By: Tony Zhang
April 23, 2014
The U.S. manufacturing sector is showing what appears to be the most stable and significant recovery since the recession. In fact, small and mid-sized enterprises are quickly rebounding with rising optimism.
A lot of it owes to the work done by the U.S. government.
President Obama said the U.S. will once again become a manufacturing powerhouse. I believe it will happen soon, because this country possesses advantages in energy, land, capital, technology, among others.
In Michigan, investors in the manufacturing sector are welcomed with very affordable land, tax exemptions and even cash allowance for creating jobs. The U.S. also has an efficient government and well established legal system.
In contrast, China’s manufacturing industry, especially the injection mold industry, faces fast inflating wages and land prices.
It has become difficult to obtain land for the construction of a plant, especially for small and medium-sized businesses. Land brokers and consortia with government backing, state-owned enterprises, and large public companies have easy access to land resources, resulting in spikes of factory building rent and industrial-use land prices.
This type of profiteering from land trading sets a bad example for business owners. They no longer are willing to engage in real manufacturing. They instead invest in land and real estate. Small factory owners in Shenzhen who don’t have sufficient funds to buy land there go back to their hometowns and use their connections to purchase land. They claim they would build industrial parks and invest hundreds of millions in the local industry, but their entire purpose is just to get the land.
The government is inefficient, and sometimes even hindering.
Many of us working in SMEs have probably encountered “problems” with fire department, environmental protection, quality inspection and other government agencies. Whether it’s a certification or inspection, it always, overtly or covertly, becomes a significant cost. As long as you pay the agencies, you’ll get a pass. If you don’t pay, you may end up spending a lot more [trying to do things the right way] but not going anywhere.
We don’t have good financing channels in China, financing costs are overly high, and the credit system has failed to be established.
With impetuous business owners looking for quick profit, and corrupt and inefficient government at all levels, where are they taking China’s manufacturing?
With the Dow Jones Industrial Average reaching new highs, China’s similar indexes are still hovering at a low level. What does the economic barometer indicate?
Business owners face different options. To sell the factory, go back home, buy land and enjoy a peaceful life? Or to stick to manufacturing, continue to put in hard work and hope to achieve success?
Many SMEs in the mold making or injection molding industry have dozens to hundreds of employees, the vast majority coming from the bottom of society. A monthly income of a few thousand yuan supports a happy family.
In small factories, employees can directly interact with the factory owner, many of them learn valuable skills by observing how the boss starts and runs the business. Once they come up with some money, they can start their own business.
In fact, many business owners in Shenzhen and Donguan started from scratch like that.
Things are tough, but they work hard and never give up.
Tony Zhang is founding owner of DC Mould (HK) Ltd. He graduated with a degree in mold design and production from a technical school in Sichuan in 1989, moved to Guangdong province in 1991, and founded DC Mould in 1997. He immigrated to Canada in 2012.