The increase in wages of Chinese workers affects the manufacturing industry, and the market share of garment exports declines
US media said that during his campaign for president, Donald Trump had been claiming that China was taking away American manufacturing jobs.
According to a report on the US “New York Times” website on July 25, Trump’s views once had merit. China has a large number of workers and their wages are far lower than those in the United States, which is attractive to manufacturers who want to cut costs, increase profit margins, and maintain low prices. A study published in the Journal of Labor Economics shows that from 1999 to 2011, the United States lost at least 2 million jobs due to the surge in imports from China.
The salary level of Chinese workers has increased
According to the report, however, in today’s China, the prospects facing workers are quite disturbing, and not as Trump implies. They risk losing their jobs as domestic economic growth slows, production costs rise and competition from foreign countries, including the United States, intensifies. In recent years, China’s labor market has undergone dramatic changes.
As China’s economy moves forward and a lot of opportunities emerge in many industries, the appeal of assembly line work is no longer as attractive as it once was. So, to attract workers, managers offer higher wages. Meanwhile, local governments in Shenzhen and other industrial hubs have been steadily raising mandatory minimum wages to improve the welfare of working families and encourage companies to produce higher value-added and more expensive products. Shenzhen is a coastal trade hub adjacent to Hong Kong.
According to reports, the above factors have jointly pushed up the salary levels of Chinese factory workers. According to estimates from the Japan External Trade Organization, their average monthly salary is currently US$424 (approximately 2,831 yuan – this website’s note), which is more than 29% higher than three years ago. Compared with many other emerging economies, China’s current labor costs are much higher. Workers in Vietnamese factories earn less than half that of Chinese workers, and workers in Bangladesh and other countries earn less than a quarter of Chinese workers.
Rising production costs have also greatly changed China’s competitive position relative to the United States. A 2015 study by the Boston Consulting Group (BCG) showed that manufacturing costs in China’s major export processing zones are almost as high as those in the United States, taking into account wages, worker productivity, energy costs and other factors.
More US companies are “returning home”
According to reports, as the benefits of significant cost reduction have disappeared, more and more American companies are “returning home”, that is, moving their factories back to the United States. According to another survey of U.S. manufacturing companies conducted by BCG last year, 24% of respondents said they were actively moving production back to their home country from China, or planned to do so within the next two years. In 2012, this proportion was only 10%.
This means more job opportunities for American factory workers. In the BCG survey, half of the respondents said they expected to hire more manufacturing workers in the United States over the next five years. The United States is not alone in taking jobs away from China. Rising costs are prompting many companies in various industries to relocate production to various other countries.
On the shelves of American retailers, you can often see products produced by many factories that are being relocated from China. In February this year, Jiuxing, a footwear manufacturer headquartered in Hong Kong and OEM for major brands such as Michael Kors and Lebu, closed a factory in China and transferred some production lines to factories in Vietnam and Indonesia. TAL Garment, a clothing company also headquartered in Hong Kong and manufacturing for American brands such as Dox and Brooks Brothers, plans to close a factory in China this year and transfer production to new factories in Vietnam and Ethiopia.
Other companies with extensive operations in China may not close factories but are looking to invest money elsewhere.
Although China still ranks first in exporting clothing to the United States, it also faces increasing competition from lower-cost Asian rivals. A report released by the Li & Fung Research Center of the Fung Group in March this year showed that the market share of China’s clothing exports to the United States declined last year, while the shares of countries such as Vietnam and Bangladesh increased. This is a Hong Kong-based research company focusing on supply chain and procurement research. “China is not an attractive place for all low-cost jobs,” said Zimmerman, who chairs the American Chamber of Commerce in China in Beijing. “China is moving up the value chain, which means there will be adjustments.”
As China’s economic growth is hindered, workers in the country are also facing the loss of jobs. Chinese factory workers who have already begun to be affected may face a more severe situation in the future. The increase in wages of Chinese workers affects the manufacturing industry, and the market share of garment exports declines
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