"Made In China" Touches The Ceiling; How To Retain International Tycoons With Cheap Labor

When the news that Adidas is about to close a factory in Weiyi in China came out, a thousand waves were aroused. This is not the first multinational enterprise to withdraw from "Made in China", and obviously, it will not be the last.

As early as 2009, Nike, Adidas' competitor, closed Taicang Factory, the only shoe manufacturing factory in China.

In 2011, when our reporter interviewed in Dongguan, we found that Dongguan Wanshida, the supplier of Apple's touch screen, also moved its factory to Vietnam. Recently, Starbucks also reported that it was preparing to close its Chinese factory and transfer the production of ceramic cups back to the United States.

The news of closing factories, moving to Southeast Asia, and even moving back to China has never been interrupted in recent years. Behind this news, "Made in China" inevitably hit the ceiling. The rapid rise of various costs such as manpower is slowing down the popularity of the "world factory".

　　 No longer cheap labor

China, known as the "world factory", once attracted manufacturers from all over the world to move their factories to China because of multiple advantages such as labor costs and raw material costs. Now, this advantage is gradually disappearing.

According to Zheng Yuesheng, director of the General Statistics Department of the General Administration of Customs, at the end of 2011, the General Administration of Customs conducted a questionnaire survey on 1856 export enterprises, and believed that 80% of enterprises had increased labor costs. In addition, 56.4% of enterprises believe that the cost of exchange rate has increased significantly, and 56% of enterprises believe that the cost of raw materials has increased.

Herbert Hainer, the global CEO of Adidas, said in an interview with a German reporter that because the wage standard set by the Chinese government has gradually become too high, the company hopes to partially withdraw from China and move to areas where labor is cheaper.

Recently, British media reported that Adidas only provided licensed products for the London Olympic Games to Cambodia clothing Factory workers pay 10 pounds (about $15) a week. Even if Adidas finally corrected that the average monthly wage of local workers was 130 dollars (about 828 yuan), this figure is far from the Suzhou factory's claim that "the average monthly wage per capita is not less than 3000 yuan" when it recruited workers.

According to the latest survey of China Briefing, China's labor cost ranks third in Asia. The minimum wage is about two to three times that of India. With welfare expenditure, the cost will rise by 40% - 50%. The investigation also said that the increase in labor costs would lead to large-scale manufacturing flight.

"At present, the average wage of Vietnam's manufacturing industry is about 1000 yuan per month, that of India is about 600 yuan, and that of China's eastern coast is about 2500 yuan to 3000 yuan." Zhong Shan, vice minister of the Ministry of Commerce, said publicly earlier.

　 Textile industry becomes a disaster area

During a recent visit to Xidan Joy City, a key business circle in Beijing, the reporter found that the commodities in the international brand stores of Nike, Adidas, H&M and other textile products are no longer "made in China", but more from Cambodia, Vietnam and other Southeast Asian countries.

It is precisely because more and more multinational enterprises choose to disperse their production capacity to areas with lower costs, and it is increasingly difficult for local textile enterprises that cannot withdraw like multinational enterprises.

"The cost of raw materials, labor, exchange rate and other costs are soaring, but they dare not take orders. Now the life of textile enterprises is very difficult, and many enterprises have already lost their ability to support it. They either transfer to Southeast Asia or go bankrupt." Zhang Xiansheng, a textile enterprise leader in Zhejiang, told reporters that the advantages of the domestic textile industry no longer exist, The cost is much higher than that of Southeast Asia and other countries.

Jinlong Textile Co., Ltd. in Wucheng County, Shandong Province has closed down. A staff member left behind said to the media: "Now the production of many textile enterprises has dropped to a very low level. As far as the operating rate is concerned, large manufacturers can open 30% - 50%, and many small factories have been shut down. For example, we have already opened and shut down several times."

Taiwan Yuyuan Group is one of Adidas' 300 OEM factories in mainland China, and has a large share of orders. According to Li Peng, secretary-general of the Asian Footwear Association, this enterprise has also begun to transfer to Southeast Asia on a large scale in recent years, and factories in mainland China have also begun to transfer from coastal areas to areas with lower labor costs in mainland China.

Another important reason for textile enterprises to relocate is their main raw material cotton. The reporter learned that due to quota restrictions, although the international cotton price is at least 4000 yuan/ton lower than the domestic cotton price, many enterprises have to choose domestic cotton.

"Cotton accounts for 60% or 70% of the cost of textile enterprises, and the high price difference between domestic and foreign cotton has seriously weakened the export advantage of Chinese textile enterprises." Liu Cheng, cotton economic analyst of China Commercial Circulation Productivity Promotion Center, said in an interview.

　 "World Factory" gives way?

The news that enterprises are leaving Southeast Asia is constantly spreading, which makes people start to worry about whether China will give way from the name of "world factory"?

"If Nike, Adidas and other enterprises reduce production lines on a large scale, it will have a great impact on OEM and supporting facilities. Due to the impact of product process integrity, many OEM factories are difficult to survive independently. In this case, if they want to rely on the orders of Adidas, Nike and other enterprises to survive, they must move to Southeast Asia together." Li Peng said.

Xi Zhengxing, deputy general manager of Jianshe Yamaha Motorcycle Co., Ltd., said, "In fact, Japan is now a mirror of us. For domestic enterprises, labor costs are a factor that no one can control. The only thing that can be controlled is production efficiency. 'Made in China' must find advantages in the manufacturing process, otherwise the future is not optimistic."

"In the short term, looking around the world, no country has surpassed China's production competitiveness (co processing competitiveness)." Li Youhuan, director of Guangdong Social Science Comprehensive Development Research Center, told reporters that with the change of China's economic environment, especially the increase of production costs, the competitiveness is gradually declining. China's position as a world factory will inevitably be challenged, but it is irreplaceable at present and for some time to come.