The end of made in China? Nah – Mark Schaub

 

Mark Schaub

The story that Western companies are fleeing China is as old as the presence of foreign companies in China. China lawyer Mark Schaub looks at the recent flare in Western media and explains why they are wrong, again, in his weekly China Chit-chat.

Mark Schaub:

There has been a lot of discussion about China’s role in global supply chains. Many (often by lawyers or consultants dealing in China who feel dejected) have been predicting that Western companies will be departing China and cutting China out of their global supply chains. Their reasoning includes 1) geo-politics makes investing in China or trading with China less palatable; 2) COVID has awoken Western governments to the dangers of over-reliance upon one supplier (especially if that one supplier is China); and 3) Western consumer backlash due to human rights concerns.

My answer is “Don’t think so”.

For at least 15 years there have been regular reports from some elements of the media in respect of an expected wave of “onshoring” and of moving supply chains closer to their home markets. Back in 2007 a journalist Sara Bongiorni wrote a whole book on trying to live for a year in the US without buying any products made in China. Hers was less a political quest and more just to see if this was possible.  It does, however, serve to show that the “China is making everything” concern is not new.

Despite all of this I have seen little evidence in my own practice of Western companies ceasing to source from China. A notable exception is certain clothing that seems to have moved largely to Bangladesh. However, this seems not to have been due to human rights concerns or the strategic importance of Western consumers being able to buy a cheap T-shirt … or rather it is no doubt due in no small part to the strategic importance of Western consumers being able to buy quality products on the cheap. Most of us have an in-built prejudice that exports are unallayed goods whereas imports are a sign of weakness. Rarely do we consider how the importing public has benefitted from trade with China – in the world of 2022 are most consumers worried about East-West geo-political issues or inflation.

We always think this time will be different – COVID lockdowns and a single ship blocking the Suez canal all illustrated how incredibly complex global supply chains could come a cropper in a manner beyond anyone’s control. However, perhaps the better lesson is how quickly logistics can overcome temporary disruptions and how clever they are to work around problems. Even at the height of the Shanghai lockdown workers beavered away in closed loop environments to keep the port open and avoid massive supply chain disruption.

Much more in Mark Schaub’s weekly China Chit-chat.

Mark Schaub is a speaker at the China Speakers Bureau. Do you need him at your (online) meeting or conference? Do get in touch or fill in our speakers’ request form.

Are you looking for more experts in managing your China risk? Do check out this list.

Why factories might outperform in China’s 2021 New Year – Shaun Rein

 

Shaun Rein

Typically, China’s economy comes to a standstill during the annual Chinese New Year, but not in 2021, explains business analyst Shaun Rein to CNBCTV. GovermentalCovid-19 restrictions make it tough for migrant workers to return home, and double salaries at the factories might encourage them to continue working during the festival. Other industries like travel and leisure might suffer, though.

CNBCTV:

Shaun Rein, Managing Director at China Market Research Group on Wednesday said he expects the factory sector to outperform the expectations.

“The factories are offering incentives for workers to stay, they are giving double payment on their salaries. Meantime a lot of these workers have decided to stay where they work and so factories are going full steam ahead in January and February, so we expect that the factory sector is going to outperform a lot of expectations,” he told CNBC-TV18.

“You are also going to see outperforming in manufacturing and on eCommerce,” he added.

Rein’s observations come at a time when the Chinese migrant workers return home during the Chinese Lunar New Year period. Coming in the backdrop of almost a year of the coronavirus pandemic with reports showing re-emergence of the cases in January, the Chinese government got nervous and a lot of provincial governments made the COVID test mandatory.

China’s central government said that between January 28 and March 8—the six week period—there are going to be high restrictions on internal travel.

These new instructions on travel will hit the travel and leisure industry negatively, Rein said.

More at CNBCTV.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your (online) meeting or conference? Do get in touch or fill in our speakers’ request form.

Are you looking for more strategic experts at the China Speakers Bureau? Do check out this list.

Some industries have severe scratches as economy resumes - Arthur Kroeber

2019 was a good year for most of China's industries, the corona virus black-lash might be rough for some industries, says leading economist Arthur Kroeber in the Financial Times. Substantial double-digit declines in many production-side economic indicators might be expected over the first three months of the year,” he added.

The Financial Times

In the first week of February, for instance, new apartment sales dropped 90 per cent from the same period in 2019, according to preliminary data on 36 cities compiled by China Merchants Securities. Such numbers reinforce a growing sense that China’s overall GDP performance in the first quarter of this year may shock even the pessimists.  

Mr Kroeber said that in some sectors the fallout could be “horrific”, given the disruption to China’s vast manufacturing base sustained by the shortage of workers who are unable or unwilling to return to work. 

