"Made in China" Is Suffering From Industrial Restructuring

Nike is the largest sports products manufacturer of the world, its fiscal report of the fourth quarter last year showed that Vietnam had become the largest production base worldwide for Nike , and this important place of production base will continue to be enhanced in 2011.

China's human resource prices are keeping rising in recent years, for this reason, more and more international manufacturers chose to move their factories to Southeast Asian countries which has cheaper labor prices. But however, many foreign companies are also considering to or have moved their research centers to China.

To control the costs of labor, Nike kept moving its primary production base in the past 30 years, the production base was first in Japan, then in Korea, China Taiwan, and later in Hong Kong, Philippines, Malaysia, Thailand, etc. The new production center of Nike was moved to China in 1981. Japan was once a part of global factories of Nike and other large enterprises, but was discarded due to the high wage growth rate.

According to the statistics of ILO, the Vietnamese workers' wages is $85/month from the PPP perspective, Indonesia is $148/month, but the highest monthly minimum wage in Shenzhen City of China is 1320 Chinese yuan/month, that's about $190 at current exchange rates. In addition to higher salary expectations, another important problem is the proportion of working-age population is declining very fast in China.

The condition was even worse in June 2011, because the inflation was almost out of control in China, it led to a sharp rise in raw material prices, the government had to take tight fiscal policy to control inflation, which in turn makes the financing cost of manufacturers even higher. Finally the cost of production could not be controlled and many of factories have ceased production or closed down.

Therefore, we can clearly see that the advantages of "Made in China" is one step loss, China's manufacturing needs to be redefined. In the mean while, other Southeast Asian countries try to replace the position of "world factory" and attract more overseas companies to open plants in them.

From 2010, Nike's products in China markets began to change: more and more canvas shoes was marked as "Made in Vietnam". The tradition of Nike is entrusting production to the overseas production partners, Chinese manufacturers have been Nike's biggest partners by 2010, but this throne of production was taken by Vietnam manufacturers after 2010.

In the view of practitioners of manufacturing, the dominating status of "Made in China" is changing now. However, the industry operators stressed that "Made in Vietnam" will not replace "Made in China". For the "Made in Vietnam", the best result is only the complementarity of "Made in China". Chinese manufacturers need to be stick to industrial upgrading and make efforts to the strategy of accelerating the production of high value-added products. At the same time, overseas companies are increasing the research for investment in China, building new research centers in China or moving R & D centers to China. More and more High-tech capitals are finding chances in China.

"Manufacturing industry is transferred out of China, this is the inevitable pain in industrial upgrading phase of China." said by an expert from iFreetouch.com. He also believes that the transition process of China should be gradual and step by step, keep it slowly to prepare for the high-tech competition, otherwise it will repeat the mistakes of Japan. The industrial restructuring of Japan was too hasty, the labor costs were too high after entering the stage of high-tech phase, the advantages were almost lost and the industrial restructuring was finally halt.

The industrial restructuring is both opportunity and challenge to China, China is facing too many difficulties in industry upgrading because most factories in China are to profit by OEM, the core technology is generally controlled by foreign companies. Therefore, the Chinese manufacturers must invest more in R & D to narrow the gap with developed countries.