The news that Adidas's only factory in China will withdraw from China in October this year once again touched the nerves made by China. According to industry analysts, the withdrawal of foreign brand factories such as Adidas is due to rising domestic costs and is a normal business decision. However, its withdrawal also reminds China that the status of the “world factory†is at stake. In the later period, China's manufacturing industry can no longer continue to rely on low-cost to survive. Focusing on industrial upgrading is the only reason for future development.
Recently, Adidas's only factory in China will withdraw from China in October this year, once again touched the media and the nerves of the industry. Although the news of the transfer of multinational companies’ production lines has become commonplace in recent years, in the first half of the year, the national economy and the growth rate of foreign trade all broke the “8â€, this news still made people worry about where China's manufacturing industries go. “The shift of production lines to places with low costs is normal,†said Hu Min, director of the clothing department of the China Textile Import & Export Chamber of Commerce.
Like Hu Min, most people in the industry pointed out that the rapid increase in costs is the main reason for the current relocation of multinational companies' production lines. However, they also stressed that this does not mean that China should abandon traditional labor-intensive industries. In the long run, China’s competitive advantage is still evident. To improve our overall competitiveness, we must rely on industrial upgrading.
It is normal for "Adimens" to withdraw. "The factories like Adidas generally have high requirements for fabrics, and the requirements for sewing and other processes are relatively low, so the cost is very important." Hu Min said that in view of China's rising labor costs in recent years Fast, it is normal for companies like Adidas to transfer production lines.
In fact, Adidas’s relocation was not a case. As early as March 2009, Nike closed the only footwear factory in China located in Taicang, Jiangsu, and the factory was relocated to Vietnam. In 2011, mainland listed underwear company Lilis expressed that it intends to Move some of the high-cost production lines away from China, expand production in Thailand, and invest in new factories in Cambodia. According to the latest news, Starbucks also recently stated that it intends to close its Chinese factory and return ceramic cup production to the United States...
"It is not necessary to overreact to the closure of the only direct factory in China, such as Nike and Adidas, because the main business of these multinational brands is to manage the brand instead of manufacturing. The majority of the products are from foundries rather than the few directly-owned factories." Researcher Mei Xinyu said.
Wang Yan, secretary-general of the China Garment Association, also pointed out: “With the increasing production costs and peripheral costs in China, internationally operating companies like Adidas choose some countries with lower labor costs to build factories in line with the international environment and corporate needs. of".
According to statistics, Adidas currently has sales of more than 1 billion euros in the Chinese market. In the first quarter of this year, Adidas' global sales revenue increased by 14%, but its gross profit margin decreased by 0.7%. Although overall sales revenue is growing, retail sales revenues with higher profit margins have also increased, but it is still not enough to offset the increased input costs.
“For Nike and Adi, the cost-effectiveness of Chinese manufacturing has no advantage.†Industry analysts said that as an international company, Adidas' supply chain system is more sensitive. Once a certain market's supply advantage no longer exists, it will naturally Deported from the supply chain.
The main reason for the unsustainable cost advantage is that “the cost of export products remains high, which has greatly weakened the competitiveness of Chinese products in the international market,†said Jiang Jichun, chairman of Hangzhou International Garment City. Like him, many people in the industry believe that the rising cost of domestic labor or the main reason for the withdrawal of Adidas and other brands.
According to a research report of a foreign institution, at present, the monthly average wage of employees of Chinese textile manufacturing enterprises is 188 to 300 euros, while Bangladesh only has about 80 euros, and Vietnam does not reach 120 euros. China’s average labor cost is more than twice that of Southeast Asian countries.
It is worth noting that, in addition to the minimum wage, China also has mandatory insurance and other welfare expenditures, plus these wage costs will rise 40% to 50%. Reports have pointed out that emerging manufacturing industries such as India have uniform welfare spending in addition to wages, but this expenditure is either ignored or accounts for up to 10% of wages. “One year's salary costs have risen by 20%. The rise for two years in a row has caused companies to overwhelm. For profit considerations, companies sometimes have orders that they dare not pick up.†People told reporters.
Under the influence of increasing cost pressures, the market share of some of China’s traditional labor-intensive export products in Europe, Japan, and the United States has also declined significantly.
Customs statistics show that during the first five months of this year, China’s seven major categories of labor-intensive products such as textiles, clothing, bags, footwear, toys, furniture, and plastic products had a market share of 63.3% in Japan’s imports of similar products, down 0.4 percentage point. In the same period, the share of similar products in Vietnam, Indonesia and Bangladesh in the Japanese market increased by 0.7, 0.2 and 0.2 percentage points respectively.
