Pay Surge Will Guide Shoe Enterprises To Accelerate Pformation.

After Foxconn technology group took the lead in raising wages, "world factory" or ushered in a new round of wage increase, the pformation of processing trade as early as possible could be accelerated.

In April this year, several central ministries and commissions in Guangdong investigated foreign trade, and found that this year's labor costs generally rose by more than 15% or even more than the end of last year.

"The era of over consumption of labor force has passed."

Zhang Yansheng, director of the Foreign Economic Research Institute of the NDRC, said that in the international division of labor of pnational corporations, it is difficult for China to continue to play the role of contributors of cheap labor, and the pformation of processing trade is imperative.

Xiao Hefei, deputy director of the international economic and Trade Research Center of Guangdong University of Foreign Studies, said that the relocation of the Pearl River Delta from the export to domestic sales, from simple foundry to upstream research and development, is the three pformation path in front of the foundries.

Zhang is considering building a new factory in Hunan.

Once it is established, it will be the second largest factory in the inland area.

As one of the largest footwear suppliers in China, Zhang's Group employs the raw materials specified by importing purchasers, processing them according to the design and type provided by buyers, and finally completes the export settlement, earning just a little processing fee in the intermediate links.

Through such a way of trade, the Pearl River Delta entrenched in the past 20 years, he has clutched Nike, Adidas such high-quality buyers.

As early as 2006, domestic and foreign trade policies were tightened, export tax rebate rate was lowered and RMB appreciation was appreciated. Most importantly, the voice of gradually shrinking and adjusting the mode of processing trade was rising.

At that time, the Pearl River Delta was also eager to move out factories such as shoemaking and garment making, leaving room for capital intensive and technology intensive industries.

In 2007, Zhang set up its first inland factory in Jiangxi, setting up a monthly capacity of 700 thousand pairs of shoes and attracting about 2000 workers.

At present, this wait-and-see and exploratory arrangement has not seen much success yet.

Today, most of the capacity of the company is still concentrated in Guangzhou, Qingyuan and other regions. "The production capacity of factories in Guangdong is close to 3 million pairs per month. The most important thing is that the products with a little complicated technology can only be processed in Guangdong."

Zhang said.

In fact, such capacity migration and adjustment date back to 2004.

At that time, although buyers such as Nike had taken China as the main sourcing country, their share of the global procurement map was rising rapidly in Vietnam, Indonesia and other places where labor force was cheaper.

In the development of Xinjiang soil, purchasers found that factories, such as Southeast Asia and other places, are still inferior to factories in the Pearl River Delta, no matter in terms of production efficiency or technological level.

The idea of factory owners in the PRD to manage and manage factories in Vietnam and other places began to ferment.

After years of accumulation and deep analysis of procurement experience, these large multinational purchasers are starting to push their voices to Southeast Asian investment plants.

The original consideration of Nike was to help local suppliers improve their technology and efficiency. The changes in the trade environment before and after 2006, especially the gradual increase in labor costs, enabled more capacity to move out of the PRD.

Take Zhang's factory as an example, although he still has nearly 3 million pairs of monthly capacity in Guangdong, but after five or six years of development, his capacity in Southeast Asia has been basically close to this figure.

As a matter of fact, it is hard to say where there is more advantage than the comprehensive cost of the two places.

Zhang said, the total cost of a pair of shoes is the largest material cost, and the purchasing price of each area is basically the same. The price and efficiency of labor and the comprehensive management and operation cost have become the competitive points of various regions.

The price of labor in Southeast Asia is generally lower than that in the PRD. The average monthly cost of employing an ordinary worker in Guangdong is around 1600 yuan (covering social security, provident fund and other costs), while the cost of employment in Indonesia is less than 1000 yuan.

But Guangdong's factories still have an advantage over efficiency and high-end products.

"Buyers are not at ease to produce complex products in inland or Southeast Asia."

Zhang said that the factory's migration route depends on the degree of mastery of complex processes and the next change in labor costs in these areas.

However, what we can see is that the annual share purchase plan of Nike and other companies in China has been shrinking year by year.

Attempt to export to domestic market

The domestic alliance established by Panyu jewelry manufacturers has almost collapsed.

As early as 2005, the government of Panyu District was trying to promote the pformation of domestic jewellery processing trade enterprises in the domestic market.

As the world's largest jewelry processing base, R & D and sale of "two ends" out of trade mode makes it hard for local governments to enjoy the real benefits of this industry.

"Great fame, but not much tax". The NPC deputies repeatedly suggested that enterprises should be pformed into domestic sales at the meeting of the District People's Congress.

The outbreak of the financial crisis at the end of 2008 led to a sharp decline in external demand, and the idea of pilot domestic sales finally got the response of enterprises.

