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http://www.wsws.org/articles/2008/mar2008/chin-m17.shtml

Rising costs throw Chinese manufacturing into crisis
By John Chan
17 March 2008
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For years, China’s cheap labour has helped global corporations push down the wages and conditions of workers around the world. Cheap goods churned out by sweatshops based in China also kept inflation low internationally and underpinned the low interest rate policy in the US that fuelled its financial and housing bubbles.
All this is coming to an end
.
Thousands of manufacturers have shut down or moved out of China
because of rising raw materials costs, higher wages and the rise of the yuan against the US dollar. These processes are in turn accelerating inflationary pressures, not just within China, but internationally.
Small and medium firms (with capital under $US3 million) in China’s light industries, such as shoes and textiles, have been hard hit. The Financial Times (FT) on March 2 reported that one in six Chinese textile companies lost money last year, even though export prices increased 8 percent. According to the China National Textile and Apparel Council, growing wages and a weaker US dollar are squeezing the textile industry’s profit margins.
The textile sector’s average profit margin is 3.9 percent, but the bottom two-thirds of companies are struggling on an average margin of just 0.74 percent. While textile exports grew 19 percent last year to $US175.6 billion, national textile council chairman Du Yuzhou told the FT the industry was “relentless at weeding out the weak”, with large corporations absorbing smaller bankrupt firms. Amid a wave of industrial restructuring, many corporations are shifting production to inland provinces or countries such as Vietnam, Indonesia and India, seeking cheaper labour.
The Asia Footwear Association estimates that about
15 percent of shoe makers in Dongguan—a major export hub in Guangdong’s Pearl River Delta—have shut down or relocated in the past year.
During that time, more than 1,000 mainly small and medium footwear factories have closed throughout the province—out of a total of 7,000-8,000. The Federation of Hong Kong Industries predicts that 10 percent of the 60,000-70,000 Hong Kong-owned factories in the delta will close this year. Many factories chose to shut before January 1—when limited new labour laws take effect, requiring employers to sign long-term contracts with workers, pay social security insurance premiums and provide higher compensation for layoffs.
A Hong Kong shoe factory owner, Leung Ka-yiu, who was planning to move his operations to Vietnam told Asia Times that since 2006 the Chinese government had been implementing polices that were unfavourable to the export processing. The measures included heavier taxes for foreign investors and reduced tax rebates for exports. “The labour law can be said to be the last push for me to leave,” he said. “If the law is strictly followed, my factory’s labour cost will increase by 20 percent, which many shoe factories like mine cannot afford, given our profit margin of about 8 percent.” He laid off two-thirds of his workers in December.
Zhu Yongxin, a shoe factory owner in Foshan, Guangdong province, complained that the cost of steel for buttons had trebled from 20,000 yuan a tonne in 2004 to more than 60,000 yuan. Oil for sewing machines cost 75 yuan a barrel—up from 60 yuan a year ago. The cost of unskilled labour had risen to around 1,200 yuan ($US168) a month from 800 yuan two years ago. Skilled workers must now be paid 1,500-2,000 yuan. Zhu said he planned to move the factory to inland Hunan province.
..../

Chinese Boom Economy: good bye.

