China’s Export Machine Threatened by Rising Costs
June 30th, 2008 at 02:21pm Bob Trojan
Excerpt from today’s Wall Street Journal……a growing trend??
“HONGHE, China — As a sign over its main boulevard proclaims, Honghe is “China’s Famous Town for Sweaters.” But the economy of sweater town is unraveling, providing an early sign that China’s manufacturing sector may be entering middle age.
Over the past two decades, this city about 90 minutes’ drive from Shanghai built a comfortable niche in the global economy. At the industry’s height in recent years, more than half of Honghe’s 100,000 residents worked in 100 factories and 8,000 shops that knitted, dyed, packaged and shipped some 200 million sweaters a year. The local government says the enterprises brought in $650 million a year in revenue.
Now many exporters and workshops here have shut their doors. Others, their work floors partly idle, are cutting costs. Some of the migrant workers who came here for jobs are returning home.
Manufacturers say their profits have dwindled as they pay out more for raw materials and energy. China’s strengthening currency has made Honghe’s products more expensive for important markets such as the U.S., where the price of Chinese goods surged a record 4.6% in May from the previous year, according to the U.S. Commerce Department. Foreign buyers, used to inexpensive Chinese products and nervous about economic weakness at home, are often refusing to pay more.
Beijing, too, has contributed to the squeeze: Companies say the government’s tougher protection for workers and the environment has made it more expensive to do business. Foreign buyers say tighter visa policies have made it harder for them to visit Chinese factories or attend trade shows.
These pressures are felt by enterprises across China. But none have been hit harder than the companies that feed the vast global appetite for inexpensive goods such as toys, household goods, shoes and clothes. Manufacturers of low-cost products have been a key engine of China’s economic miracle, helping to turn the country into the world’s No. 2 exporter after Germany. For years, these companies continued to grow by expanding their volumes and trimming margins to undercut the competition. As material and labor costs rise and China’s currency strengthens, these manufacturers are among the least able to absorb the costs.
The transformation is most apparent in the boomtowns that tied their fortunes to making one product cheaply, from Guangdong province in the south to Honghe’s environs in the Yangtze River Delta. Many of these manufacturing centers have seen hundreds if not thousands of factories and workshops close in recent months, industry executives say. In Shengzhou, a city near Shanghai that claims to make one-third of the world’s neckties, manufacturers are trying to hold a united front to boost prices. Dongguan, in Guangdong, is seeing makers of toys, shoes and brushes close shop.”
Entry Filed under: Export, Economy, Uncategorized
5 Comments Add your own
1. redrover | July 1st, 2008 at 11:24 am
Linda Grist Cunningham writes:
“but that traditional newspaper in the Rock River Valley isn’t disappearing anytime soon”
That may be true, but it is clear to me that what our daily newspaper actually does has changed dramatically over the last half century or so, and not for the better, in my opinion.
Newspapers used to be as much about advocacy as about advertising. Rockford’s two papers sometimes took different sides on issues of importance to the community, and in so doing fostered public debate on these issues.
The RRStar does publish editorial positions on issues, but I can’t help but conclude from what I’ve seen of them that many of its positions are designed to promote the business interests of its advertisers and shareholders, or at least do them no harm.
And as for what is published in most of the rest of your “traditional paper” as “news”, Ms. Cunningham, much of it seems to me to be mostly about fostering consumption of the things that are advertised in it and hardly ever about promoting critical thinking about issues of importance to the community, many of which, over the years, have been carefully ignored by your publication.
And then there is the lost art, at least in Rockford, of investigative journalism.
When was the last time the RRStar conducted any sort of investigative journalism?
Maybe I’ve been out of the loop, but the last time I remember this happening occurred more than 30 years ago when RRStar reporters went out to follow city workers and catch them goofing off on the job.
Has our town and area become so virtuous since then that there is no longer any reason to go looking under rocks in this Rock River valley?