In this regard, An Jun Consulting senior researcher He Jun believes that in China's economic transformation strategy, industrial upgrading is an important move, and can even determine the success or failure of structural adjustment. "Made in China" has become more expensive than ever. Cost increases are a long-term trend in China. However, whether it is the development of new industries or the transformation of old ones, it is impossible to circumvent the high costs of cities.
Industry insiders expect that as the pace of China's manufacturing transformation and upgrading is further accelerated, more and more multinational companies will shift their production lines to Southeast Asian countries and even their own countries.
The new competitive advantage has not yet formed. “The former developed countries have seized high-end manufacturing industries, and emerging countries have undertaken the transfer of low-end and middle-end manufacturing industries.†Insiders pointed out that with the loss of cost advantages, new competitive advantages have not yet formed. The "world factory" is getting further and further away.
In this regard, Mei Xinyu stated that the competitiveness of China’s manufacturing industry and exports is not only due to low costs, but also has the advantage that other countries have difficulties in the short term. of. However, he also stated that reducing the dependence on "cost advantage" will be a long-term task facing China. "Now we must seize the limited time to achieve industrial upgrading and seek technological and product technological breakthroughs." The surveyed experts generally believe that.
However, some experts still have reservations about whether the Chinese mainland can upgrade from a labour-intensive “world factory†to a higher-end, technology-intensive industry from the current wave of foreign manufacturing evacuation. When interviewed by the media, Liu Yan, an associate professor at Southwestern University of Finance and Economics, pointed out: "China's population base is too large. It is very difficult for Japan and South Korea to be as light as China's Taiwan. It will shift the low-end labor force left by foreign capital to high-end." Liu He believes that at the moment, China must consider industrial upgrading and consider also absorbing this part of the labor force.
Hu Min also believes that labor-intensive industries are generally closely related to the lives of ordinary people. It is obviously impossible to give up this advantage prematurely, but it is also worthwhile to insist that transformation and upgrading are debatable. After all, some small businesses do not have the strength to transform and upgrade. “Currently companies go outâ€, mainly through the acquisition of small and medium-sized foreign brands, with their advanced design concepts and technologies to improve their own products. But the economic downturn in Europe and the United States, the company's 'going out' road is not as you think. Smooth," said Jiang Jichun.
In view of the above situation, Hu Min suggested that the relevant departments must promote the transformation and upgrading of powerful large-scale enterprises, give up some low-value-added industries and build their own brands; on the other hand, they should also properly retain some low-end industries. Guide enterprises to improve quality in order to cope with increasingly fierce market competition.
Recently, Adidas's only factory in China will withdraw from China in October this year, once again touched the media and the nerves of the industry. Although the news of the transfer of multinational companies’ production lines has become commonplace in recent years, in the first half of the year, the national economy and the growth rate of foreign trade all broke the “8â€, this news still made people worry about where China's manufacturing industries go. “The shift of production lines to places with low costs is normal,†said Hu Min, director of the clothing department of the China Textile Import & Export Chamber of Commerce.
Like Hu Min, most people in the industry pointed out that the rapid increase in costs is the main reason for the current relocation of multinational companies' production lines. However, they also stressed that this does not mean that China should abandon traditional labor-intensive industries. In the long run, China’s competitive advantage is still evident. To improve our overall competitiveness, we must rely on industrial upgrading.
It is normal for "Adimens" to withdraw. "The factories like Adidas generally have high requirements for fabrics, and the requirements for sewing and other processes are relatively low, so the cost is very important." Hu Min said that in view of China's rising labor costs in recent years Fast, it is normal for companies like Adidas to transfer production lines.
In fact, Adidas’s relocation was not a case. As early as March 2009, Nike closed the only footwear factory in China located in Taicang, Jiangsu, and the factory was relocated to Vietnam. In 2011, mainland listed underwear company Lilis expressed that it intends to Move some of the high-cost production lines away from China, expand production in Thailand, and invest in new factories in Cambodia. According to the latest news, Starbucks also recently stated that it intends to close its Chinese factory and return ceramic cup production to the United States...
"It is not necessary to overreact to the closure of the only direct factory in China, such as Nike and Adidas, because the main business of these multinational brands is to manage the brand instead of manufacturing. The majority of the products are from foundries rather than the few directly-owned factories." Researcher Mei Xinyu said.
Wang Yan, secretary-general of the China Garment Association, also pointed out: “With the increasing production costs and peripheral costs in China, internationally operating companies like Adidas choose some countries with lower labor costs to build factories in line with the international environment and corporate needs. of".
