Industry News

The dilemma facing China's manufacturing industry is concerned

Updated:04-09-2019
Summary:

  With the relocation of the factories of Adi and […]

 

With the relocation of the factories of Adi and Nike, the difficulties faced by Chinese manufacturing industry have attracted more and more attention. At present, China's manufacturing industry is facing the dilemma of deteriorating investment and operating environment and severe overcapacity. The rapid expansion of the manufacturing bubble has become the soft underbelly of the Chinese economy. As China's natural energy consumption and resource-based product prices are irreversible, manufacturing manufacturing costs are rising, and China's manufacturing low-cost advantage is being lost. More importantly, China is also facing the dual pressure of developed countries to return to manufacturing and accelerate the catch-up of developing countries. Their traditional extensive growth mode is in full swing.

For a long time, China's export-oriented economy and foreign investment strategy are inseparable. Foreign capital uses China's cheap production factors to make China into the ranks of globalization, making China a veritable "world processing factory." As such, China itself has become a manufacturing power that is comparable to the United States and Japan. The most striking manifestation is that China has suddenly become the world's largest producer of steel, cameras, toys, sporting goods, shoes, clothing, textiles, television, mobile phones, pens, as long as you want.

However, a few years after the financial crisis, the comparative advantage of China's manufacturing industry and these countries has changed significantly due to the recovery of manufacturing in developed countries such as the United States and Germany and the rise of manufacturing in emerging countries such as India and Mexico. For example, with the collapse of many companies, the once prosperous manufacturing center, the manufacturing industry in Dongguan, Guangdong, is on the verge of bankruptcy, causing a serious shortage of funds for the local government.

Just two years after China overtook the United States to become the world's largest manufacturer, it faces the prospect of “de-industrialization” in the coming decades, and China has little to stop this trend. A report from the US think tank predicts that by 2015, US-made products will likely lead China in terms of goods sold in the United States.

Through analysis, we find that there are three main reasons for the loss of China's manufacturing advantage:

The first is China's increasing production costs. The most important factor in eroding China's competitive advantage is the labor force, which is why the original foreign companies came to China. The large total labor force and low cost have been the prominent comparative advantages of China's manufacturing industry. With the change of population structure, this advantage is continuously lost.

According to the person in charge of the General Statistics Department of the General Administration of Customs, at the end of 2011, the General Administration of Customs conducted a questionnaire survey on 1,856 export enterprises, arguing that enterprises with rising labor costs were as high as 80.4%. According to a research report by a foreign-funded institution, the average monthly salary of employees of Chinese textile manufacturing enterprises is 188 euros to 300 euros (about 1531.8 to 2244.37 yuan), while Bangladesh has only 80 euros (about 651.8 yuan), Vietnam. It is also less than 120 euros (about 977.74 yuan). From this point of view, China's average labor cost is two to three times that of Southeast Asia.

Second, there is a lack of globally recognized brands. Compared with manufacturing in the US, Japan and Europe, China's manufacturing industry is still lagging behind in important factors such as technology, quality control, management, expertise and other high-end manufacturing. For more than 20 years, the lack of core technology has always been considered a curse that hangs over the fate of "Made in China."

After the reform and opening up, GM, Caterpillar, Nike, Volkswagen, Toyota and other transfer of production bases to China, but China still can not replace the "head" of these brand holders. This "head", for industrial products, at least includes two things: one is technology, and the other is brand. For more than a decade, China has established an “empire” called the “cheap” factory in the world. Despite its abundant resources and manpower, China still lacks a globally recognized brand.

The third is the appreciation of the renminbi. For example, people who bought the goods from China after the renminbi appreciated, and bought the same quality and quantity of goods, foreign companies will have to pay millions of dollars or more to buy. And because of the appreciation of the renminbi, some people will use this to create a psychological effect on China that is unfavorable to China. That is, people may think that the price of products from China will rise without any specific analysis, and foreign companies will think that they will go to China. Imported products will not make much money, and it is also not conducive to the introduction of foreign capital, resulting in capital outflows.

Based on this, China's manufacturing industry is increasingly lacking in competitiveness and becoming more and more hollow. Due to the continuous compression of domestic manufacturing profits and limited export of products, many labor-intensive industries are accelerating the pace of external migration. Some small enterprises in Vietnam mainly carry out simple processing of raw materials. On the one hand, they can directly sell in the local market. On the other hand, they can be exported to Europe, the United States and even shipped back to China.

The loss of China's manufacturing advantage has undoubtedly sounded the alarm. It is imperative to reposition China's manufacturing. This is both an arduous task and a hurdle that must be overcome. However, whether corporate transformation or fierce competition is painful, it will pay a huge price. The rise in the rate of bank failures in the past two years is evidence. However, the transformation marks the improvement of the quality of Chinese enterprises, and competition can experience the maturity of Chinese enterprises.

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