The transformation of "Made in China"

Since last year, customers who purchase Vanke Eslite shirts will find that the label is no longer just “Made in China” but “Made in Bangladesh”.

These shirts are from the Nantong Xingao Printing and Dyeing Co., Ltd. factory in Bangladesh. Xingao is a company that manufactures products for Vanke Eslite. It started to invest in Bangladesh a few years ago.

This is not a case. Driven by factors such as rising labor wages in China, appreciation of the renminbi, and rising raw material prices, the advantages of “Made in China” began to fade.

As a "world factory", China has attracted a number of foreign manufacturers, but now they have embarked on the road of return. Former Apple CEO Steve Jobs once told Obama that the job of producing the iPhone will not return to the United States, but Apple has decided this year to invest hundreds of millions of dollars to build a production line in the United States.

Historically, the manufacturing center first moved from Europe to the United States, then from the United States to Japan and South Korea, and then to emerging economies such as China. "The rising cost of production and operation and the relocation of manufacturing industries are an inevitable process." Liu Jiejiao of the Institute of Industrial Economics of the Chinese Academy of Social Sciences told this newspaper.

Rising labor costs

Last summer, Adidas announced that it would close the only factory in China and cancel the contract with ten foundry factories, thus triggering discussions about the “Made in China”.

Adidas explained to the newspaper that the closure of the Suzhou plant is because it will enable the group to have a unified procurement structure, play a scale effect and reduce the complexity; and terminate the contract with ten suppliers because it is optimizing the procurement structure. At present, Adidas still has cooperation with more than 300 foundries in China.

"China used to be an important purchasing market for the Adidas Group in the future," said Adidas. The Group currently purchases 40% of its global purchases from China.

According to reports, Adidas’ wages in Suzhou workers exceeded 3,000 yuan. In contrast, the monthly salary of Adidas' workers in Cambodia in Southeast Asia is $130, less than one-third of the wages of Suzhou workers.

The rise in labor costs in China has become one of the risks in the eyes of foreign companies in China. According to a survey conducted by the American Chamber of Commerce in China, 47% of respondents believe that labor costs have become the biggest risk facing enterprises. The basic wage of China's labor force has been increasing year by year in the past few years. According to a survey by Standard Chartered Bank, rising labor costs have led companies in China to consider transferring factories. The most popular foreign alternative investment destinations are Cambodia, Bangladesh and Vietnam.

After Adidas closed the Suzhou plant, it was speculated that the Suzhou production line would move to Southeast Asian countries. Adidas said that the closed factory did not migrate to any other place, but in the face of rising labor costs in China, Adidas also realized the challenges. In a written response to the newspaper, Adidas said: "Although there have been rising labor costs and rising raw material prices in China and elsewhere, these are only one of the many cost factors in order to ease the input costs. As we rise, we are constantly rethinking our purchasing behavior."

Apple Inc. of the United States has made it clear that it will transfer some of its Apple computer production lines in China back to the US this year. Under the call of the US to revive the manufacturing industry, the former "Made in China" began to return more to the United States. The risk of “industry hollowing out” is hard to ignore in China.

Anglo-American Revelation

In fact, developed countries such as the United Kingdom and the United States have long encountered the problem of "industry hollowing out". Now, they are trying their best to make up for it.

In March 2013, British media reported that British food producer Symington plans to move noodle production from Guangzhou back to Leeds, which will create more than dozens of jobs in the local area.

The report cites a 2011 survey by the British Industry Association (EEF): One-seventh of the manufacturers moved some of their production operations back home, including clothing retailers such as TopShop and River Island.

The "return" of the US manufacturing industry has also attracted much attention in recent years. "Return of British manufacturing" and "return of American manufacturing" have become one of the most popular topics of the British and American media, and this trend is a response to the phenomenon of "industry hollowing out".

As an established industrial country, the UK was the first economy to encounter manufacturing difficulties. In the 19th century, in order to pursue higher profits, British companies went overseas to carry out colonial investment and production, and some domestic manufacturing and processing enterprises also moved out. In the 20th century, British overseas investment even exceeded domestic investment, and the manufacturing industry declined. The impact of this decline has not yet been fully resolved. The famous "British disease", its "root of disease" is also inseparable from the hollowing out of the industry.

Now, whether it is the government, business or the media, it seems that they are trying to treat this "British disease."

“The British government is keen to strengthen manufacturing,” said Lee Hopley, chief economist at the British Industry Association, telling reporters that “there are many policies aimed at supporting producers to invest in new technologies and innovations. To ensure the development of the supply chain and make the UK a great business."

In addition to considering costs, companies are also concerned about the flexibility of the supply chain. According to Hopley, one-quarter of the UK companies that have withdrawn their overseas production lines are hoping to make better use of local suppliers. “Some producers have experienced supply chain disruptions overseas, so move the supply chain closer to the UK for better control.”

In the voice of “British manufacturing return”, “product quality” was regarded as a breakthrough. In January 2013, a report in the British newspaper The Guardian quoted the opinion of a British clothing manufacturer, saying that “we lost the price campaign, but we can win quality wars, integrity wars and creative wars”.

For the quality of British products, Liu Jiejiao of the Institute of Industrial Economics of the Chinese Academy of Social Sciences is also very touched. In 2011, when he visited Detroit in the United States, he discovered that all the lines used to repair artifacts in the museum were produced in the United Kingdom. “The specifications for repairing cultural relics are very high. If there is a slight flaw, the repair will fail. Even if the Chinese textile industry is developed, it will not meet the British quality standards.”

However, at the macro level, “the return of British manufacturing” does not seem to be a prominent manifestation. Hopley also acknowledged that manufacturing retracement is not a "one-way trend." From 2009 to 2012, the proportion of British manufacturers doing production overseas rose from 32% to 42%, and one in four companies expected to increase their share of overseas production in the next two years. .

The problem of hollowing out of the industry in the United States originated from the stagflation crisis of the 1970s. In the 1990s, the wave of two global industrial shifts largely eroded the labor-intensive industries of the United States, and the financial industry flourished. Many people believe that the subprime mortgage crisis of 2008 is the result of the hollowing out of the industry.

US President Barack Obama is struggling to revive the manufacturing industry in the United States. In fact, he can now observe the trend of manufacturing reflow. Harold Sylkin, a senior partner of the Boston Consulting Group, told this reporter that such cases are now close to 200, far more than they had expected.

Chinese manufacturing worries

Liu Jiejiao judged that in another 20 years or so, China may face a large-scale manufacturing transfer. “Per capita income has increased further. Many people will be reluctant to do production work, and the cost of manufacturing will increase relatively.”

What makes Liu Jiejiao worry is the transfer caused by non-labor factors. For example, the corruption of local governments has made the Chinese market less attractive to multinational companies. In addition, the resentment of “Made in China” by European and American countries has also caused the worries of Chinese manufacturing industry to emerge. “Some companies will think that 'Made in China' will put their products at risk of more trade protection, so they will tend to shift to other regions,” Liu said. “This requires intergovernmental communication and strive for fairer. Trade environment."

However, the transfer of manufacturing cannot be completely equivalent to “industry hollowing out”. The different links of the division of labor in the manufacturing industry are completed by different enterprises. "Industry transfer does not necessarily mean that all links are transferred out." Liu Jiejiao told this reporter. Therefore, as long as the core links can be retained as much as possible, China can avoid the problem of “industry hollowing out”.

The United States is a typical example in this regard. Although the proportion of manufacturing practitioners has been declining year by year, the United States has always firmly grasped the core technology. "The 're-industrialization' of the United States is concentrated in the high-end manufacturing process." Liu Jiejiao said.

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