Recently, under the pressure of workers’ general strike, the Cambodian Ministry of Labor announced that it would increase the monthly minimum wage in the garment industry by 25% to US$100. However, industry workers are still dissatisfied and demand that the minimum wage be increased to US$160 per month.
Industry insiders said that because the time gap between rising labor costs has gradually shortened, it no longer makes much sense for Chinese brands to move to Southeast Asia.
The cost advantage of Southeast Asian countries may no longer exist
Recently, Luthai A, a leading company in yarn-dyed fabrics, announced that it plans to invest US$8 million in a new shirt processing plant in Cambodia with an annual output of 3 million pieces. Like Lutai A, there are no longer just one or two companies setting up factories in Southeast Asia. Since 2004, as China’s manufacturing industry has gradually moved overseas, nearly 200 garment companies have “moved” their production bases to Southeast Asia in order to enjoy lower labor costs and raw material prices.
Xiong Xiaokun, a senior light industry researcher, pointed out in an interview with reporters that most companies move to Southeast Asia because of their low labor and rental costs. However, the labor technology level in Southeast Asian countries is not high, management is difficult, and production efficiency is low. In addition, they have to suffer from “strike incidents” in these countries. At present, Southeast Asian countries are increasingly clamoring for higher wages, which will significantly reduce the attractiveness for companies to invest and build factories. The number of Chinese brands moving to Southeast Asia is bound to decrease.
The reporter learned that the world’s largest shoe manufacturer Pou Chan Industrial Co., Ltd., which produces for well-known sports brands such as Nike and Adidas, is gradually transferring some of its production lines to Southeast Asian countries such as Indonesia and Vietnam. The strike in Cambodia this time , which will have some impact on Baocheng’s local factories. Since 2013, although Baocheng’s revenue has basically remained stable, the continued increase in labor costs has had a certain impact on its operating performance.
It is reported that after negotiation, many shoe and clothing manufacturing factories in Cambodia are about to adjust the monthly salary of workers from US$80 to US$100. When asked whether he had been affected by the “strike wave” in Southeast Asia, a relevant person from a garment company in Jiangsu Province told reporters, “I haven’t heard any news about this over there yet.”
“With the increasing demands for rising labor costs, Southeast Asia’s cost advantage may no longer exist. However, companies that have built factories in Southeast Asia may not turn around and return home in the short term. These companies have basically stabilized in Southeast Asia. Although the labor force The cost has increased, but it is still lower than domestically.” Xiong Xiaokun said.
Should textile companies fly to the “Southeast” and move to Europe and the United States?
Just as manufacturing companies are struggling with whether to “fly” to Southeast Asia, Zhejiang Cole Group Co., Ltd. (hereinafter referred to as “Kerr Group”), a leading cotton textile enterprise, has announced that it plans to spend US$218 million to build a new plant in Lancashire, South Carolina, the United States. St. County opened its first overseas factory, and this was also the first time for a Chinese textile company to build a factory in the United States.
Huang Guogang, director of the office of Cole Group, said that the project’s foreign investment is mainly to cope with the high labor and energy costs of the domestic cotton yarn industry, avoid the trade barriers set up by the international market for my country’s textile industry, and promote the implementation of the company’s internationalization strategy. .
It is reported that Cole Group’s decision was made after comparing Vietnam, India and other Southeast Asian countries with the United States. The person in charge of the company said that although the United States has high labor costs and is not as advantageous as Southeast Asian countries, it can make up for it in terms of cotton raw materials and cotton textile power consumption.
Xiong Xiaokun pointed out that Cole Group’s establishment of a factory in the United States can bring some new enlightenment to the development of traditional manufacturing. Comparatively speaking, there is greater potential to build factories in European and American countries. 1
On the other hand, my country’s textile and garment industry is highly dependent on exports, and exports are mainly concentrated in European and American countries. Building factories in Europe and the United States can reduce transportation costs for garment companies with foreign trade export business; building factories in Europe and the United States is beneficial To open up the market, the transportation costs of building factories in Southeast Asia and selling to domestic or European and American countries are relatively high; on the other hand, in addition to higher labor costs than Southeast Asian countries, European and American countries are significantly better than Southeast Asian countries in terms of technology, management, and talents. This “entering Europe and the United States” strategy will have a positive impact on promoting the transformation and upgrading of textile and garment enterprises and the development and improvement of their own resources, technology, market and brand competitiveness.
Li Jin, chief researcher of the China Enterprise Research Institute, believes that South Carolina in the United States is adjacent to the Atlantic Ocean and close to Central America and Europe. It is a place with relatively intensive traditional manufacturing industries. There are obvious geographical advantages in building a factory here. In addition, there is an advantage of the North American Free Trade Agreement, which stipulates that trading partners in the region are free, which can play a very good role in reducing costs for foreign companies. This kind of experience can be learned, but specific problems must be analyzed in detail.
“It is not foolproof to set up factories in Europe and the United States. Now is the time when the RMB continues to appreciate. If it starts to depreciate, there will be exchange rate risks. Moreover, the relevant departments are considering national security and other aspects. , some measures may be taken to restrict it. Therefore, whether to set up factories in Southeast Asian countries or to…When setting up factories in developed countries, one cannot judge what is better or worse. Enterprises must decide based on their own circumstances and strategies, and make a choice based on which market is more suitable for them. “Li Jin said.