Shoe Enterprises' Bankruptcy Wave Hits China

Hesitate again and again, hesitate again and again.

Before a pile of messy bills, Wang Qihua finally had to face the fact that the financial situation of the factory in the last three months was too heavy to make ends meet.

In March 14th, 26 workers in the factory were summoned to the dining hall with only two large round tables. Wang spoke before them about the possibility of the factory being shut down at any time.

Wang Qihua, a 36 year old shoe maker in Jiangmen, Guangdong, has the greatest ambition to keep his "Hongfa shoe factory" and pass it on from generation to generation.

The noisy venue was quiet because of the bad news. People began to silence, smoke and touch their hair.

Wang Qihua, who has always been straightforward, has never been so hesitant as he is today. He is really embarrassed to tell his employees that he has been unable to pay wages and factory rents in addition to scraping up the utilities and equipment maintenance fees of that month.

The result was a bit frustrating, but Wang Qihua had no choice but to think of the way to say goodbye to his 13 years of business life - drinking a bottle of wine or singing a few songs.

Of course, this unfortunate spring is not just one of him. In his Pearl River Delta, tens of thousands of small and medium business owners are suffering from a fierce industrial shock.

Thousands of shoe enterprises closed down, 15% toy factories closed, more than 10000 foreign investors were evacuated, and vicious layoffs...

The prestigious "world factory" in the Pearl River Delta came to a general outbreak in the spring of 2008.

There are also many of the gold diggers who dream of breaking.

This gloomy spring passes through the untidy sewing machine workshop, empty warehouse and main production area full of oil and leather smell. If we do not greet the idle workers, Wang Qihua can go through the private small factory with only 1000 square meters in half a minute to enter the office.

A letter from the Hongkong bankruptcy administration office was tiled on the messy desk in Wang Qihua, where the neat and regular traditional characters told him that the dealer he was looking for had gone bankrupt.

This means that the other party owed Wang Qihua 280 thousand yuan of money has completely lost the possibility of recovery.

Wang Qihua, who was unwilling to give up, made a phone call to the other side.

As soon as the merchant of Hongkong heard about the creditor, he immediately turned his tongue around and scolded Wang for being a poor man who did not know the rules.

Wang Qihua began a day's work in a bitter smile.

But the job is just to check out those quiet machines, or to contact dealers everywhere to solicit orders.

For a period of time before and after the Spring Festival, factories only produce more than 500 pairs of shoes per month, less than 20% of normal production.

For more than a month, a deficit of up to ten thousand yuan left the small factory unbearable and lingering on the brink of collapse.

"It's a disaster."

Zhang Yongan, a 58 year old former paper merchant in Jiangmen, looks very complicated before his 5 storey factory building if it can still be called a factory building.

More than a week ago, he sublet it to a restaurant, an Internet cafe and a hotel. No one ever remembered it as a commercial kingdom that he had worked hard for 30 years.

In January 2008, Zhang Yongan shut down the original 400 people's paper mill because of the serious failure of liquidity.

"It's a shame for me to retire in this way."

Behind this stubborn man, it is a new industrial area. It is not difficult for people to imagine the busy days when the crane and the huge factory buildings have been suspended.

The disaster actually appeared in 2007.

Last year, the suicide of Zhang Shuhong, a toy dealer in Foshan, brought pressure and panic to the toy industry in the Pearl River Delta.

"More than 1000 of the five thousand or six thousand shoe factories in Guangdong have failed."

Last November, a survey data from the Asian Footwear Association put the PRD manufacturing industry on the cusp of public opinion.

This data also claims that more than 75% enterprises are considering going to Southeast Asia and Mainland China with lower labor and raw material costs.

Like the collapse of Domino, the collapse of the footwear industry has permeated many labour intensive industries such as toys, textiles, clothing and furniture in the Pearl River Delta. It has also led to the "collapse chain" of the entire industry - from raw materials suppliers, producers, service providers, logistics, to restaurants that are open to people from other places, and to the closure of the streets.

