Rising Cost Of Footwear Industry In China Once Again Leads To Profit Compression

In 2012, the development of Chinese enterprises may be entering the most difficult part of this century.

If the goal of Chinese economy and Chinese enterprises was simply "catching up and Surpassing" before, then, China's economic scale has jumped to second in the world and continues to rise rapidly. China needs not only to catch up with the developed countries, but also itself as a target for more and more countries and regions to catch up with.

Correspondingly, the goal of China's economy and Chinese enterprises should be changed from pure "catching up and Surpassing" to "preventing overtaking".

On the one hand, the developed countries, after the subprime crisis, have learned from each other's pain and pushed for "re industrialization". They hope to rebuild many traditional industries that were formerly known as "sunset industries" and compete with emerging market economies like China.

In the United States, Obama put forward a national export strategy aimed at "doubling exports five years", drew up a new plan to attract more than $1 trillion overseas investment in the next five years, and set up the "selection office" of the investment promotion team across 23 ministries and commissions, and built a website called "select the United States". This is the first time in the history of the United States that the investment promotion work has been mentioned in the presidential order, and it is also the first time to establish an administrative binding inter ministerial committee to attract overseas investment working group.

On the other hand, the developing countries are making efforts to catch up with China in the traditional labor intensive industries, and the competition of some developing countries such as Vietnam and India is becoming more and more aggressive. Vietnam has replaced China as the largest processing and export base of Nike shoes.

In the increasingly open competitive environment, the number of Chinese enterprises eliminated by the two sides is absolutely limited.

Nevertheless, many pressures are not borne by the Chinese economy and Chinese enterprises alone. Some pressures are also opportunities on the other hand, and some long-term favorable factors are accumulating:

First, look at domestic demand.

This year, even if the growth rate of China's economy has dropped to 7%, this is still the dream growth rate which most other countries dare not expect.

China is already the second largest economic power in the world, and the huge domestic market has created the most uncompetitive advantages for Chinese enterprises.

Next, look at the cost of raw materials.

In the past ten years, the profit margins of many of the Chinese finished products industry have been squeezed, but now the bull market has come to a bear market. All kinds of shocks will undoubtedly lead to a large concussion of crude oil and gold prices, but the overall market of primary products is no longer reversible.

This is undoubtedly a gospel for Chinese manufacturing enterprises, which are suffering from rising cost of raw materials.

Look at the domestic real estate and other asset market bubble gradually disappears.

A part of building materials and engineering enterprises will suffer from this pain, but is it not a good thing for most enterprises in the real economic sectors suffering from the soaring cost of rents and land? In recent years, this is not a good thing. There is also a manpower cost. For a single business, this is no doubt a factor of increasing profits, but for the entire national economy, this means that the expansion of domestic consumption demand will speed up and new business opportunities will come from this.

Based on these factors, which enterprises can survive?