I think that the “traditional newspaper” disappeared from our town years ago, first with the merger of the Register Republic with the Morning Star, and then with the end of local ownership of those two publications through purchase by Gannett, Inc.
As a result, although we still have a daily newspaper in this town, it more often than not behaves more like a Thrifty Nickel with delusions of grandeur than like a traditional newspaper from back when it really meant something to be one.
This is nothing more than what passes for business as usual in the “race to the bottom”, Mr. Trojan.
Where will we find other workers to exploit as easily and as profitably as we have for so long in China?
Where will we find another government that, like China, will be willing to undercut its environmental and workplace safety regulations in order to promote corporate profit?
Those are the questions that this article’s author, James T. Areddy, is really asking.
http://online.wsj.com/article/SB121479507619315069.html
And it is the inhumanity underlying those questions that has led some of us, like myself, to renounce the devil that is corporate capitalism and all of its works.
2. redrover | July 1st, 2008 at 11:26 am
Sorry, I just accidentally posted something that was posted in another blog. Here is the correct version:
This is nothing more than what passes for business as usual in the “race to the bottom”, Mr. Trojan.
Where will we find other workers to exploit as easily and as profitably as we have for so long in China?
Where will we find another government that, like China, will be willing to undercut its environmental and workplace safety regulations in order to promote corporate profit?
Those are the questions that this article’s author, James T. Areddy, is really asking.
http://online.wsj.com/article/SB121479507619315069.html
And it is the inhumanity underlying those questions that has led some of us, like myself, to renounce the devil that is corporate capitalism and all of its works.
3. Bob Trojan | July 1st, 2008 at 7:09 pm
redrover;
I’ve covered some of your points in an earlier response. I also agree that big corporate America has gotten out of hand in a number of areas. However, some of them still operate with employees and customers as a first priority. It’s unfortunate that a few of them have really made a mess.
My blogs are really meant for those of us who realize, especally in the Rock River Valley, that we manufacturers are mostly small to medium companies, family owned who can operate below the “radar screen” of the big boys. My blogs are intended to provide a vehicle to these companies in the hopes that I can provide some value and perhaps hope, in their daily work lives.
We try, through these blogs, to inform the public and manufacturers about issues dealing with the economy, training, technology, etc. as you can see for the “categories”.
These recent articles that I am quoting from are trying to make the point that I think there may be a reversal of some of the manufacturing that was lost and that we may have opportunities for a return of some of it.
I am sure you will agree that trying to make it better is what we are trying to accomplish. We have to keep trying.
4. redrover | July 2nd, 2008 at 11:17 am
I understand what you are trying to do in your blog, Mr. Trojan, and I respect it.
But unless we all look more deeply into how we got into this mess and what is keeping us here, it does little lasting and meaningful good to have hope.
I guess it’s a little bit like applying a band-aid to skin cancer.
Economic forces are not like the weather. They are not acts of God. They are made by men and can be changed by men.
The Wall Street Journal is now and always has been the propaganda instrument of the men who made and supported the economic and trade policies that stripped our town of its manufacturing jobs.
In my posting, I try to point out the underlying message in the WSJ article you cited so as to encourage others to look beneath the economic news they are reading and root out the messages that are really being presented in those articles.
My hope is that when businessmen and workers begin to do this, they will begin to better understand what they must do to reform this nation’s economic policies, whom they can count on as allies in this struggle, and whom they must recognize as adversaries who are out to deceive, demoralize and defeat them.
Unless we small manufacturers and workers know that we are under economic attack in this country and who the enemy is, we cannot begin to defend ourselves and recapture what we have lost.
In my opinion, that’s the best recipe for real hope for the beleaguered manufacturers and workers in our town — hope that comes from insight and motivates reaction.
5. Bob Trojan | July 2nd, 2008 at 12:07 pm
redrover;
Thanks for your comments; I understand your point of view.
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