Edited by Realistbear

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http://www.wsws.org/articles/2008/mar2008/chin-m17.shtml
Rising costs throw Chinese manufacturing into crisis
By John Chan
17 March 2008
Use this version to print | Send this link by email | Email the author
For years, China’s cheap labour has helped global corporations push down the wages and conditions of workers around the world. Cheap goods churned out by sweatshops based in China also kept inflation low internationally and underpinned the low interest rate policy in the US that fuelled its financial and housing bubbles.
All this is coming to an end
.
Thousands of manufacturers have shut down or moved out of China
because of rising raw materials costs, higher wages and the rise of the yuan against the US dollar. These processes are in turn accelerating inflationary pressures, not just within China, but internationally.
Small and medium firms (with capital under $US3 million) in China’s light industries, such as shoes and textiles, have been hard hit. The Financial Times (FT) on March 2 reported that one in six Chinese textile companies lost money last year, even though export prices increased 8 percent. According to the China National Textile and Apparel Council, growing wages and a weaker US dollar are squeezing the textile industry’s profit margins.
The textile sector’s average profit margin is 3.9 percent, but the bottom two-thirds of companies are struggling on an average margin of just 0.74 percent. While textile exports grew 19 percent last year to $US175.6 billion, national textile council chairman Du Yuzhou told the FT the industry was “relentless at weeding out the weak”, with large corporations absorbing smaller bankrupt firms. Amid a wave of industrial restructuring, many corporations are shifting production to inland provinces or countries such as Vietnam, Indonesia and India, seeking cheaper labour.
The Asia Footwear Association estimates that about
15 percent of shoe makers in Dongguan—a major export hub in Guangdong’s Pearl River Delta—have shut down or relocated in the past year.
During that time, more than 1,000 mainly small and medium footwear factories have closed throughout the province—out of a total of 7,000-8,000. The Federation of Hong Kong Industries predicts that 10 percent of the 60,000-70,000 Hong Kong-owned factories in the delta will close this year. Many factories chose to shut before January 1—when limited new labour laws take effect, requiring employers to sign long-term contracts with workers, pay social security insurance premiums and provide higher compensation for layoffs.
A Hong Kong shoe factory owner, Leung Ka-yiu, who was planning to move his operations to Vietnam told Asia Times that since 2006 the Chinese government had been implementing polices that were unfavourable to the export processing. The measures included heavier taxes for foreign investors and reduced tax rebates for exports. “The labour law can be said to be the last push for me to leave,” he said. “If the law is strictly followed, my factory’s labour cost will increase by 20 percent, which many shoe factories like mine cannot afford, given our profit margin of about 8 percent.” He laid off two-thirds of his workers in December.
Zhu Yongxin, a shoe factory owner in Foshan, Guangdong province, complained that the cost of steel for buttons had trebled from 20,000 yuan a tonne in 2004 to more than 60,000 yuan. Oil for sewing machines cost 75 yuan a barrel—up from 60 yuan a year ago. The cost of unskilled labour had risen to around 1,200 yuan ($US168) a month from 800 yuan two years ago. Skilled workers must now be paid 1,500-2,000 yuan. Zhu said he planned to move the factory to inland Hunan province.
..../

Chinese Boom Economy: good bye.

I was never convinced by the Chinese economic miracle!!

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I've been waiting for this. All that nonsense about "if you want to get on, learn Chinese" reminded me that in 1997 it was the Tiger economies about to dominate the world. Then their economies collapsed.

History rhymes.

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They're relocating to the cheap labour interior provinces as the Chinese motorway network expands just like the US did back in the 1950's. Sichuan & Chonquin here we come ;)

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I was never convinced by the Chinese economic miracle!!

not so much a miracle though, more like hard work.

nothing will stop the growth of india and china - theyve now got the liquidity to develop their own economy. after a few years they wont even need to export theyll just supply their own markets, and what a market it will be.

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I was never convinced by the Chinese economic miracle!!

I've posted before on here before anecdotals that china has undergone just as much of a property bubble as everyone else. Don't look to China to do anything to help with the mess.

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Amid a wave of industrial restructuring, many corporations are shifting production to inland provinces or countries such as Vietnam, Indonesia and India, seeking cheaper labour.

A Hong Kong shoe factory owner, Leung Ka-yiu, who was planning to move his operations to Vietnam told Asia Times that since 2006 the Chinese government had been implementing polices that were unfavourable to the export processing.

Chinese Boom Economy: good bye.

This is yesterdays news and was forecasted and expected to happen early last year, more good news for Asian countries.

We have been living through one of the largest transformations in the structure of the global economy, as far as Australia is concerned, for a century. The rise in the terms of trade over the past five years is the biggest such event since the Korean War boom in the early 1950s. But while the Korean War event was a temporary one, all the indications are that the rise of China is not just a cyclical event, but a structural change of the first order. China certainly has a business cycle, like all other economies, and will slow at some point. Even so, it is highly likely that, short of some catastrophic event, China has many years of strong growth still ahead. It will not be at the 11 per cent per annum pace of the past couple of years, and there will be periods of weakness and instability. But the rise of China is not a flash in the pan of economic history.

