Does China'S Shoes And Clothing Manufacture Suffer From Disease?

Recently, a shoemaking enterprise in Zhejiang has changed a number of new machines in order to attract workers, but it still suffers from labor shortage.

The attractiveness of China's manufacturing is decreasing because of rising costs.

The consumer goods manufacturing industry is turning to Southeast Asia, while the industrial manufacturing industry is returning to the United States.

However, the market is lost.

The new story of production base turning into a star market has just started.

A rumor that lingers for four years will become a reality at the end of October: Adidas will close the only factory directly under China in Suzhou, Jiangsu.

Adidas also informed the other 10 foundries that it would terminate the OEM contract.

The official explanation of Adidas is "considering the strategy of re integrating global resources".

But it is widely interpreted that, like its old rival, Nike, the vane type "migratory bird" company moves the manufacturing base out of China in pursuit of lower costs, and more producers will follow.

Besides the manufacturers of clothes and shoes, China is also losing its attraction in the field of industrial products, and the United States has become a new destination for these investments.

Shoes and clothing made to the United States

Over the past twenty years, the US and other western capital flows to China is a general trend.

These capital surges and strongly support the rise of China's economy.

This force is so important that it has even been criticized as "China's dependence on foreign capital".

However, there has been a growing skepticism in the United States. Some people believe that the Chinese have taken away the jobs of American workers.

According to a report recently released by the US Economic Policy Institute, "from 2001 to 2011, China's trade deficit caused more than 2 million 700 thousand jobs lost or replaced by the United States, of which more than 2 million 100 thousand manufacturing sectors."

Hinch Levy, an engineering professor at Massachusetts Institute of Technology, said that the important factor affecting the capacity of US companies to move back is supply chain.

"During the period -2008 2003, China's labor cost rose by 19%, while the US labor cost increased by 3%."

Professor Hinch Levy said.

China's past advantages are changing under these new circumstances, and the US funded enterprises may consider that products supplied to the local market are produced locally.

NCR company greater China public relations explained to reporters that this is part of its "regional production mode" implemented around the world.

The so-called regional production mode refers to where to sell and where to produce.

However, she said, "NCR has not pferred production from China to the United States, nor has it reduced the number of factory workers and domestic investment."

Obama's stimulus policy has also been one of the reasons for the attractiveness of the United States.

The federal and state policies of the United States, such as the reduction of corporate tax and subsidies and support for R & D, have encouraged the ability of enterprises to move back and forth.

Royal Bank of Canada global asset management chief economist Eric Lascelles also held the same judgement.

He told reporters, "I think the withdrawal of manufacturing from US companies is not the mainstream, but we can conclude that the era of manufacturing industry shifting from the us to China in the past 30 years is coming to an end."

Ma Yu, director of the Ministry of foreign investment research of the Ministry of Commerce, issued a warning. "This is a dangerous sign and deserves attention."

This highlights the Institutional Predicament Faced by China's manufacturing industry, and the space for which national policies can be excavated.

Migratory birds fly to Southeast Asia

Southeast Asia is another option for capital.

Sun Yingli received some notice on receipt of a notice of termination of Adidas's contract. The contract period between the two parties was not until 2015.

Sun's company has started OEM for Adidas since 1996, and the two sides signed a long-term cooperation agreement in 2006.

That coincided with the golden age of Adidas's production in China.

In 2007, Adidas Group subordinates

Half of the products are made in China.

But then Adidas began implementing strategies to increase supplier diversity.

The 2011 Annual report mentions that some Latin American countries impose a high import tax on China's exported footwear products, which is why Adidas will further decentralize its production base.

By 2011, the proportion of footwear products of Adidas group from China is still the largest, but has dropped to 35%.

The growth rate of Southeast Asian countries such as Indonesia and Kampuchea is obvious. The share of the latter has doubled.

{page_break}

"Closing the Adidas Suzhou plant is a strategic consideration of reintegrating global resources. This strategy will help Adidas better play our scale effect and reduce complexity."

The official response provided by Adidas to the Southern Weekend reporter was unflawed, trying to cool down the shutdown. "Closing the factory has nothing to do with raising salaries, and it has nothing to do with our stock situation. At present, Adidas has a good inventory in China".

But in fact, the secret of factory pfer is the cost.

In July 2008, Adidas global CEO Herbert Heiner told German media that wage standards made by the government were becoming too high in China, and the company hoped to partially withdraw from China and move to cheaper labor areas.

Just four years ago, Haina's statement triggered the speculation that Adidas would shift the production line.

Compared with four years ago, China's labor costs are rising.

