestral home, the social security paid has not been pferred, they can only refund 30% of their employees' wages. Therefore, many employees are more willing to send the social security money directly to the employees, and the employees themselves choose to buy social security or not to buy it. The new labor contract law requires the company to pay the social security fee, which causes some employees' wages to be less than the original part of the social security fee that they originally issued, and the staff also have their opinions.

The four is the lack of power supply.

Many enterprises can only "open four stops three" a week. The peak load often requires enterprises to start work at night, and the workers on the night shift need to pay 1.5 times of their wages. In addition, foreign enterprises have very strict orders and time requirements for shipping orders, so the blackouts will have a great impact.

The small and medium-sized enterprises are the main foreign businesses that take the place of foreign businesses. The amount of contractual foreign capital is about 3 million dollars or less, and the labor-intensive traditional manufacturing industry is mainly distributed in hardware, toys, clothing, shoes, plastics and other industries.

These industries are in the terminal of the industrial chain, and their reliance on the upper part is not very strong. They rely mainly on orders. Foreign merchants can only get stable supplies if they are produced in Vietnam or Kampuchea or in China.

Of course, there are other factors, such as plastic, toy and hardware enterprises, because the contract has been signed in advance, but because of the rising price of petroleum metal raw materials, the original contract can not be carried out.

At the same time, in Guangdong, the electronics industry basically did not move out.

Because the industrial chain of the whole industry is here, it has a good matching supply system, and the quality of the labor force is relatively high. This is not available in Vietnam or Kampuchea, and it is hard to duplicate it. Therefore, even if the labor cost is high, enterprises are not easy to move away.

The relocation enterprises are mainly funded by Taiwan funded enterprises, and the proportion of developed countries such as Europe, Japan and other countries is relatively small.

In the long run, market competition and survival of the fittest, with the strengthening of the internal and external market environment and the standardization of institutional environment, the industry is reshuffling, and some enterprises lacking competitiveness and non-standard operation are eliminated or relocated (including moving to the mainland and abroad), which is beneficial to the economy of the Pearl River Delta region.

In the Pearl River Delta, land resources and labor costs are becoming increasingly expensive. Objectively, low value-added and labor-intensive enterprises need to be pferred outwards to make room for high-end manufacturing and modern service industries, so as to raise the level of industrial structure.

In the survey, many enterprises thought that they could digest the rising cost pressure, and their employees' salaries were much higher than the local minimum wage.

This shows that the grim business environment is not a disaster for the entire export industry. The industry may need a phoenix to regenerate, making the Chinese economy stronger and more competitive.

But in the short term, we are not worried.

First of all, there are malicious closes in individual enterprises. After secretly selling assets, business operators suddenly absconded with money, leaving behind a lot of problems such as arrears of wages, local factory rent, suppliers' payment and customs duties.

If these problems are not handled well, it will easily lead to social unrest.

Secondly, from the survey, there is no large-scale relocation of foreign enterprises. The closure and relocation have limited impact on the local economy, but there is also the risk of large-scale relocation.

It is reported that a large number of foreign-funded enterprises have visited the investment environment in Kampuchea, Vietnam and other countries, considering the relocation of the plant.

Among them is a well-known Taiwan enterprise with 500 thousand employees in the mainland. It takes more than 300 Taiwan funded enterprises to study in Vietnam, Kampuchea and other countries. The government of Vietnam will guarantee 800 thousand labor force and 100% tax rebates. The cost of labor is 400 yuan per person per month, and the land is free.

Some enterprises have already built factories there. They can be reckoning from time limit for construction. They will be put into operation after 7 and August this year.

Once this happens, it will lead to the dissolution of the employees in their present location. The packaging, logistics, and supporting enterprises of the products are difficult to continue, the original factory buildings and rental housing are idle, the hotel catering industry is sluggish, and the proportion of non-performing assets of banks is rising. The impact will be far beyond that of the enterprises themselves, and the impact of the normal development and pformation of the local economy can be imagined.

Guangdong is one of the most important provinces of foreign trade in China. In 2007, the total export, import and export trade surplus accounted for 30.3%, 29.2% and 39.5% of the whole country respectively. In some key cities, GDP and industrial output value accounted for 70-80%.

Large fluctuations in Guangdong's foreign trade will also significantly affect the country's foreign trade situation.

Third, the phenomenon of Guangdong may not be a case. At present, there is also a case of foreign enterprises' withdrawal in Shandong.

It has been reported that 103 Korean companies have "evacuated" Shandong without any reason.

In January 21st, an unprovoked response to the special task force jointly established by the Ministry of industry and resources of Korea and the Ministry of foreign affairs and trade, Ministry of labour and the Ministry of justice of the Republic of Korea, has entered into an investigation of the concentration of Korean enterprises such as Qingdao.

Therefore, the phenomenon of "relocation" of foreign enterprises deserves great attention.

Policy making requires an international perspective. The influence of "relocation" phenomenon of foreign enterprises can provide some inspiration for our future policy formulation.

Policy making needs to have a complete international perspective, not only to gaze at developed countries as important trading partners, but also to catch up with emerging countries as potential competitors.

It is understood that at present, the neighboring countries of China are constantly modifying preferential policies to attract foreign investment. For example, Vietnam has formulated a tax exemption policy of "5 (years) exemption from 7 (years)", and has introduced a 10 year tax exemption policy to provide free land, which has attracted a lot of foreign investment enterprises in China.

Therefore, when adjusting foreign trade policies, we may need to take a little more consideration of the factors of neighboring countries, especially those of potential competitors.

A perfect policy is not equivalent to an effective policy.

The protection of labourers in the new labor contract law is rather vague. For example, the employer will establish labor relations with the laborers from the date of their own employment. For example, if a worker has worked for ten consecutive years in a continuous period of two years, he should conclude an unfixed term labor contract, that is, a lifelong employee.

The starting point of the new law is to protect the rights and interests of laborers, but the actual effect of doing so may be counterproductive, which in turn increases the paction cost of the labor market. Many employers have become very cautious in hiring people, and can hire less people. This has hampered the employment level. On the other hand, it has also weakened the competitiveness of China's manufacturing industry, and has not properly accelerated the pfer of Chinese manufacturing industry to other countries.