Liu Qiang, Secretary General of the Panyu jewelry business association, said that more than 30 enterprises that were qualified to sell domestically initiated the establishment of the Panyu jewelry domestic sales alliance, and moved to northeast and East China to find domestic buyers.

However, the attempt to dock with the mainland has disappointed Panyu producers.

Liu Qiang concluded that buyers in Europe and the United States used big orders, and the number of orders for a product was almost tens of thousands, such as a ring, usually twenty thousand or thirty thousand orders at a time, and two additional orders in about a month.

Most of the domestic buyers are willing to order 10 pieces and 20 pieces to observe the market reaction, or even two or three super small orders.

Moreover, most domestic buyers do not provide design drawings. If factory owners in Panyu want to buy domestic orders, it means setting up a new design team for the Chinese market.

Liu Qiang said that unpleasant things happen from time to time. Factories have designed their own products, and have received small orders. Domestic buyers are taking the finished products as samples to find cheaper foundries.

After several attempts, Panyu has continued to try to sell its suppliers in the domestic market.

In 2009, Panyu completed $1 billion 400 million in jewelry exports, while the domestic sales amount was only around 100 million yuan.

It is hard to say that the test of Panyu's domestic sales is over.

Liu Qiang said that there are still a few generation factories in the brewing of direct retail terminal, directly facing the terminal market.

"It is foreseeable that building brands and expanding channels will take a long time."

Xinyi underwear in the South China Sea is another reference sample for the domestic pformation of the factory. The steady domestic sales expansion plan has made remarkable achievements in its pformation over the past 6 years.

The exporter, who has developed for twenty years on the European order, launched the domestic sales plan in 2005.

From 2005 to 2010, the proportion of the domestic sales of the company increased from 5% to 10%, 15%, 20%, 40% to 55% this year, and it is estimated that the domestic sales volume will exceed 200 million yuan this year.

Chen Weiqiang, general manager of the company, said that the increasingly small processing profit made the factory more difficult to survive. The export profit of 3% of the garment industry, compared with over 15% of the domestic pure profit, forced the enterprises to choose the market pformation.

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The fate of OEM

When Zhang Yansheng came to Dongguan in June, he was told by a Hong Kong business owner that in the production process, from raw material selection to product design to terminal sales, the manufacturers only participated in the manufacturing and assembly of intermediate links.

The way of processing trade has blown up a bloated figure of China's foreign trade.

Zhou Shijian, a vice president of the former Minmetals Association and a researcher at the Sino US relations research center of Tsinghua University, said that imports of US $100 were processed by processing trade and exported to US $120. The import and export volume reached US $220, but the actual added value in China was only $20.

How low is the real added value made in China?

The two most famous cases are Bobbi dolls of MATTEL group and iPod of Apple Corp.

Zhou Shijian said that the retail price of dolls in the United States was US $9.9, while the actual export price in China was US $2. After deducting the cost of imported raw materials, the Chinese factory actually earned only 0.35 US dollars in processing fees.

A iPod in the US sells for $420, of which China earns only $4.

Robert Koopman, chief economist of the US International Trade Commission, reckon that China's exports to the US amounted to US $201 billion in 2006, according to China Customs. However, 113 billion of its exports came from other countries, and only 88 billion US dollars were created in China.

45% of China's total exports to the US belong to the value-added part of China, that is to say, these values remain in China, and another 55% of the value added part belongs to the intermediate components or products of imports.

This is all the remuneration paid by the cheap labor supplier in China in the past 30 years.

Statistics show that in the 10 years before 2005, the monthly wages of workers in China's processing trade enterprises increased by only 26 yuan.

The Panyu jewelery Association estimates that the labor cost of enterprises has increased by about 50% since the implementation of the labor contract law in 2007.

When labor resources are over consumed and labor prices are no longer cheap, such trade mode of processing trade will be difficult to continue in China.

Zhang Yansheng said there is an estimate that there are still about 100 million of the labor force in rural China not pferred. "According to this figure, the pition period to China's foreign trade is only 10 years".

Guangdong province foreign trade system official introduced that through the two years' research, the processing trade enterprises have been roughly classified. The top of the OEM enterprises is the production links of large multinational corporations in the Pearl River Delta. The enterprises rely on China's cheap labor resources. "The characteristics of migratory birds in such factories can not talk about pformation. Only the migration of production links, our train of thought is classified guidance, striving for them to gradually put R & D links into China."

The main body of the series of policies and measures to promote pformation is actually Hong Kong, Macao and Taiwan, as well as private capital processing trade enterprises. Whether such enterprises can accomplish the pformation from low end to middle and low end products production is the key.

Zhang Yansheng's investigation of Hong Kong, Macao and Taiwan foundry enterprises in the Pearl River Delta found that 20% of the enterprises can successfully complete the pformation, and 20% of them will be eliminated in the process of pformation. The question is whether the remaining 60% enterprises can complete the pformation?