"If we add social insurance, the average monthly salary of our workers here is more than 3000 yuan.

This is doubled compared with two years ago, but we are also worried that we can not recruit workers. The workers who have been recruited have a high job hopping rate.

Li Xin (a pseudonym) is a middle-level Adidas foundry in Fujian. In order to recruit workers, he looks for help everywhere.

Li Xin said that the proportion of human cost expenditure in his business accounted for 12% of the turnover from 30% a year ago.

One side is China's rising labor costs. On the other hand, the adult labor force in Indonesia, Vietnam and other Southeast Asian countries earn more than one thousand yuan per month. Li Xin's company has begun to expand overseas branches, and three factories have landed in Vietnam and Indonesia.

Compared with Adidas, the old rival Nike has made greater progress in shifting production base.

Since 2005, Nike has increased the proportion of Vietnamese factories in its manufacturing industry every year. By 2009, the proportion of Vietnam and China's orders was 36%.

After two years of anti - overrun, Vietnam's share rose to 39% in 2011, while China dropped to 33%.

This is not the first factory migration of Nike and Adidas.

Two brands, originated in Europe and America, are very sensitive to costs.

In the 70s of last century, its main production base was in Japan. Due to the appreciation of the Japanese yen and the rising labor costs in Japan, they shifted their production base to South Korea and Taiwan. In 1990s, they shifted orders to mainland China for cost reasons.

Today, Southeast Asian countries such as Vietnam and Indonesia are new places of interest.

The migration of Nike and Adidas also promoted the pfer of Taiwanese foundry factories.

In early 2012, the nine Xing holding company listed in Hongkong closed a processing plant in Dongguan and continued to improve its production capacity in Indonesia.

UNIQLO, a casual clothing chain from Japan, also takes Southeast Asia as its next destination.

In 1999, UNIQLO established production departments in Shanghai and Shenzhen.

By 2007, 90% of UNIQLO products were made in China.

But after 2008, UNIQLO gradually reduced its reliance on China's manufacturing and reduced its share to 80% in 2011.

This year's annual report shows that the company plans to actively expand production in other Asian countries in order to reduce costs, "the goal is to pfer 1/3 of the production outside China".

In addition to clothing sellers, food companies are also highly sensitive to price.

A well-known North American food company has been importing products directly from abroad for the past two years. One employee of the company said, "every product manufactured in China should have at least one or a few reserved countries.

Once China loses competitiveness, it can pfer orders immediately. "

Not long ago, the China EU Chamber of Commerce conducted a survey on EU enterprises in China.

According to the survey, 22% of respondents said they were considering investing in other markets outside China.

When asked about motivation, one of the main factors is the rising cost.

The survey data show that consumer goods enterprises are more inclined to withdraw than industrial enterprises, which is related to the former's more sensitive to price.

"Compared with industrial enterprises, the production and pfer of consumer goods enterprises are faster," Li said. "5 years can basically be completed."

From world factory to world market

"Ten years ago, 70% of our member companies exported their products, and 30% of them faced the Chinese market," said Harry, President of the American Chamber of Commerce in Southern China. "But now the ratio is just the opposite."

Although China's attractiveness as a manufacturing base is decreasing, its attractiveness as a market is rising.

The reporter interviewed several multinational companies such as Adidas, Nike and so on. They expressed their attention to the Chinese market collectively.

While shifting more and more production bases to China, Nike, Adidas and UNIQLO pform China's position from production base to core market.

A new Northern logistics center was announced in Tianjin, which echoed with the logistics center responsible for China's sales in Suzhou Industrial Park.

The way of Nike is exactly the same.

In 2009, when Nike closed its only factory in Taicang, China, it spent a lot of money to build a world's second largest logistics center in Taicang. The delivery time was shortened by 15%.

They also plan to open more stores and aim at the two or three line cities of China.

The two old rivals have been pulling their production out of China, but they are playing the main driving force of the Chinese market.

Temporarily lagging behind the Adidas group, its global CEO Herbert Heiner has increased to China in recent years. He called China "our star market".

According to the EU Chamber of Commerce survey data, 74% of the respondents believe that China is becoming more and more important in its global strategy.

The report says: "before, China is mainly a world factory, and now and in the future, China will become the ultimate world market of our products."

"Ten years ago, we have 70% member enterprises whose products are mainly exported, and 30% enterprises are facing the Chinese market."

20 years ago, Harry, President of the American Chamber of Commerce in Southern China, came to China.

His American Chamber of Commerce in Southern China represents more than 1800 American companies investing in Southern China.

He said, "but now the ratio is just the opposite."