Month: November 2011

Chinese Manufacturers Looking Elsewhere

While most of us think of “Made in China” as a ubiquitous label, China is beginning to look elsewhere for its manufacturing needs. Labor costs in China have risen 15-20% each year for the past few years, causing many Chinese companies to look elsewhere.

Many companies, as a result, are looking to south-east Asia for their manufacturing needs. They are finding, however, that such a move is not simple since their supplier networks and their worker productivity is much better in China.

Profit margins have dropped considerably for Chinese manufacturers from a height of about 10% to a low of 3% currently. In addition, Beijing has made a decision that they will be doubling wages for factory workers by increasing minimum wage. They plan to continue doing so every year for the next few – perhaps causing more people to look elsewhere for their manufacturing needs.

Some companies are selecting to keep their bases in China, while also setting up shops elsewhere. They find it difficult to completely move away from China, however, As Dong Tao, an economist with Credit Suisse said, “There is no developing country that can match half the efficiency China offers.”

China is Getting Connected with 3G Mobile Phones

China is definitely plugged in. Their 3G mobile phone users list just reached 102 million by the end of September. Nearly half of these people, or 43.16 million, use the country’s self-developed TD-SCDMA standard. This according to the Ministry of Industry and Information Technology (MIIT).

The State Council’s Information Office recently held a press conference at which Xiao Chunquan, the director general of the Bureau of Operation Monitoring and Coordination of MIIT said that China’s telephone users hit 1.24 billion at September’s end.

Economic Development in Xinjiang Uygur

Two new economic development zones in China have recent been opened for more construction. The State Council, or China’s Cabinet, has unveiled guidelines allowing these areas in the western Xinjiang Uygur autonomous region to be further developed.

The specific zones including the Kashgar and Korgas economic development zones in western and southern Xinjiang will receive fiscal subsidies and tax preferences to help with construction in these areas.

The goal is for the central government to help these zones to develop as regional hubs for China’s opening up to other Asian countries as well as to Eastern Europe.
The plan is for the central government to offer a certain financial subsidy each year from 2011 through 2015. They will exempt qualified enterprises from business income taxes for five years and they will subsidize fixed-asset investments while offering government loans.

The government will also focus on the construction of the China-Kyrghyzstan-Uzbekistan railway and the China-Pakistan railway to facilitate this regional growth.

Gap Stores Coming to China

China has been targeted as a new location for Gap, the US apparel retailer. Gap has announced that, by the end of 2012, they plan to triple the number of stores they have in China. Trying to counter their less than stellar sales in North America, Gap Inc, which includes Gap, Banana Republic and Old Navy, is outlining a strategy to increase its total sales.

Gap opened its first store in China in November 2010. Now, they plan to expand from their current 15 stores to more than 45 by the end of fiscal 2012.

As Glenn Murphy, Gap chairman and chief executive said in a statement, “The combination of our global strategy and formidable growth platform puts us in a strong position to expand our reach into the top 10 apparel markets worldwide.”

National Day Holiday in China Fuels Economy

China’s recent week-long National Day holiday which lasted from October 1 to October 7, 2011 was certainly good for the economy. Tourism revenue there reached 145.8 billion yuan ($22.94 billion), which is an increase of 25.1% year-on-year.

The most scenic locations in China got 302 million tourists, which was an 18.8% increase from the same time period last year, according to the National Tourism Administration (NTA) and the National Bureau of Statistics (NBS). The data even showed exactly what each tourist spent, on average during the week. Each tourist was recorded to have spent approximately 483 yuan during this holiday, which was an increase from the 459 yuan spent last year.