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challenges to raise China’s foreign plants

Beset by rising costs, shortages of labor and industry policy to discourage low value of Chinese exports are lines of manufacturing production facility in South Asia. But the movement has its drawbacks.

A growing number of companies in China to build factories abroad, including Vietnam and Indonesia for the benefits of reducing costs and favorable trade policies. Although the exact number of plants that have established plants in the sea is not available, many companies have made the manufacture of appliances, cars, televisions, shoes, textiles and clothing move in recent years .

Texhong Textile Group, for example, the creation of a textile factory in Vietnam in 2006. The main suppliers of textile products of cotton rakes to 0 million in combined sales annually. A year later built one of the largest provider of LED lighting in China, Neo-Neon LED Lighting International Ltd., a factory of 2,000 employees in Vietnam. In 2008, the largest Chinese manufacturer of air conditioners, Zhuhai Gree Electric Appliances, Inc., a production plant with an annual capacity of 200,000 units built, Southeast Asia and in the country.

Pegasus Footwear Co. Ltd is now planning to build a factory in Vietnam and Indonesia, production costs cited as main reason. Vietnam has a relatively mature industry and footwear in parts of the supply chain well developed. Since the manufacture of shoes does not require sophisticated technology, is the low labor cost in Vietnam some reason trying to transfer production there.

After Aroma Consumer Products (Hangzhou) Co. Ltd, are a candle factory in Vietnam, basic monthly salaries in the countries of South Asia has only three-fifths of China. In fact, deserves a line worker in Vietnam, about 1 per month, less than 53 percent compared to China, said Khiem Vu, project manager of Vietnam-based Kearny Alliance, a nonprofit organization that facilitates trade, business education, training and applied research.

basic monthly salaries in China almost 27 per cent last year has increased in many industries, particularly for skilled workers. In some rural areas, 15 percent of wages for employees of the production line, an increase of 5 percent cited the increase in exports led.

“If you look at the statistics of labor costs in China, 2006-2010 would be an explosion of costs about 600 yuan per month in 2006 to 1,200 yuan per month seen in 2010,” said Danny Friedmann Board Intellectual Property in China and editor of the IP-dragon, a blog on IP issues in the country. “Strikes in companies such as Honda suppliers and drama of the suicide Foxconn pushed labor costs.”

Tom Orlik economist believes that labor and other costs rise in China, will reduce the attractiveness Coast is a plant site. That there is more investment from overseas and less costly inland provinces. Orlik Translated written for China, a blog discussing the economic and political situation.

More than just salary

But there are other factors, companies to build factories overseas. For example, despite the increase monthly payments, is the lack of manpower is a problem in China. The pressure to find enough workers, is one reason, Neo-Neon has decided to transfer some production lines in Vietnam. In addition to being able to find enough workers, the company could save on electricity costs for power in Vietnam 40 percent lower than in China.

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appreciation yuan is also mounting pressure to maintain low production costs in China. The currency began to strengthen in April and policy makers are losing more value in the coming years.

Business professor and blogger Brian Schwarz believes China Challenges to avoid trade sanctions is another reason why suppliers led to relocation of production offshore. China is the main target of anti-dumping investigations from different importing countries. This year, the EU imposed a tax to 16.5 percent for leather shoes made in China. footwear exports from ASEAN member countries, are now only 10 percent responsible. Avoid

EU trade sanctions Dongguan to Huabao Shoes Co. Ltd., a shoe factory back in Vietnam five years ago, when the country not to pay anti-dumping. The factory now produces 80,000 pairs per month. keep

The incentive to move not only for printing costs are low and to avoid trade sanctions, but also from Beijing itself. The national government is encouraging suppliers to develop their business abroad, particularly the offers of low-value manufacturing, and more polluting and energy intensive industries.

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