Things are changing in China. Will it continue developing into an economic powerhouse? Is this a temporary recession, or are they starting a decline that will lead to manufacturing moving to other less expensive countries?
I read a CNN business news story a few days ago after one of the upward blips in oil prices, that Chinese demand was once again rapidly increasing. I really wondered about that at the time because I had also read stories like the one attached below.
Posted on the KATU-TV website.
http://www.katu.com/news/business/31253764.htmlFactory closure in China a sign of deeper pain By WILLIAM FOREMAN, Associated Press Writer DONGGUAN, China (AP) - Unemployed worker Wang Wenming was angry at his boss for shutting down a massive Chinese factory this week that made toys for Mattel Inc., Hasbro Inc. and other American companies.
But the assembly line worker was also furious at the United States.
"This financial crisis in America is going to kill us. It's already taking food out of our mouths," the 42-year-old laborer said Friday as he stood outside the shuttered Smart Union Group (Holdings) Ltd. factory in the southern city of Dongguan.
The company, which has struggled as global growth has slowed in recent months, employed 7,000 people in mainland China and Hong Kong. It wasn't immediately clear how many have lost their jobs.
Economic upheaval in the U.S. is already changing and shrinking China's vast manufacturing hub in the southern province of Guangdong, long regarded as the world's factory floor. However, factory closures won't just be a China problem - shoppers will feel the effect in malls and stores in the U.S. and Europe.
"When these companies go bust, the outcome is higher prices," said Andy Xie, an independent economist in Shanghai. "Labor costs have gone up 70 to 100 percent in the last three or four years. But these guys have not been able to raise their prices because Toys "R'' Us, Home Depot and Wal-Mart are saying no price increase. How is that possible?"
For years, there were too many factories competing to win bids from foreign buyers demanding prices that were often unrealistically low. The winners were American and European consumers, who enjoyed rock-bottom prices.
But many factories were scrimping on materials and stiffing their suppliers just to survive, Xie said. The financial crisis will be the final culling factor that forces many wobbly factories to go belly up and end an unsustainable situation, he added.
