Manufacturers are struggling on weak external demand and rising costs19 July, 2012, 3:49. Posted by Zarathustra
By now, we are sure that everyone is familiar with stories about weakening external demand and rising costs, which place enormous pressure on manufacturers in China.
Yesterday, we read about Addidas’ intention to close its only fully owned factory in Suzhou of China. According to Yicai, more and more manufacturing companies are moving their production lines away from coastal China to Western of China, or even South East Asia. That is consistent with what most people’s understanding of this matter, that China no longer has the labour costs advantage as the country used to have in the past due to variety of reasons. Addidas, for instance, cited the rapidly rising minimum wage as one of the key reasons why they considered moving.
|By Steve Jurvetson from Menlo Park, USA (glue worksUploaded by Zolo) [CC-BY-2.0], via Wikimedia Commons|
The difficult situation for manufacturers is wide-spread in places where exporters are concentrated in. According to Yicai, manufacturers in Donguang are closing down their production. One shoes manufacturer which used to employ more than 7,000 workers at its peak will be closed down soon. Again, the theme remains the same: weak external demand and rising labour costs are forcing manufacturers to consider moving away from coastal cities like Donguang to further west in China.
The picture is certainly not pretty, although not unexpected given the current external environment.