According to statistics, Adidas currently has sales of more than 1 billion euros in the Chinese market. In the first quarter of this year, Adidas' global sales revenue increased by 14%, but its gross profit margin decreased by 0.7%. Although overall sales revenue is growing, retail sales revenues with higher profit margins have also increased, but it is still not enough to offset the increased input costs.
“For Nike and Adi, the cost-effectiveness of Chinese manufacturing has no advantage.†Industry analysts said that as an international company, Adidas' supply chain system is more sensitive. Once a certain market's supply advantage no longer exists, it will naturally Deported from the supply chain.
The main reason for the unsustainable cost advantage is that “the cost of export products remains high, which has greatly weakened the competitiveness of Chinese products in the international market,†said Jiang Jichun, chairman of Hangzhou International Garment City. Like him, many people in the industry believe that the rising cost of domestic labor or the main reason for the withdrawal of Adidas and other brands.
According to a research report of a foreign institution, at present, the monthly average wage of employees of Chinese textile manufacturing enterprises is 188 to 300 euros, while Bangladesh only has about 80 euros, and Vietnam does not reach 120 euros. China’s average labor cost is more than twice that of Southeast Asian countries.
It is worth noting that, in addition to the minimum wage, China also has mandatory insurance and other welfare expenditures, plus these wage costs will rise 40% to 50%. Reports have pointed out that emerging manufacturing industries such as India have uniform welfare spending in addition to wages, but this expenditure is either ignored or accounts for up to 10% of wages. “One year's salary costs have risen by 20%. The rise for two years in a row has caused companies to overwhelm. For profit considerations, companies sometimes have orders that they dare not pick up.†People told reporters.
Under the influence of increasing cost pressures, the market share of some of China’s traditional labor-intensive export products in Europe, Japan, and the United States has also declined significantly.
Customs statistics show that during the first five months of this year, China’s seven major categories of labor-intensive products such as textiles, clothing, bags, footwear, toys, furniture, and plastic products had a market share of 63.3% in Japan’s imports of similar products, down 0.4 percentage point. In the same period, the share of similar products in Vietnam, Indonesia and Bangladesh in the Japanese market increased by 0.7, 0.2 and 0.2 percentage points respectively.
In this regard, An Jun Consulting senior researcher He Jun believes that in China's economic transformation strategy, industrial upgrading is an important move, and can even determine the success or failure of structural adjustment. "Made in China" has become more expensive than ever. Cost increases are a long-term trend in China. However, whether it is the development of new industries or the transformation of old ones, it is impossible to circumvent the high costs of cities.
Industry insiders expect that as the pace of China's manufacturing transformation and upgrading is further accelerated, more and more multinational companies will shift their production lines to Southeast Asian countries and even their own countries.
The new competitive advantage has not yet formed. “The former developed countries have seized high-end manufacturing industries, and emerging countries have undertaken the transfer of low-end and middle-end manufacturing industries.†Insiders pointed out that with the loss of cost advantages, new competitive advantages have not yet formed. The "world factory" is getting further and further away.
In this regard, Mei Xinyu stated that the competitiveness of China’s manufacturing industry and exports is not only due to low costs, but also has the advantage that other countries have difficulties in the short term. of. However, he also stated that reducing the dependence on "cost advantage" will be a long-term task facing China. "Now we must seize the limited time to achieve industrial upgrading and seek technological and product technological breakthroughs." The surveyed experts generally believe that.
However, some experts still have reservations about whether the Chinese mainland can upgrade from a labour-intensive “world factory†to a higher-end, technology-intensive industry from the current wave of foreign manufacturing evacuation. When interviewed by the media, Liu Yan, an associate professor at Southwestern University of Finance and Economics, pointed out: "China's population base is too large. It is very difficult for Japan and South Korea to be as light as China's Taiwan. It will shift the low-end labor force left by foreign capital to high-end." Liu He believes that at the moment, China must consider industrial upgrading and consider also absorbing this part of the labor force.
Hu Min also believes that labor-intensive industries are generally closely related to the lives of ordinary people. It is obviously impossible to give up this advantage prematurely, but it is also worthwhile to insist that transformation and upgrading are debatable. After all, some small businesses do not have the strength to transform and upgrade. “Currently companies go outâ€, mainly through the acquisition of small and medium-sized foreign brands, with their advanced design concepts and technologies to improve their own products. But the economic downturn in Europe and the United States, the company's 'going out' road is not as you think. Smooth," said Jiang Jichun.
In view of the above situation, Hu Min suggested that the relevant departments must promote the transformation and upgrading of powerful large-scale enterprises, give up some low-value-added industries and build their own brands; on the other hand, they should also properly retain some low-end industries. Guide enterprises to improve quality in order to cope with increasingly fierce market competition.
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