'Cheap China' era ends as factory workers wise up

[parkland]

Because of large population centers near sea port, lax labor laws etc. Bangladesh, Sri Lanka and ASEAN countries are going to be beneficiary of this situation and India to a lesser extent. Chinese have setup factories in Bangladesh since 1990's, like Koreans and Japanese, but now Chinese and Taiwanese investors are coming to Bangladesh in increasing numbers.

kk sir u take all the industries of china. happy

 

[IndoUS]

Lets face it China is a developed country now and has immense wealth. Whats the point of having a bustling economy when the people can't afford anything. it is normal, as economy grows people will want more and for that they will need higher income and industries don't like to pay higher income so companies will try to move and find places where they can get cheaper labor cost.

 

[Fanling Monk]

It's all about the food chains. After WWII the US was the manufacturing center of the world and shortly it reached Europe. During the Korean and Vietnam wars Japan was the beneficiary. Shortly after that the Asian Tigers, Korea, Taiwan, Hong Kong and Singapore picked those works that the ones in the higher deemed unprofitable because their workers' cost was higher.

Two decades ago China was ready to accept the works that were about to past down from upper chain because the pay scale of the Tigers' workers reached more or less in parity with the west and Japan. For the next 20 years China will be in the process of passing most of the manufacturing works further down the chain.

It sounds easy enough but it's not. The governments from the lower rung must take actions before the works are coming their ways. They must have laws that are friendly to the investors; they must have the infrastructures so that the raw materials and final products can move in and out quickly: and finally they must educate their workforce ahead of time so that they are capable to accept the works due their way. And the countries who have the above criteria would be the first to benefit.

 

[gpit]

This is actually a pretty sophisticated picture, not as easy as one would perceive superficially.

1) In-land China is still a vast region with very cheap labor, while the labor becomes costly in the coastal areas. Though transport expenses would cancel part of the in-land labor benefit, there is still a price gap allowing manufacturers move to inland. In addition, inland Chinese are also pretty well educated. Infrastructure is impressive, too. Chongqing is a typical example where, if I remember WSJ’s claim correctly, last year export from the in-land mega city increased by 161% YOY!

2) It is only natural evolution for low end industries to fade away in China. The question is where will those industries move into? One can’t assume they will automatically go to low cost countries: there are abundant countries with much lower labor cost than that in China, yet the industries failed to go there but to China. Stable social environment, business friendly bureaucracy, educated labors, reasonably good infrastructure, etc, all these counts. This how makes some Indian arguments laughable when they gleefully taunt “cheap labor China”: India is worse than cheap labor China though India has even cheaper labor, because India lacks business friendly bureaucracy, misses well-educated labors, doesn’t possess sound infrastructure, etc. It is therefore imperative for those candidate countries to invest in education and infrastructure, etc.

Sun-set industries, such as shoes, toys, clothes etc will inevitably decrease in volume in China. Some of them will go upgrade, some will move out. I’m not sure about shoes or toys, but I am a little bit more familiar with garment industry, as my remote cousin is in the business. This industry has already moved many manufacturing plants to Cambodia, Bangladesh, etc. Remaining factories are moving to higher quality garments, for instance taking complex customer order with sophisticated design, high quality materials and by using standardized laboratories for testing colors, dyes, rayon, etc.

 

[IndoUS]

This is actually a pretty sophisticated picture, not as easy as one would perceive superficially.

1) In-land China is still a vast region with very cheap labor, while the labor becomes costly in the coastal areas. Though transport expenses would cancel part of the in-land labor benefit, there is still a price gap allowing manufacturers move to inland. In addition, inland Chinese are also pretty well educated. Infrastructure is impressive, too. Chongqing is a typical example where, if I remember WSJ’s claim correctly, last year export from the in-land mega city increased by 161% YOY!

2) It is only natural evolution for low end industries to fade away in China. The question is where will those industries move into? One can’t assume they will automatically go to low cost countries: there are abundant countries with much lower labor cost than that in China, yet the industries failed to go there but to China. Stable social environment, business friendly bureaucracy, educated labors, reasonably good infrastructure, etc, all these counts. This how makes some Indian arguments laughable when they gleefully taunt “cheap labor China”: India is worse than cheap labor China though India has even cheaper labor, because India lacks business friendly bureaucracy, misses well-educated labors, doesn’t possess sound infrastructure, etc. It is therefore imperative for those candidate countries to invest in education and infrastructure, etc.

