How Should China Actively Respond To The Global Shift In Manufacturing Economy?

Global manufacturing layout shift? Domestic textile industry should think about new competitive advantages.

Since the second half of last year, China's exports have been on a downward trend. Some have attributed the decline in exports to the exchange rate problem, the lack of international purchasing demand, the high cost of domestic labor, and the tariff problem caused by trade agreements.

However, the report on global manufacturing economy pfer (TheShiftingEconomicsofGlobalManufacturing) released by BCG, a Boston consulting firm, reminds us that there are deeper factors affecting the world as a whole.

"Share in the global market.

Is the annual negative growth a final conclusion?

According to customs statistics, 1~10 months of this year, China's textile and apparel exports totaled 234 billion 980 million US dollars, down 5.4% compared with the same period last year, of which 91 billion 60 million of textile exports were down 1.9%.

Exports of US $143 billion 920 million decreased by 7.5%.

Looking at the single month data released by the General Administration of customs, in January, China's textile and clothing exports were 25 billion 540 million US dollars, down 10.8% compared to the same period last year. In February, the export of textiles and garments was 21 billion 680 million US dollars, an increase of 99.3% compared with the same period last year; in March, exports decreased by 32.6% US dollars; in April, exports were 19 billion 880 million US dollars, down by 16.3%; in May, exports were 23 billion 390 million US dollars, decreasing by 6.3%; in June, exports were 25 billion 350 million dollars, and dropped to 25 billion 350 million; exports were US dollars and declined;

It can be seen that exports rose only in February, while other months fell.

In addition, in May, June, August and September, the figure dropped to a single figure, while the other months decreased to double digits.

In June, the export decline narrowed to 1.2%. People thought it would be better then. However, the export situation in the next few months has proved to be grim.

In the first three quarters, the United States is the only country in China's main export market to achieve growth.

1~9 months, China

Clothing exports to the United States totaled 36 billion 400 million US dollars, an increase of 8.3%, which led to a 1.3 percentage point increase in China's overall exports.

Influenced by exchange rate, the EU market and the Japanese market are still in the doldrums.

In the first three quarters, China's total exports to the European Union amounted to US $40 billion 230 million, down 10.7%.

In the 28 EU countries, exports to only 6 countries have increased.

Over the same period, China's total exports to Japan were 16 billion 100 million US dollars, down 11.6%, the fastest decline in the four main export markets.

From the semi annual report released by several textile and garment enterprises in August, there are few enterprises that export growth.

In the first half of the year, the main business export revenue of Zhejiang's Limited by Share Ltd was 36.51% lower than that of the first half of the year. The textile and garment export enterprises of Shandong Xinhua Jinhua international Limited by Share Ltd were 0.14% lower than that of the same period last year.

The Limited by Share Ltd of the Zhejiang Xinda printing and Dyeing Group also said that due to the depreciation of the yen and the euro and changes in the export environment, the export business of the company was affected, resulting in a decrease in foreign revenue compared with the same period last year.

60% of Dalian's pan Rick Clothing Co., which is concentrated in the European market, is expected to export 10% to 20% of its total exports to the European market this year.

Chu Xuemei, general manager of the company, said: "the depreciation of the euro has greatly weakened the competitiveness of Chinese products, and the number of orders for individual customers has dropped by 50% this year."

Is the purchasing power of the international market shrinking? Through interviews, companies have pointed out that despite the slow global economic recovery this year, the purchasing demand has been affected, but it is not enough to become the main reason for the decline in China's exports.

Enterprises have pointed out that order pfer is the main culprit.

"This is not a temporary change in the export situation, but an accumulation and outbreak of long-term factors."

Chu Xuemei thinks, "RMB appreciation, plus domestic labor cost is high, Chinese products no longer have price advantage."

Will the pfer order return?

In fact, the pfer of orders is no longer a one or two day matter. In recent years, many enterprises have felt this change.

However, in the early stage, the pfer of orders will really cause the confusion of enterprises. With the passage of time, a lot of orders have gone back, but let enterprises accept this reality more frankly.

Lei Shengzu, director of Shenzhen Chuang Lun Textile Co., Ltd., said: "low order orders are bound to shift. Labor costs in China are too high. Orders with complex technology will remain in China, after all, Chinese workers are still skilled in technology.

In fact, if you are expensive or expensive, you have to look at the specific situation. If the enterprise is doing the big road goods, then it will be expensive.

In addition, Chinese workers are efficient enough to offset cost losses.

For such a "positive" idea, Chu Xuemei has different opinions: "2~3 years ago, the order was indeed pferred first, and it was discovered that it was not successful and came back one after another.

