Huanqiu Shibao: is South-East Asia replacing “Made in China”?

The following are loosely translated extracts from an article by Huanqiu Shibao, published on Friday, and authored by several Huanqiu reporters.

It refers to an UNCTAD 2012 Investment Report, apparently this one, officially published on July 5, 2012.

There is a rising trend at Huanqiu Shibao to provide emoticon votes, rather than opening a commenter thread. This article doesn’t appear to allow online readers’ comments either (there is a button, but it leads nowhere, and there are indeed no comments), although it is hard to see how its topic should be particularly sensitive.

Links within the following paragraphs were added during translation — JR

Main Link: Is South-East Asia replacing “Made in China”? (Huanqiu Shibao, August 10, 2012)

========================

From Adidas to Oclaro [currently Shenzhen, scheduled to leave for Malaysia within three years], foreign manufacturing investors announce relocations from China to South-East Asia, write the Huanqiu reporters. And a recent UNCTAD report said that in 2011, foreign direct investment (FDI) to South-East Asian nations had reached 117 billion US dollars, an increase by 26 per cent, far more than a rise by less than eight per cent in FDI to China. And Vietnam’s state news agency excitedly announced that the scale of NIKE trainers made in Vietnam now exceeded that of those made in China, making Vietnam the world’s biggest NIKE trainers producer. Currently, Vietnam’s share in NIKE trainers global production was at 41 per cent, with China’s only at 32 per cent. Previously, Adidas had announced it would move its only wholly-foreign-owned factory in China to [correction – 20130729] Cambodia Laos. This causes worries to people at home that international investors could be moving from China to South-East Asia, in terms of manufacturing, writes Huanqiu.

越南国家通讯社日前兴奋地宣称,全球知名体育品牌耐克的运动鞋在越南的生产规模已经超过在中国的生产规模,成为世界最大的耐克鞋生产国。目前,越南生产的耐克运动鞋占耐克运动鞋总量的41%,而在中国生产的耐克运动鞋比例只占32%。此前,阿迪达斯公司也决定关闭中国唯一独资工厂,将工厂搬到柬埔寨。这让国内许多人担心国际资本在制造业方面的投资是否正从中国转向东南亚。

Souvenir from Turkey, made in China

Souvenir from Turkey, made in China

The article then quotes a Chinese garment manufacturer who is sympathetic towards European and American buyers’ demands that he relocate his production to South-East Asia. “I find that understandable – who wouldn’t want to buy at low prices?” (我很理解,谁不希望以更低价格拿到进货呢?) The European Union had allowed duty-free imports from Cambodia from January 2011.

However, a Standard Chartered Bank analyst is also quoted, with more encouraging news for the readers: It was difficult to determine if this was a real shift from China to South-East Asia, as foreign investment in China was rising, too.
A major reason for the slowdown in foreign investment in China was that the global economy had slowed down, and China’s economy along with it, but that didn’t mean that South-East Asia would replace China. Some international companies were seeking diversification, especially because of rising costs in China, and to avoid risks of protectionism against China in some [importing] countries.

尽管国际对东南亚制造业的投资迅速增长,但渣打银行亚洲研究部主管许长泰对《环球时报》记者表示,这并不表明制造业从中国向东南亚的重大转移。他说,对东南亚制造业的外国投资上升,但很难确定这些投资是否是从中国撤出的,因为对中国的外国投资仍然在增长。尽管外资进入中国速度放缓,但主要是由于全球经济形势严峻,中国经济也在放缓,而不是东南亚取代中国。一些国际企业正在寻求多样性的可能,主要是考虑到在中国经商成本的上升,以及为了规避一些国家对“中国制造”采取贸易保护主义措施的风险。

After a discussion of Japanese investment in South-East Asia, the article addresses the challenges it sees for South-East Asia.

Vietnam’s 41 per cent share in Nike’s trainers’ production didn’t spell great practical benefits for the people. A Nike trainer on the Vietnamese market costs about as much as one anywhere else, according to Huanqiu Shibao’s research, and would therefore be out of reach for normal Vietnamese buyers.Besides, Huanqiu’s Hanoi correspondent quotes a 28-year-old worker from the 10th Garment Factory in Hanoi’s suburbs, the monthly income is at 2,500,000 Vietnamese Dongs (1 USD about 21,000 Dongs). That is above the state-defined minimum wage standard, and a free lunch is included as another benefit, but that is mostly spent on her motorcycle rides to and from work (500,000 Dongs monthly spent on gasoline), a monthly flat rental (1,200,000 Dongs), water, energy etc. at 300,000, etc.. Even her and her husband’s incomes combined didn’t pay the bills, when they both worked at the garment factory, and extra jobs needed to make ends meet.