Sun-set industries, such as shoes, toys, clothes etc will inevitably decrease in volume in China. Some of them will go upgrade, some will move out. I’m not sure about shoes or toys, but I am a little bit more familiar with garment industry, as my remote cousin is in the business. This industry has already moved many manufacturing plants to Cambodia, Bangladesh, etc. Remaining factories are moving to higher quality garments, for instance taking complex customer order with sophisticated design, high quality materials and by using standardized laboratories for testing colors, dyes, rayon, etc.

Well mate then why does the US have unemployment problems and mounting debt problem. US has far greater living standards, infrastructure and education level. There are steps, and some Countries are farther ahead and some countries are trying to catch up. China had similar problems 20-30 years back and they solved them, US had the same problems during the industrial era. But they all came out good.

 

[Korean]

Lets face it China is a developed country now

No. Developed country - Wikipedia, the free encyclopedia

You won't see China listed anywhere, but will find Taiwan.

Just drive out of China's major cities for an hour and it's still like being time-warped to 19th century.

Whats the point of having a bustling economy when the people can't afford anything.

Another sign that China still is a 3rd world country.

 

[Korean]

China's problem is that before they are ready to stand alone, their wage cost rises faster than the productivity so that foreigners are ready to pack up to leave, some to back home while others in search of other 3rd world countries. All this while China's industrial champions are failing to climb up the value ladder and stuck being cheap goods sellers. The plight of China's domestic brand automakers losing market shares to foreigners is the best example of this, and Haier's continuing struggle to break out of its "cheap" brand positioning in western markets is another.

The current Chinese growth is fueled by massive infrastructure construction, not by the sophistication of Chinese companies adding values to their product. So that happens when the debt-fueled construction stops? A Hard-landing.

 

[Fanling Monk]

I think China still has another 200 million workforce in inland Provence that are ready to join the mainstream and that's why I said it will take another 20 years before China is ready to relinquish some of the manufacturing jobs.

Up to the late 80s in the vicinities of New York Chinatown there were clouded with garment factories that employed about 50,000 Chinese women. All the restaurants and stores in or near Chinatown were greatly benefited. Then all of a sudden they all disappeared overnight in the 90s and the Chinese population was hurt badly financially because many business were closed along with them..

But a good sign is there are garment factories began to emerge is the last couple years all over NY near the Chinese population. I think some segments of manufacturing jobs also in the process of returning to the US as well. Americans seem to value those jobs these days.

 

[Korean]

I think China still has another 200 million workforce in inland Provence that are ready to join the mainstream

I think most of younger age farmers already left their hometowns to become migrant workers.

Beside, as you move your factory inland, the transportation cost rises up and infrastructure is less than impressive. In that case, it's better to relocate to Vietnam's coast cities.

 

[Fanling Monk]

That's why China is building infrastructures and roads/rails in the northwest and southwest to reach neighborhood countries. In the northeast she's using NK's port for an outlet to the Sea of Japan, or Korean Sea as you probably would preferred. Even in Tibet a rail connection to Nepal is planned. So every little thing helps.

 

[FairAndUnbiased]

That's why China is building infrastructures and roads/rails in the northwest and southwest to reach neighborhood countries. In the northeast she's using NK's port for an outlet to the Sea of Japan, or Korean Sea as you probably would preferred. Even in Tibet a rail connection to Nepal is planned. So every little thing helps.

The inland provinces don't need to export to the outside world. They already export to the rest of China.

Sichuan controls something like 70% of China's hydroelectricity resources and half the gas, and Shanxi half the coal. Why do they need to export outside? The biggest market is China itself.

There's also very little advantage to be gained by moving inland. The GDP per capita of all but 4 inland provinces (Tibet, Guizhou, Gansu, Yunnan) is already over 50% of Guangdong's (the 5th poorest, Guangxi, is right at 50%: 3919 USD vs. 7787 USD). More importantly, the other formerly big exporters of labor like Hunan, Hubei and Sichuan are already at 60%-75% of Guangdong, which is the traditional export center of China accounting for 35% of all exports. Guangdong is the most US dependent exporter, with 80% of its exports going to the US. The decline of Guangdong is a decline in export to the US.