But after several years of searching and the rapid development of manufacturing in Southeast Asian countries, many European and American merchants have successfully pferred orders.

For some complex products, they will let Chinese enterprises do a small part first, make a look, understand the technical difficulties, and take big goods to Southeast Asia and other countries to do so, so as to reduce the total cost.

The report on global manufacturing economy pfer released by BCG, a Boston consulting firm, has pointed out that in the past 30 years, subtle changes in workers' wages, productivity, energy costs, monetary value and other factors quietly and greatly affect the purchasing decisions of enterprises.

Take workers' wages as an example.

The report points out that although the manufacturing wages in the world's top 25 exporters have risen from 2004~2014, the average annual wage growth rate of China and Russia has reached 10%~20%, and this has lasted for 10 years, while the annual average wage growth rate of other economies is only 2%~3%.

10 years ago, the average wage in the manufacturing sector adjusted for productivity was about $4.35 per hour in China, compared with $17.54 per hour in the US.

Now, according to the productivity adjustment, China's manufacturing average wage has doubled 3 times to 12.47 US dollars per hour, while Russia has reached 21.90 US dollars, while the US has increased by only 27% to 22.32 US dollars per hour.

Ling Fangcai, chairman of Guangdong textile import and export Limited by Share Ltd, said: "labor costs account for 30% to 40% of the cost of production, so enterprises are very sensitive to labor costs.

Now, our labor cost is 5~6 times higher than that of Southeast Asian countries, so these foreign businessmen are looking for places to replace China.

This year, some European and American customers reduced orders and caused slight fluctuations in the company.

Although the growth of Jiangsu Su Mei Textile International Trade Co., Ltd. is still good this year, its annual export growth is expected to be 20%. However, Xu Jian, deputy general manager of the company, also thinks that the labor cost is China's textile.

A major problem.

"After several pay adjustments, the average monthly wage of Vietnamese workers is about $150, while the monthly wages of workers in China will reach $500 or even higher."

The most worrying thing for Chinese enterprises is happening. China's productivity has been unable to offset the impact of the sharp increase in labor costs, and the orders pferred will no longer return.

Xu Jian pointed out that the worker's population structure is his biggest concern: "what is more serious than labor costs is that China is moving towards aging, and many young people are unwilling to engage in textile and clothing production, while the countries around us have a large number of young labor force.

As long as foreign production efficiency reaches 70% to 80% of the domestic level, their labor strength will be very obvious.

Are competitors only ASEAN?

Most enterprises refer to the Southeast Asian countries such as Vietnam and Kampuchea as objects of comparison when referring to the pfer of orders.

In fact, from the report on the global manufacturing economy pfer, we can see that our imaginary enemies are far more than that.

The layout of "global manufacturing cost competitiveness" has changed significantly.

Who would have thought that the cost of manufacturing in Brazil has been higher than that in the United States? Who would have thought that Britain has become the lowest cost manufacturing economy in Western Europe? The manufacturing cost of Russia and Eastern Europe has risen to almost the same level as that of the United States. According to the report, the manufacturing cost of the top 10 commodity exporting countries in the world is higher than that of the United States except China and Korea.

The United States and Mexico are now emerging stars in the global manufacturing industry.

The cost advantage of China's factory manufacturing industry has weakened to less than 5% compared to that of the United States. If the trend continues for 10 years, the cost gap between China and the United States will disappear, and the average manufacturing cost in Mexico is estimated to be 13% lower than that in China.

In recent years, both the United Kingdom and the United States have launched the slogan of the return of manufacturing industry. Many people in the industry do not think so. They believe that the labor cost of these developed countries is bound to be very high.

However, the cost report explains the backwash of manufacturing industry very well.

In addition to China, several other economies that were previously considered as low manufacturing costs, such as Brazil, Czech Republic, Poland and Russia, also declined significantly from 2004~2014.

According to the report, the cost of manufacturing in Brazil has risen sharply, even higher than 23% in the United States by 2014, while the average cost of Poland and Russia is roughly equal to that of the United States.

From this report, we can not only see that China's labor cost advantage is disappearing, but more importantly, the global procurement landscape is changing.

The global manufacturing industry will have no core procurement area, but it will be dispersed in different regions.

Because all regions of the world have relatively low cost manufacturing centers, more consumer goods in Europe and the Americas will be made closer to local locations.

At that time, what makes China and Europe buyers go beyond the geographical location to purchase?

As a result, Chinese enterprises can no longer lock the competition perspective in Asia, but look globally.

Instead of thinking about what advantages the competitors have, it is better to think about how to locate our textile and garment exports in the face of such a situation. What new competitive advantages should China build to compensate for the shortage of the textile industry caused by the rise of irreversible labor costs?