尽管全球41%的耐克运动鞋产自越南,让越南工商界和一些学者颇感高兴,但这些国际巨头的投资并未给越南民众带来太多的实惠。《环球时报》记者在调查中发现,越南市场上销售的耐克鞋价格与国际市场基本持平,普通人基本买不起。而对于为国际资本打工的普通人来说,赚的也都是血汗钱。28岁的阮兰香在位于河内市郊的第10制衣厂工作。每月到手的工资只有250万越南盾(1美元约合2.1万越南盾),尽管这比政府规定的最高工资标准要高,公司中午还提供免费工作餐。但是她给《环球时报》记者算了这样一笔账:骑摩托车上下班每月燃油支出50万越南盾,房租每月120万越南盾,水电费每月30万越南盾……自己的工资都不够维持家里基本生活。因此,原本和她一起在制衣厂打工的丈夫不得不辞去工作,在外面多打几份零工,养家糊口。

Companies like Nike had moved to South-East Asia mainly for lower labor costs and to achieve a maximum profit, writes Huanqiu. Adidas, one of the biggest London Olympic Games sponsor, was facing investigations by the London Organizing Committee not long ago, for allegations that factory workers only earned ten British Pounds a week, and their factory therefore being called a “sweat shop”.

实际上,像耐克这样的国际巨头将生产线移师东南亚,主要是为了充分利用当地较低的劳动力成本优势,实现自己利润的最大化。不久前,伦敦奥运会最大赞助商之一阿迪达斯公司因只向为其生产伦敦奥运会特许商品的柬埔寨服装厂工人支付每周10英镑的工资而被称为“血汗工厂”,目前正面临伦敦奥组委调查。

Dissatisfaction with wages had led to protests among workers in many South-East Asian countries, and after the “Adidas sweat shop” incident, the Cambodian minstry of labor had stipulated that from September 1, factories in the Cambodian textile and shoe industry had to provide an extra amount of five US dollars, a non-leave pay (or attendance bonus) of ten US dollars, seven dollars for transport and living costs etc., which would then amount to 83 US dollars a month as a minimum wage. The Vietnamese government had also adjusted the minimum wages several times in recent years, most recently in October 2011, stipulating that foreign-invested companies needed to pay 2,000,000 Dongs as a monthly minimum, instead of only 1,550,000. But this still didn’t meet the demands of Vietnamese workers. According to statistics by the Vietnamese garment-industry “labor union”, fluctuation within the workforce at state-owned companies was at 15 to 20 per cent, it was at 20 to 30 per cent in some small and medium-sized companies, but at 40 per cent in foreign-invested companies.

同样,东南亚国家制造业发展也面临种种挑战。由于普通工人不满工资低,许多东南亚国家频频爆发工人抗议。阿迪达斯“血汗工厂”事件后,柬埔寨劳工部长发布通告称,9月1日起,柬埔寨的纺织、服装和制鞋工厂应向每名工人每月提供补助金5美元、全勤奖10美元、运输和住宿费7美元等,使每月最低工资达到83美元。越南政府近年来多次上调最低工资标准,最近一次调整是在2011年10月,越南将此前规定的外资企业155万越南盾的最低月工资标准均调整为200万越南盾。尽管如此,仍未达到越南工人的要求。据越南纺织业工会统计,国有大企业工人变动比例为15%至20%;在一些中小企业工人变动比例为20%至30%;而在一些外资企业里,这一比例高达40%。

Also, Huanqiu quotes Jiang Jianhua, the Cambodia Wenzhou Chamber of Commerce’s deputy managing director, as saying that while labor costs in some South-East Asian countries were relatively low, Vietnam’s garment industry’s management costs were close to those in China, and that they didn’t provide a great advantage. Besides [it isn’t quite clear from the article if the following should still be attributed to Jiang], Vietnam’s legal system was rather backward, its taxation system not transparent, and these, too, were hampering factors. In Thailand, garment manufacturing costs were too high, frequently higher than even in China, and while Cambodia’s political environment was rather stable and labor costs cheap, investors in Cambodia needed to be mindful about backward infrastructure and a usually low quality among the workforce.