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I was talking about this back in July, Cambodia has now grown since then using the same formula we used on China. Bring in managers and technicians from China and use labour from the local area, Thailand, Vietnam etc and cut out the Western managers and techs.

http://www.housepricecrash.co.uk/forum/ind...st&p=690740

Edited by maxwell

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China has already achieved a critical mass required for industrial development. Shoe and textile factories may close or not, they were the first wave of low tech investment. Higher tech industries like car plants, aerospace factories and their thousands of suppliers will flourish. Wealth creation will continue in China.

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Sorry to distub the status quo, bearing in mind chinas position WRT sov wealth funds, why shouldnt we believe this is just a repricing /consolodation phase that every capatailst setup has to go through from time to time? All that is happening is the less mature/less competative producers are going bust, there is nothing to suggest china's market share in cheap tat/consumerist goods is about to collapse.

What we should be more concerned about is how they intend to use their absolutely enormous capital they have absorbed on the world stage; I fear this far more than anything else. China acknowledged post-vietnm it would struggle militarity in fighting its primary foe, IE the US, why bother going o all the pain of fighting militarily when you can destroy a nation by producing cheap crap and selling it to your enemy, making yourself a packet whilst debasing your foe's currency?

The only thing that matters in my book is productivity. Without productivity, you might as well live in a cave. The UK does not produce anything these days, just look at out trade (in)balance.

You can get all bullish about the african/thai/cambodian economy, unfortunately, I dont think they have it in them.

China is the future IMHO.

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China has already achieved a critical mass required for industrial development. Shoe and textile factories may close or not, they were the first wave of low tech investment. Higher tech industries like car plants, aerospace factories and their thousands of suppliers will flourish. Wealth creation will continue in China.

Two new power stations a week, massive social capital investment , roads, bridges, hospitals, schools, houses, 14000 new drivers a day, telecom, broadband, education, the most internet users and growing, biggest mobile phone market, cashed up banks............

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You can get all bullish about the african/thai/cambodian economy, unfortunately, I dont think they have it in them.

China is the future IMHO.

I'm saying that China will be doing even better than before, perhaps without the growth. Cambodia/Thai etc will make some money but China will have the profit and control. Using one place Cambodia as an example, the Chinese already holiday in there although it's more business Dubai gambling, drugs and prostitution affair, Japan have seen the future and are investing in these areas as a counter attack.

Just look at North Africa and the way China swept in and started digging out resources, the UK and USA had been doing this for years but China were unwelcome. They also sold back to North Africa who are the biggest buyers of Chinese cars after the Middle East. Sudan is bombing West Darfur rebels using planes, China is being asked to assist in the area and provide stability. There are hundreds of tiny battles being fought by proxy througout the area, I reckon this is the third world war, a mixture of massive economic actions alongside minor military actions on key pressure points. Iraq was the wrong way to do it, Africa was the right way.

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I'm saying that China will be doing even better than before, perhaps without the growth. Cambodia/Thai etc will make some money but China will have the profit and control. Using one place Cambodia as an example, the Chinese already holiday in there although it's more business Dubai gambling, drugs and prostitution affair, Japan have seen the future and are investing in these areas as a counter attack.

Just look at North Africa and the way China swept in and started digging out resources, the UK and USA had been doing this for years but China were unwelcome. They also sold back to North Africa who are the biggest buyers of Chinese cars after the Middle East. Sudan is bombing West Darfur rebels using planes, China is being asked to assist in the area and provide stability. There are hundreds of tiny battles being fought by proxy througout the area, I reckon this is the third world war, a mixture of massive economic actions alongside minor military actions on key pressure points. Iraq was the wrong way to do it, Africa was the right way.

Agreed. Wars from now on will not be based on control of borders, but for control of resources.

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All very well controlling raw materials and resources, but they're not so useful if instead of being used in situ, in properly functioning local economies from which the profits can be repatriated, they have to be carted off back to the home economy via slow, fragile bulk carriers and tenuous pipelines if there's a proper shooting war going on.

Not really in anyone's interest for these peripheral proxy scuffles to get beyond the armalite-and-espadrilles stage? Will WWIII be avoided by the masters of the universe at any cost?