“Substantial double-digit declines in many production-side economic indicators might be expected over the first three months of the year,” he added. Rebound stocks may present themselves, but calling the bottom will be tough... 

Mr Kroeber said that in some sectors the fallout could be “horrific”, given the disruption to China’s vast manufacturing base sustained by the shortage of workers who are unable or unwilling to return to work. 

“Substantial double-digit declines in many production-side economic indicators might be expected over the first three months of the year,” he added. Rebound stocks may present themselves, but calling the bottom will be tough.

More at Channel News Asia.

Arthur Kroeber is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more strategic experts at the China Speakers Bureau? Do check out this list.  

Digitization of China's manufacturing - Arthur Kroeber

Arthur Kroeber

China has been leapfrogging into the digitization of the consumer industry but is now moving into the established manufacturing too. Economist Arthur Kroeber, author of China's Economy: What Everyone Needs to Know® looks at the progress, and potential barriers for robotizing China's factories.

Arthur Kroeber is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.  

Are you looking for more strategic experts at the China Speakers Bureau? Do check out this list.

Manufacturing trends: automation and ethics - Ben Cavender

Ben Cavender

Manufacturing is changing fast in China, says business analyst Ben Cavender to the Fast Company. Factories phase out labor for automation, and stick to more ethical standards. Although some of the less ethical producers move to countries outside China.

The Fast Company:

According to Benjamin Cavender, a principal at the China Market Research Group, which advises brands doing business in China, factories are also increasingly automating their production lines, which means fewer labor-intensive tasks for workers. “The market was fairly low-tech, run by small operators,” he explains. “There’s been a hell of a lot of consolidation over the last couple of years. Since most of the smaller factories did not have the margins or the cash to be able to update their operations, they’ve closed down.”

Big international brands are also increasingly applying pressure to factories they partner with to make their buildings more environmentally sound and to ensure workers are treated fairly. “There’s been a push by a lot of the international brands to force the Chinese [manufacturing] companies to clean up their act,” Cavender says. “If you’re Nike, for example, you don’t want to get attacked in the U.S. because consumers are unhappy that you’re being unethical about how you source product.”... 

Unfortunately, the movement toward more ethical factories in China does not signal a global trend. Increasingly, Chinese companies are themselves seeking out cheap labor in other parts of Asia and the rest of the world, perpetuating the standards that once ruled in Shenzhen. The collapse of the Rana factory in Bangladesh in 2013, which killed 1,129 people, was a brutal reminder of how low those standards can be. 

“The major factory owners in China that have scale–the big guns–have moved all the low-value manufacturing offshore,” Cavender says. “They’ve started buying factories in Vietnam, India, Malaysia, or Sri Lanka. They’re having the cheaper production done there, then reimporting the product back to China to do the high-tech finishing.”

More in the Fast Company.

Ben Cavender is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more strategic experts at the China Speakers Bureau? Do check out this list.  

Related articles

• Japan's IHI inaugurates heavy concrete factory joint venture in Myanmar
• Chinese factories moving to automation, looking beyond sweatshops
• Tesla in the Crosshairs Again Over Factory Conditions

Rising cost in China are here to stay - Shaun Rein

Shaun Rein

Silicon Valley companies face fast rising costs when they make their products in China. Low-end production might move to other Asian countries, but for high-end products, companies should face the new China reality, says Shaun Rein, author of The End of Cheap China, in Mercury News.

Mercury News:

Prices of imports from China rose 3.6 percent in 2011, the highest uptick on record, according to the U.S. Bureau of Labor Statistics. 

"This is a long-term shift and it's going to continue," said Shaun Rein, managing director of Shanghai-based China Market Research Group, who just published a new book, "The End of Cheap China." 

"Last year, 21 of China's 31 provinces increased the minimum wage on average 22 percent," he said. "Americans will have to pay more when they shop at Best Buy or companies like HP will have to squeeze margins and become less profitable. So what's happening is companies are trying to change their supply chain."... 

"If you are a Nike or an apparel company, you are moving out of China," Rein said. "But if you are a computer- or iPhone-maker -- anything higher up on the assembly difficulty level -- you can't shift production outside of China. The other (Asian) countries just don't have the worker productivity and world-class infrastructure that is needed."

More in Mercury News.

Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form
.

Related articles

• Shift from export to domestic consumption needed - Shaun Rein (chinaspeakersbureau.info)
• Expect more inflation - Shaun Rein (chinaspeakersbureau.info)
• Labor shortage hits white-collar jobs - Shaun Rein (chinaspeakersbureau.info)
• What did Starbucks right in China? - Shaun Rein (chinaherald.net)