"New labor laws, tax burdens, environmental regulations and appreciation of the renminbi are all in the thin cost space of labor intensive industries."

The Wall Street journal, the world's leading financial and economic media, quoted the Swiss Bank economist Jonathan Anderson as an analysis of the industrial downturn in the Pearl River Delta this year, which may be the beginning of a heavy blow to the profitability of Chinese manufacturers.

"It's all too sudden."

Wang Qihua said.

The change seems to be overnight, but in fact, this is a long latent outbreak. Some small and medium enterprises with long standing malpractice have been in a general attack for a long time due to unfavorable factors such as RMB appreciation, raw material prices and labor shortage.

A private enterprise growth model 16 years old, graduated from junior high school Wang Qihua left his hometown Guangdong Dianbai County, to Dongguan Taiwan funded shoemaking workers.

At this time, China's reform and opening up has entered the tenth year. Relying heavily on introducing foreign capital and developing labor-intensive industries, the Pearl River Delta has become the largest economy in South China, and has gradually established the status of "world factory".

In less than a year after entering the factory, Wang Qihua learned the skill of pulling a line with a character teacher.

This got the favor of the boss and a young woman worker who promoted him to the monitor of the workshop, and the latter married him in 1991.

In 1995, Wang Qihua, who has been promoted to the assistant of factory director, is confident that he has enough confidence and experience to be an independent portal.

That summer, he and his wife came to the rural area of Jiangmen, renting an old ancestral hall, invited two small workers, and set up the first small factory.

No business management, no corporate culture, no marketing promotion. Like most of the early local business owners in Guangzhou, Wang Qihua, who was eager to get rich and hardworking, took all the duties from factory director to delivery clerk, and carried out family workshop operation.

"At that time, making a pair of shoes can earn more than 30 yuan.

The shoe market, which is in short supply, let Wang Qihua accumulate the first barrel of gold, and the small factory soon moved from the ancestral hall to the regular factory building.

In the steady development of Wang Qihua's small factory, the world footwear industry has initially completed the process of pferring to China, and "Chinese shoes" have gradually entered the golden age.

A pair of cheap and cheap leather shoes have been shipped out of Chinese factories and placed on shelves all over the world, to a considerable extent, carrying the international image of "made in China".

And this golden period finally led China to become the world's largest footwear producer and exporter in the future.

Now, nearly 7 of the world's 10 pairs of shoes are produced in China.

In the midsummer of 1999, an industry association investigation at a cost of his own, Wang Qihua fell into contemplation in front of a large factory building in Dongguan: there are all day long roaring machines, orderly pipelining and uniform clothing workers, as if the whole factory is a large machine with a unified body.

By contrast, his small factory is in primitive society.

He wants to expand the scale of the factory. He borrowed 500 thousand from all parts and bought a whole set of second-hand shoe machines in Taiwan, so that the factory basically realized production automation.

Around 2001, when Wang Qihua began to separate the names of workers, he knew that his factory was expanding rapidly, and he needed someone to help him manage.

Almost without thinking, he chose the way of family management.

You can trust others.

The director is brother-in-law, the finance is his uncle, and his brother-in-law also manages to purchase.

The average school degree only junior middle school families began to run the factory.

Due to the lack of modern enterprise management experience, the factory has been in a state of overstaffing, reward and punishment, and low efficiency.

Even so, Wang Qihua's factory reached its peak in 2002, with over 100 people. The annual output of shoes was close to 200 thousand, and the fixed assets were nearly two million yuan.

But the expansion of new workers and the increase of their stalls have dispersed Wang Qihua's energy.

He once attached great importance to the training and eventually became a walk through procedure.

Some beginners only learned for a long time and were pushed onto the assembly line.

This finally led to a catastrophe: a Sichuan girl who had a smattering of operation rules was cut off in the injection molding machine.

This time, Wang Qihua compensated more than 30 thousand yuan.

Relatives went their own way, and gangs quickly turned Wang Qihua's factory into a "yes and no" field.

