Courtesy of Also Sprach Analyst.
By now I’m sure you’re familiar with stories about weakening external demand and rising costs in China. This places enormous pressure on manufacturers.
Yesterday, Addidas announced its intention to close its only fully owned factory in Suzhou. According to Yicai, more and more manufacturing companies are moving their production lines away from coastal China to western China, or even South East Asia. That is consistent with what most people understand of this matter, that China no longer has the labour costs advantage that ti used to. Addidas, for instance, cited the rapidly rising minimum wage as one of the key reasons why they are moving.
According to Yicai, manufacturers in Donguang are closing down their production. One shoes manufacturer which used to employ more than 7,000 workers at its peak will be closed down soon. Again, the theme remains the same: weak external demand and rising labour costs are forcing manufacturers west.
The upside might greater consumption power from rising wages but the squeeze on manufacturing is not pretty.
