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OPINION PIECE

Several years ago, we reported on the changes

within China that were affecting manufacturing and

production processes, playing havoc with delivery

schedules and, more importantly, bringing an increase

in costs. Susi Rogol talked to Steve Lang of Mon Cheri

in the US about the current state of play...

towards more of a service economy. When manufacturing

converts to value-added service industries in China, they

will experience some of the same conundrums faced by

the American and European economies. Taiwan has been

going through this scenario for several years already;

Japan has been in this situation for a while; and Korea

will face it, too, as manufacturing has little option but

to move to the more labour-friendly economies. This is

just basic economics and inevitable as countries move

into more sophisticated markets and away from labour-

intensive businesses.

“Because of the labour scarcity, China is relaxing its

one-child policy region by region. This policy change is

designed not only to provide greater sources of labour

in the future but also to address family structure so that

one child alone is not burdened with the responsibility of

parents and grandparents in later years – as you know,

it’s common for extended families to live together and for

the younger generation to take care of their elders.

“Another change in China is the recognition that wages

must rise. The workers are receiving increases due to supply

and demand and have secured Social Security benefi ts from

the government. With costs increasing, selling prices have

necessarily been driven north putting some products beyond

the reach of wholesalers. This is one of the reasons that the

shoe industry has been moving production to Vietnam.

A SHIFT OF EMPHASIS

“The Chinese government wants to see its people as

consumers with money to spend on products in its

domestic marketplace, rather than depend on an export-

driven system to achieve that eight percent GDP growth

annually. They no longer want to rely on America and

Europe because when those continents have economic

diffi culties, China has a slow down on business generated.

If domestic companies are producing goods for domestic

consumers it evens out the ups and downs of the

throughput in the factories and thus helps the country’s

stability and growth.

“In terms of deliveries, the labour issues and the rising

cost of materials have slowed deliveries across the board.

Finding labour that is dedicated is a challenge for every

factory. To compensate for this, companies that import

have begun to accept longer lead times for product and

have adjusted accordingly. One adjustment is to put more

goods on the shelf, that is to hold stock, or to order earlier

in the cycle than in the past.

“A further pressure has been the appreciation of the

Chinese currency. When I fi rst began manufacturing in

China, the exchange rate was almost nine Chinese dollars

to one US dollar. Today it is about six to one and may

fall further. Coupled with spiraling labour costs, this is

making everything more expensive to manufacture.”

So what are the long-term prospects regarding

clothing manufacturing in China? Says

Steve: “China will continue to produce in

our industry for at least another decade.

Companies once headquartered along the

coast are moving operations inland to be

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