I predict a leveling off of exports to the US, while making great gains in Europe, Africa, Latin America, and Southeast Asia.

China's problem is that before they are ready to stand alone, their wage cost rises faster than the productivity so that foreigners are ready to pack up to leave, some to back home while others in search of other 3rd world countries. All this while China's industrial champions are failing to climb up the value ladder and stuck being cheap goods sellers. The plight of China's domestic brand automakers losing market shares to foreigners is the best example of this, and Haier's continuing struggle to break out of its "cheap" brand positioning in western markets is another.

The current Chinese growth is fueled by massive infrastructure construction, not by the sophistication of Chinese companies adding values to their product. So that happens when the debt-fueled construction stops? A Hard-landing.

Sup false flagger. Huawei is the second largest telecom company in the world. It has far more value added than Samsung does.

That's proven by Samsung vs. Huawei's profit margin. The higher the profit margin, the more value added a company does. Otherwise, the profit margin gets eaten up by imported components.

Samsung's profit margin is 7.8%: Samsung Electronics - Wikipedia, the free encyclopedia

Revenue US$ 142.4 billion (2011)[3]
Profit US$ 11.53 billion (2011)

Huawei's profit margin is 64% greater than Samsung's at 12.9%: Huawei - Wikipedia, the free encyclopedia

Revenue CNY 185.176 billion (2010)
Profit CNY 23.8 billion (2010)

 

[ChinaToday]

China's problem is that before they are ready to stand alone, their wage cost rises faster than the productivity so that foreigners are ready to pack up to leave, some to back home while others in search of other 3rd world countries. All this while China's industrial champions are failing to climb up the value ladder and stuck being cheap goods sellers. The plight of China's domestic brand automakers losing market shares to foreigners is the best example of this, and Haier's continuing struggle to break out of its "cheap" brand positioning in western markets is another.

The current Chinese growth is fueled by massive infrastructure construction, not by the sophistication of Chinese companies adding values to their product. So that happens when the debt-fueled construction stops? A Hard-landing.

The current Chinese growth is fueled by massive infrastructure construction, not by the sophistication of Chinese companies adding values to their product. So that happens when the debt-fueled construction stops? A Hard-landing

The massive infrastructure construction was done 4 years ago you fool atleast get your fact right before you open your loud mouth

 

[FairAndUnbiased]

The current Chinese growth is fueled by massive infrastructure construction, not by the sophistication of Chinese companies adding values to their product. So that happens when the debt-fueled construction stops? A Hard-landing

The massive infrastructure construction was done 4 years ago you fool atleast get your fact right before you open your loud mouth

There's no reason to fear debt from massive infrastructure construction. They help the economy in the long run and besides all the debt is in RMB. We can print as much RMB as we want. It'll add to inflation, sure, but as the RMB rises against the USD, inflation actually isn't that bad since oil gets relatively cheaper.

 

[Battle of Bach Dang River]

I think most of younger age farmers already left their hometowns to become migrant workers.

Beside, as you move your factory inland, the transportation cost rises up and infrastructure is less than impressive. In that case, it's better to relocate to Vietnam's coast cities.

Yes, Vietnam is the best place for businesses want model investment China+1

 

[Korean]

Sup false flagger. Huawei is the second largest telecom company in the world.

Telecom Company = Service provider, like AT&T, BT, and NTT.
Telecom Equipment Company = Ericsson, Samsung, Huawei, etc.

That's proven by Samsung vs. Huawei's profit margin. The higher the profit margin, the more value added a company does.

Ok

Otherwise, the profit margin gets eaten up by imported components.

Not necessarily. R&D is a major expense, which is a minor cost to Huawei.

Huawei's profit margin is 64% greater than Samsung's at 12.9%: Huawei - Wikipedia, the free encyclopedia

Revenue CNY 185.176 billion (2010)
Profit CNY 23.8 billion (2010)

Nope, try newer data.

Huawei's 2011 profit drops 53% despite jump in revenue - FierceWireless

Huawei posted net profit of $1.8 billion for 2011, down from $3.9 billion in the year-ago period. Overall revenue rose 11.7 percent to $32.3 billion in 2011.

1.8 billion / 32.3 billion = 5.57%