Or should I be looking to sink some money in gargantuan stealth submarines? ;)

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China will be entering recession when oil hits $150, just the same as western economies. Global economic growth will splutter out at $200 oil

Edited by Lander

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China will be entering recession when oil hits $150, just the same as western economies. Global economic growth will splutter out at $200 oil

China's state-run Zhuhai Zhenrong Corp, the biggest buyer of Iranian crude worldwide, began paying for its oil in euros late 2006. Iran has an oil bourse open as of February 17 2008. Japan pays for the same oil in Yen, Russia in Rubles.

Iran had the world's second largest reserves of conventional crude oil (According to Wikipedia so may be wrong.)

http://business.scotsman.com/latest.cfm?id=474362007

Not that $200 oil wouldn't cause China the same problems when the USA buys it instead of themselves.

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I've been waiting for this. All that nonsense about "if you want to get on, learn Chinese" reminded me that in 1997 it was the Tiger economies about to dominate the world. Then their economies collapsed.

History rhymes.

I wouldnt put off those mandarin lessons just yet.

China is a huge country that has had boom times for the past several years.

they are in a position similar to America in the late 1920's.

yes they will likely have a bust, and it might even last as long as America's did.

but they still have massive amounts of natural growth and development ahead of them, with a serious work ethic.

America came out of it's slump, and the war, to go on to be the leading world economy for the next 60 years.

I would not be surprised to see China fill a similar position. (if they can get a little democracy together)

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I would not be surprised to see China fill a similar position. (if they can get a little democracy together)

Only business people like China.

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Only business people like China.

Yes, they outsource manufacturing cheaply there, then file derisory tax returns in a convenient tax haven. Then wonder why the economies they have successfully decoupled from are going south rapidly. Hopefully they will sell in China.

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Air China Says 2007 Net Profit Up 57 Pct

SHANGHAI, China - Chinese flag carrier Air China Ltd. reported Tuesday that its net profit surged 57 percent in 2007, helped by the stronger Chinese currency and robust investment returns. The Beijing-based airline, poised for soaring passenger traffic growth thanks to the 2008 Summer Olympic Games, said its net profit for 2007 was 4.23 billion yuan (US$596.9 million; euro378.5 million), up from 2.69 billion yuan in 2006.

Revenues rose to 51.3 billion yuan (US$7.2 billion; euro4.6 billion) in 2007 from 44.9 billion yuan (US$6.3 billion; euro4 billion). The Chinese yuan's rise to record highs against the U.S. dollar has worked in favor of airlines due to their substantial dollar-denominated debts.

Air China's 17.5 percent stake in Hong Kong-based Cathay Pacific Airways Ltd. (other-otc: CPCAY.PK - news - people ) also boosted its earnings. Cathay Pacific reported a 72 percent jump in its 2007 net profit earlier this month.

Air China said the number of passengers it carried in 2007 climbed 10.6 percent to 34.8 million passengers, up from 31.5 million in 2006.

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I wouldnt put off those mandarin lessons just yet.

China is a huge country that has had boom times for the past several years.

they are in a position similar to America in the late 1920's.

yes they will likely have a bust, and it might even last as long as America's did.

but they still have massive amounts of natural growth and development ahead of them, with a serious work ethic.

America came out of it's slump, and the war, to go on to be the leading world economy for the next 60 years.

I would not be surprised to see China fill a similar position. (if they can get a little democracy together)

Rubbish, China is not even close.

The US had/has millions of acres of farmland enough to feed its 1920's population.

A major supply of crude oil in its own backyard.

A compliant third world full of cheap and easily exploitable natural resources.s

China has become an industrial superpower at precisely the wrong time it barely has enough land to feed its population itself or provide energy.

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Two new power stations a week, massive social capital investment , roads, bridges, hospitals, schools, houses, 14000 new drivers a day, telecom, broadband, education, the most internet users and growing, biggest mobile phone market, cashed up banks............

... 60m tonnes of iron ore stockpiled in February up from 48m in mid-January, steel exports down 33% month-on-month in February, steel exports forecast to drop 20% in 2008, crude steel production forecast to grow 10% in 2008...

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... 60m tonnes of iron ore stockpiled in February up from 48m in mid-January, steel exports down 33% month-on-month in February, steel exports forecast to drop 20% in 2008, crude steel production forecast to grow 10% in 2008...

more good news for China

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  • 294 Brexit, House prices and Summer 2020

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