I have been aching to post this video since it aired last month.Vodpod videos no longer available.
So the Chinese don’t want Wham-O’s crappy jobs. This actually appears to be part of a larger trend (Why Factories Are Leaving China, May 13, Businessweek).
As costs climbed in Taiwan two decades ago, Ben Fan moved his lighting factory to take advantage of China’s cheap labor. Now, with Chinese wages on the rise, he’s moving again. “It’s just like what happened in Taiwan,” says Fan, chairman of Neo-Neon Holdings, which sells lamps and lighting fixtures to big retailers including Home Depot (HD), Target (TGT), and Wal-Mart (WMT). “Chinese don’t want to work in factories anymore.”
So Fan is expanding his factory in Vietnam, where wages are $100 a month, one-third what he pays in China. He plans to shift 85 percent of his production across the border, and by December he’ll have 8,000 workers in Vietnam—up from 300 a year ago—and just 5,000 in China, down from 25,000 in 2008.
It may not be so much a case that firms are leaving China as they are exploring other options within China by moving inland.
Over the past two years, millions of jobs have moved to China’s interior or elsewhere in Asia as factory owners try to cut costs. In Guangdong, the mainland’s top exporting province, wages have almost doubled in the past three years, and more than half the factories can’t find enough workers. The number of migrants who traveled to coastal provinces for work fell by 9 percent last year, to 91 million. “This lack of labor will only get worse,” says Willy Lin, chairman of the Textile Council of Hong Kong, a trade association.
For the China this probably largely a good thing. As the article notes, it is not that all manufacturing is leaving coastal China. Rather, it is the real low value stuff like Frisbees and pool noodles. The higher value, non-crappy jobs like assembling electronics will likely stay. Having more work opportunities move to other regions in China should fuel further growth and shore up the domestic market. The impact on Western markets is likely negligible in the near term. Chinese exporters point finger at Western firms for forcing them to move production. Walmart et al. are not willing to absorb any of the pay increase so exporters are forced to new locations to preserve margins. The real question is how long that can go on. Somebody has to do the crappy work as long consumers want to buy the output of those jobs. Coastal China has evolved very fast and any region that is now taking on simple apparel and pool noodles can look at their playbook to see how one goes from toys to cell phones. It seems only a matter of time until those simple jobs move on.