Companies brace for end of cheap made-in-China era.
SHANGHAI – Factory workers demanding better wages and working conditions are hastening the eventual end of an era of cheap costs that helped make southern coastal China the world's factory floor.
A series of strikes over the past two months have been a rude wakeup call for the many foreign companies that depend on China's low costs to compete overseas, from makers of Christmas trees to manufacturers of gadgets like the iPad.
Where once low-tech factories and scant wages were welcomed in a China eager to escape isolation and poverty, workers are now demanding a bigger share of the profits. The government, meanwhile, is pushing foreign companies to make investments in areas it believes will create greater wealth for China, like high technology.
Many companies are striving to stay profitable by shifting factories to cheaper areas farther inland or to other developing countries, and a few are even resuming production in the West.
"China is going to go through a very dramatic period. The big companies are starting to exit. We all see the writing on the wall," said Rick Goodwin, a China trade veteran of 22 years, whose company links foreign buyers with Chinese suppliers.
"I have 15 major clients. My job is to give the best advice I can give. I tell it like it is. I tell them, put your helmet on, it's going to get ugly," said Goodwin, who says dissatisfied workers and hard-to-predict exchange rates are his top worries.
Beijing's decision to stop tethering the Chinese currency to the U.S. dollar, allowing it to appreciate and thus boosting costs in yuan, has multiplied the uncertainty for companies already struggling with meager profit margins.
Replies to This Discussion
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Permalink Reply by Nikson Daniel on
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Permalink Reply by Hebaorong on -
maybe the made-in-china era will end soon, however, most of foreign buyers still depend on china manufacturer... although the labor of china neighbor manufacturers from such such as Vietnam, India.......much lower than China, but the stuff from these countries are not convince , foreigner will still buy from china, cos these countries can't instead of china in short time....
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Permalink Reply by Gareth on -
I think it's slightly premature to be considering the end of manufacturing in China, but the writing has been on the wall for some time. China still has a massive unskilled population and it'll be quite some time before they realise their true worth to the Chinese economy and start complaining en masse about the poor wages and working condition.
While it's true that manufacturing is likely to fall away from it's heartlands around Guangdong and Shanghai, it'll make the transition to mainland China quite easily as well as to places like Vietnam and Laos. The infrastructure is already being built in places like Anhui, Henan, Shan'xi etc... where most of the migrant population come from. These people would sooner be working from their home towns for similar wages rather than holing up in places like Dongguang and wiring money home.
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Permalink Reply by Dean 信立 on -
I have to agree with Gareth. I can state cases of where the pay has increased and also where factories have brought in cheaper labour from Western China instead of increasing the salary. My goodness, even in Shenzhen you can always bring over cheap labour from Western China who will return to their home towns happy men and women to build nice houses. If you can still do that in Shenzhen I can't imagine what is possible in other industrial areas.
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Permalink Reply by Tanya on -
hahahah... All the businessmen always focus on the well-known cities, they didn't see the potential of many of other cities that can be new markets for both manufacturers and retailers. There are 661 cities in China, how many of them are actually the focus of business market right now.
"made-in-china era will end soon" ??? - I seriously don't think so. There is something wrong with the strategy those companies use, until they can't stand anymore and quit eventually.
Even inside of company like Nokia, Senior management knows little about culture difference (and of course they think they do know but actually not), managers are narrow minded and don't think out of box, china market manager doesn't have "guan xi" and only knows a lot about those famous cities while know little even nothing about potential markets. Information flow inside of company is terrible due to nationality difference etc. And eventually everyone blame it to "trend" of economics. I'm sorry, talked little too far. anyway..
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