柬埔寨温州商会常务副会长姜建华告诉记者,尽管东南亚一些国家人工成本相对较低,但实际上,越南的服装制造企业的管理成本已经接近中国国内,没有太大优势。此外,越南法律体系相对落后,税收制度不透明也是很大的制约因素。泰国的服装制造企业成本太高,很多地方甚至已经超过中国。柬埔寨的政局相对稳定,人工便宜,但赴柬埔寨投资也需要注意交通基础设施落后以及工人素质普遍不高带来的问题。

It was quite true that the textile industry was gradually shifting to the entire Asia-Pacific region, the article quotes a KPMG report. Rising labor costs in China had compelled multinational companies to look to other parts of Asia, and a number of South-East Asian countries were going to profit from regional integration and preferential terms of trade. But from consumer electronics to furniture and other hardware products, China remained the country of origin. Besides, a Chinese consultant is quoted, most of the South-East Asian countries were rather small, and none of them provided the entire industrial chain. In that regard, there were complementary relations between China and South-East Asia.

国际也十分关注制造业从中国向东南亚转移的迹象。国际著名会计师事务所毕马威日前发布的最新报告称,“中国制造”的成本上升迫使跨国公司在亚洲其他地区寻找新的投资地。由于区域一体化和优惠的贸易条件,许多东南亚国家正日趋成熟,将从最近这一转变中受益。不过,该报告认为,虽然服装和鞋类生产正广泛向整个亚太地区转移,但从消费类电子产品到家具等硬产品仍然来自于中国。

中国正略钧策管理咨询公司副总裁陈睿对《环球时报》记者表示,制造业确实存在从中国向东南亚转移的情况。对外资来说,以出口为导向的企业转移会更快,劳动密集型和资源密集型的制造业会转移到东南亚。但他同时称,东南亚国家一般较小,不可能一国拥有很全的产业链,有些制造业这些国家做不了。从这方面来说,中国和东南亚有一些结构性的互补关系。

Unctad’s latest report also believed that while there was stagnation in foreign direct investment to China in the short term, China remained the place with the highest attractiveness for foreign investment. Some people in the market had also said that the absolute majority of the Made-in-China industry was looking for its own road, i. e. upgrading production or moving to hinterland provinces in China, seeking development there. There were close customer and supplier links between China and other regions, and some manufacturers would continue to rely on China even after relocation, in that they needed to import production equipment from China, or in that they needed China as an export market, for example.

联合国贸发组织最新的报告也认为,短期来看,投资到中国的制造业FDI出现停滞,但是中国仍然是最有吸引力的外国投资目的地。一些市场人士还表示,绝大多数中国制造业也在寻求自己的路,产业升级或向内陆地区寻求发展。而中国与亚洲其他地区开始建立紧密相连的供应链。一些制造产业即便转移后仍依赖中国,比如需要从中国进口生产设备或者依赖对中国市场的出口等。

And a Standard Chartered Bank analyst is quoted as saying that if the manufacturing industry was actually moving to South East Asia still remained unclear. China was more competitive than many South-East Asian nations in terms of logistics infrastructure, and Chinese manufacturers no longer produced for export markets only, but for growing domestic demand, too. Rather than reductions in foreign investment in China, there might rather be more rapid investment in other east Asian markets. Some European and American market participants also said that it was too early to talk about a large-scale manufacturing relocation to South East Asia. However, they also suggested that China should address improvement issues among its suppliers, as timely adjustment from passive to active patterns would be helpful for China’s development.

渣打银行亚洲研究部主管许长泰称,制造业是否会向东南亚转移目前还不明确。首先,中国的物流基础设施仍然比许多东南亚国家更具竞争力。此外,中国的制造商已不再只是为出口而生产,中国国内需求正在发挥日益重要的作用。因此,我们可能看不到生产者减少他们在中国的投资,而是以更快的速度增加其在东南亚和其他市场的投资。一些接触欧美公司的市场人士对记者表示,现在说制造业大规模转移东南亚为时尚早。但中国也要正视自身市场供应优势的变化,及时调整化被动为主动更有利于中国经济的发展。

In the words of the report – apparently this one,

FDI flows to China also reached a record level of $124 billion, and flows to the services sector surpassed
those to manufacturing for the first time. China continued to be in the top spot as investors’ preferred
destination for FDI, according to UNCTAD’s WIPS, but the rankings of South-East Asian economies such
as Indonesia and Thailand have risen markedly. Overall, as China continues to experience rising wages and production costs, the relative ompetitiveness of ASEAN countries in manufacturing is increasing.

