China'S Gradual Withdrawal From The "World Factory" Is Both A Challenge And An Opportunity.

Recently, because of the fluctuation of exchange rate and the rising cost of wages, profits from China's exports have become thinner.

In some industries, production in China has become as expensive as in Eastern Europe and even in Germany.

The economic model of "China as a world factory" is clearly outdated.

The weakening of the euro has strengthened this trend.

Coincidentally, an article from the Australian Business Observer website pointed out that the rapid wage growth in China has affected the charm of China's manufacturing industry.

In 2000, 40%.

from

13% made by Vietnam.

In 2013, only 30% of Nike shoes were produced in China, while Vietnam's production jumped to 42%.

By the end of 2015, Southeast Asian countries could share the share of the global sports shoes market with China.

In response, experts said that although China's manufacturing costs, especially the labor-intensive light industry, are losing, due to the rapid rise in labor costs in China, the manufacturing industry in China has a relatively large technological advantage compared with those in Southeast Asian countries. Besides, China has a large number of skilled skilled workers, so it is impossible for China to take off the crown of the world factory in the short and medium term.

However, the author believes that China's manufacturing industry is facing a painful pition period, and there are three major challenges.

First, the annual increase in labor wages, coupled with the appreciation of the renminbi against the euro and yen, has reduced the gap between China's labor costs and developed countries.

According to statistics from research institutes, the average wage in China increased by 11.4% every year from 2000 to 2015.

Even compared with the developed countries with the wage level in the world, China has no advantage.

Because labor productivity in the US is 4 times that of China, so labor prices in China are lower than those in the United States, but they do not necessarily represent cheaper labor costs than the United States.

Moreover, the wage increase of Chinese has been distanced from Southeast Asian countries, and many domestic and foreign business owners are looking to Southeast Asian countries.

In 2012, the average annual salary of Chinese people was 6500 dollars, 30% higher than that of Thailand and Philippines, two to three times that of Vietnam and Indonesia, and five to six times of that of Kampuchea.

In order to save labor costs, not only foreign companies, but also Chinese companies will go overseas to find cheap labor market, which will pose new challenges for Chinese policymakers.

Finally, the price gap between the East and the West in China is narrowing.

Some experts have proposed the relocation of the eastern manufacturing industry to the relatively less developed western regions.

But even if foreign companies move factories to China's poorer and poorer Midwest, they are only expedient measures, because China's labor price gap is shrinking.

The survey shows that the wage gap between the eastern coastal provinces and the western provinces is only 5% to 6%, so the cost advantages of relocation will disappear in a year or two.

Once upon a time, China was put on the laureate of "world factory", sending cheap goods to developed countries and boosting domestic economic growth.

But it also brings many problems.

On the one hand, Chinese enterprises have changed a lot of colorful banknotes from abroad. In accordance with the regulations, foreign exchange reserves must be settled. This makes China's foreign exchange reserves the world's first, and the underlying currency is more serious, which brings hidden dangers to inflation.

On the other hand, because China has become a "world processing plant", it is consumed by a large number of domestic resources and environment, and the wages of workers are reduced, and the release of such dividends is not sustainable in itself.

Therefore, China's gradual withdrawal from the "world factory" is both a challenge and an opportunity.

In the short term, China has superior infrastructure, complete supply chain and skilled industrial workers, which will provide ample time and space for China's manufacturing pformation.

On the one hand, China's economy will be forced to complete structural pformation, that is, from export oriented to domestic demand, so as to reduce China's dependence on overseas markets.

On the other hand, after 20 years of rapid development, China's industry has gradually changed from the low and middle manufacturing industry to the high-end manufacturing industry.

The global factory, once a cheap commodity for clothing and toys, is working hard to pform higher value manufacturing industries such as automobiles, airplanes and electronic products.

The pformation and upgrading of manufacturing industry and the substantial improvement of production efficiency will be the starting point for China to turn from the "world processing factory" to "the world wise factory".