In an accidental audit, Wang Qihua found that these "self" people wiped out factory oil to varying degrees.

This is actually a true portrayal of early Chinese private enterprises, with conservative management and high rule of man.

According to statistics from that time, the average life expectancy of Chinese private enterprises is only about 7 years, which is quite related to this inherent limitation.

Domestic and external troubles are only administrative villages, but the largest shoe business in Asia, Dongguan Houjie Bai Hao, has 6 lanes of wide cement roads and bright and noble houses. This is the symbol of the city's high industrialization.

But now, these things are as cold as a pile of ornaments.

In March 7th, 19 year old shoe factory representative Chen second sister had been sitting for an afternoon at a banyan job site.

She almost rotted the "bosom friend". In the past 6 hours, only 2 people consulted her, and one of them asked for directions.

"Nobody drives the machine in the factory."

Chen Ermei said, if you can't recruit anyone tomorrow, try the next village.

The rapid development of the Pearl River Delta economy in the last 20 years of the last century triggered the largest population migration in China's history - a wave of work in the south.

But in 2004, with the continuous overheated investment, the low treatment of migrant workers and the awakening of rights awareness, the supply-demand relationship in the labor market quietly changed, leading to the outbreak of the nationwide "shortage of migrant workers" in the Pearl River Delta.

In those days, workers in the Pearl River Delta had a shortfall of 2 million.

Wang Qihua's factory also contracted in the year because of lack of work, and in order to complete the order on time, he had to pay a high price to the nearby countryside to invite some women to be part-time workers, but in the end he still paid 100 thousand yuan for the late delivery.

Since then, the number of his factories has continued to decline, some of them have switched to big factories, and some have not come after the end of the year.

After the Spring Festival of 2008, the number of his factories slipped to the lowest of 26 people in recent years. This embarrassing situation made him reluctant to pick up the big bills and couldn't catch up.

The shortage of migrant workers has become a bottleneck restricting the continuous growth of the manufacturing industry in the Pearl River Delta.

"Now it's not new to recruit a skilled hand with 2000 yuan monthly salary."

Deng Zhiqiang, manager of human resources department at Houjie toy factory, said.

Wang Qihua is also troubled by rising raw material prices.

From 2007 to the present, the raw material of shoemaking industry has increased by 30% in one year, which makes the profit of shoe factory drop to 5%, which means that making a pair of 40 yuan leather shoes is only 2 yuan, almost touching the bottom line of profit.

In addition, oil shortage, electricity shortage, appreciation of the renminbi, the EU's anti-dumping on Chinese products and the tightening of bank credit have been introduced.

Wang Qihua felt that there was a magic spell after another, squeezing the already small profits and squeezing them.

"The first to bear the brunt is that some small and medium-sized enterprises which are not well managed and have long standing weaknesses will fail to take the lead because they can not withstand the impact."

Liang Yuran, Executive Deputy Secretary General of Dongguan leather and Footwear Association, said that the large factories with independent development and independent brands are at the higher end of the industrial chain and have strong ability to resist risks.

A law that defeated him in March 12th, a cafe in Taishan, Jiangmen.

Wang Qihua and his lawyer friend looked very solemn in a red pamphlet.

He even took out the computer, but at the moment he was too smart to help him get rid of the fear of his brochure.

This is the new labor contract law, which was implemented in January 1st.

It has put forward explicit requirements for the employing units in terms of wages, working hours and welfare protection, so as to protect workers' interests.

"The last straw that has crushed the camel" has almost become the most commonly used proverb in this period of time to describe the new labor contract law.

For this reason, even famous companies like HUAWEI and WAL-MART have to go out of the ordinary way to avoid layoffs.

Zhao Weilun, a consultant in Dongguan's intellectual talent market, looks at the fact that some enterprises are bogus down and evade the new law.

Now Wang Qihua has been exhausted by the monthly fiscal deficit, and he has become a negative asset, along with the money borrowed from the previous machine.

If the new labor contract law is added, it will increase him.