FDI outflows from East Asia dropped by 9 per cent to $180 billion, while those from South-East Asia rose
36 per cent to $60 billion. Outflows from China dropped by 5 per cent, while those from Hong Kong, China, declined by 15 per cent. By contrast, outflows from Singapore registered a 19 per cent increase and
outflows from Indonesia and Thailand surged. [page xvi – xvii]

And

FDI inflows to developing Asia continued to grow, while South-East Asia and South Asia
experienced faster FDI growth than East Asia.
The two large emerging economies, China and India, saw inflows rise by nearly 8 per cent and by 31 per cent, respectively. Major recipient
economies in the Association of South-East Asian Nations (ASEAN) subregion, including
Indonesia, Malaysia and Singapore, also experienced a rise in inflows. [pages 3 – 4]

As indirectly quoted by Huanqiu Shibao, the report states that

Among the economies of the Association of Southeast Asian Nations (ASEAN), four – Brunei
Darussalam, Indonesia, Malaysia and Singapore – saw a considerable rise in their FDI inflows. The
performance of the relatively low-income countries, namely Cambodia, the Lao People’s Democratic
Republic and Myanmar was generally good as well, though Viet Nam declined slightly. Although natural
disaster in Thailand disrupted production by foreign affiliates in the country, particularly in the automobile
and electronic industries, and exposed a weakness of the current supply-chain management systems,
FDI inflows to the country remained at a high level of nearly $10 billion, only marginally lower than that of
2010. Overall, as East Asian countries, particularly China, have continued to experience rising wages
and production costs, the relative competitiveness of ASEAN in manufacturing has been enhanced.
Accordingly, some foreign affiliates in China’s coastal regions are relocating to South-East Asia,2
while others are moving their production facilities to inland China. [page 43]

Addressing FDI into Chinese manufacturing in particular, the report states slowing growth as a short-term prospect:

FDI growth in the region has slowed since late 2011 because of growing uncertainties in the global economy. FDI to manufacturing stagnated in China, but the country is increasingly attracting market-seeking FDI, especially in services. According to the annual World Investment Prospects Survey (WIPS) undertaken by UNCTAD this year, China continues to be the most favoured destination of FDI inflows. FDI prospects in South-East Asia remain promising,
as the rankings of ASEAN economies, such as Indonesia and Thailand, have risen markedly in the survey. [page 44]

The report doesn’t only discuss China’s (and other developing countries) as recipients, but also as sources of foreign direct investment.

All in all, the Huanqiu Shibao article appears to be basically assuasive, but still somewhat more “alarming” than the UNCTAD report would seem to warrant. It’s conventional wisdom that China is moving up the value-adding chain, and rising wages are a logical phenomenon in this process. The main goal in terms of propaganda appears to be that the laobaixing, the common people, should continue to push ahead in terms of personal education and qualification, in a competitive global economy. In this context, it also makes sense that websites like “Utopia” remain closed down – a measure which was reportedly criticized, among others, by some 1,600 cadres and scholars who accused chief state councillor Wen Jiabao in particular for closing these sources down, and of subverting the socialist market economy. That Huanqiu Shibao may distrust the outside world appears to be an intended goal (no cohesion within China, without such distrust) – but another intended goal is that the readers accept the challenges posed by global competition, rather than rejecting them in favor of, for example, Maoism.

I hadn’t been a regular reader of Utopia, one of the websites that have been closed since spring this year, but came across an article there some six months before the closures. The article’s author was Gu Genliang, a People’s University (aka Renmin University) professor, and it wasn’t exactly globalization-friendly:

We are mired in heavy dependence on foreign resources and on on our own cheap exports. Large-scale low-end exports consume a lot of energy and natural resources, which led to our country’s dependence on foreign energy and resources which not only made the prices for these sources explode, which transferred the fruits of our people’s hard work into the hands of energy-exporting countries, but also has the potential of making us suffer from foreign countries’ embargos, thus carrying a huge security risk. At the same time, while our country is so reliant on foreign resources, it is ridiculous that we are exporting large quantities of rare earths and minerals coal, etc. at low prices.

The topic of Huanqiu Shibao’s article on ASEAN as a competitor for efficiency-seeking FDI doesn’t look exactly sensitive, but a current anti-“Maoist”, anti-“utopian”, or simply anti-“nostalgia” struggle might help to explain why there is no room for readers’ comments underneath. Such comments could spoil the article’s intended pro-competition message.

____________

Related

» UNCTAD World Investment Report 2012

____________

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: