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Current totals: 291 Entries and 298 Comments |
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Tokyo-based Toray Industries Inc. is launching production of PET film for use as a substrate for LCD screen backlight in China. The company also is doubling its manufacturing capacity for such film in South Korea. According to a Nikkei BP report, the company decided to start making the PET film in China because global LCD display manufacturers expanded there to meet growing local demand. Toray plans to move a 6,600-ton-per-annum production line from Gifu, Japan to Yihua Toray Polyester Film Co. Ltd., a 50:50 Chinese joint venture with Sinopec Yizheng Chemical Fiber Co. Ltd. in Yizheng, Jiangsu province. The line is scheduled to start running by July 2011. Toray's wholly owned subsidiary in South Korea, Toray Saehan Inc., will double its annual capacity of the PET film to 36,000 metric tons by adding one production line. Toray said the South Korean government's policy to encourage the use of locally produced materials drives demand. Total investment for both moves is reported to be 10 billion yen (745 million yuan or US$110 million).
A bio-plastic manufacturer in Chengdu, Sichuan province, is ready to take advantage of the China-ASEAN (the Association of Southeast Asian Nations) free trade agreement and increase its export of bio-resin film. Ye wenbin, general manager of Sichuan Corn-T Biology Technology Co. Ltd., has come up with a business plan to export PLA film to ASEAN countries, where the film is processed into bags and then exported to Europe. Under the free trade agreement, which started on Jan. 1, China and the six richest ASEAN members -- Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand -- eliminated tariffs and barriers to investment on more than 90 percent of the products traded between China and ASEAN, or more than 7,000 products. The zero-tariff status is expected to extend to the four new ASEAN members -- Cambodia, Laos, Myanmar and Vietnam -- by 2015. Thanks to the zero-tariff, Ye told the Western China Metropolis Daily, orders from Singapore, Thai and Malaysia are on the rise. Corn-T makes both PLA resin and film, according to a speech Ye gave last year. The company priced PLA film for 30,000 yuan (US$4,394) per metric ton and claimed annual sales of 6 million yuan (US$878,818). The China-ASEAN free-trade agreement is the world's third-largest regional agreement in terms of economic value, after only the EU and NAFTA.
The particular lifestyle of Chinese migrant workers usually is marked by these characteristics: 1. Low base salary, long (paid) overtime all year round; 2. Undesirable living conditions: shared dorm rooms, lousy cafeteria food, etc.; 3. None or insufficient health insurance, social security and other benefits; 4. Difficulty in children's schooling: They are charged extra, lofty fees to go to public schools in the city; 5. Ineligibility for local government-subsidized housing for low-income households; 6. Oftentimes, separation from spouse and family. During the heydays, migrant workers coped with these hardships, believing the pay back was worthwhile and hoping things would get better. As the global financial crisis battered the export sector, however, their hopes were shattered, leading them to rethink their jobs and life paths. Here are some thought-provoking readers' comments from the WSJ article I mentioned in my previous post. The most direct cause of the labor crisis is the fact that many factory owners in the Pearl River Delta vanished overnight. [In 2009, many such cases occurred. Local governments had to intervene and compensate abandoned workers for their overdue wages.] I live in Shenzhen, where basic-level factory jobs pay 1,000 yuan [US$146.5] a month. That's about twice as much as 15 years ago. But during the same time period, GDP grew fivefold, consumer prices doubled, and housing prices increased 10 times. Therefore, being a migrant worker here is most exhausting and hopeless... The labor shortage doesn't have much to do with the one-child policy. You can see a lot of people idling around and playing Mahjong, no matter where you go. [It's because the pay is too low.] Government employees make more than 10 times than a factory workers. Unless you are desperate, [who would want to work in a factory?] Living standards in rural areas have improved a lot. Farmers' income is catching up with low-level city jobs, while the living expenses are very low in small towns and villages. Plus, living in your home village is very relaxing and stress-free. I regret going to college and staying in a big city. My life could have been happier if I had stayed in my hometown. The so-called labor shortage is a blessing. It shows that people are defending their rights to live a decent life. My company also suffers from lack of workers and we can't finish order on time. But I still am glad for the future of China. Other comments argued that some college graduates in cities are paid not much more than factory workers, hinting that labor wages are fair. But that's a story for another day - the oversupply of college graduates across China.
By definition, a labor shortage forms when the number of jobs outnumbers available workers. On the surface, the giant gap between the two variables has been created in China by fast recovering businesses and unmatched supply of migrant workers. A Wall Street Journal article looked into the issue in depth and summarized four factors: 1. Structural problem: "Many of the outstanding job vacancies are due to a lack of skilled workers as segments of China's export industry crawl up the value chain." Meantime, younger migrant workers aren't interested in low-paying, physically demanding work. 2. Growing income at home for farmers. "Farming is becoming more rewarding than cleaning skyscraper windows in some places." Some farmers live on rental income of their farmland to large state agricultural enterprises. 3. "...The construction boom and fast economic growth in second-tier inland cities such as Chongqing, Wuhan and Nanchang. Many migrant workers prefer these places because salaries are in some cases almost on par with Shanghai's and it's simply closer to home." 4. Generation gap. While migrant workers in their late 40s or early 50s are gradually returning home, their children, who have been raised in relatively good conditions, are under much less pressure to make hard money in order support themselves or their (smaller) families, thanks to the one child policy. The analysis is solid, but nonetheless incomplete. A quick glimpse of the 74 comments (all written in Chinese, some by self-claimed migrant workers) on this article reveals one simple, pragmatic problem: low wages and lack of protection. (To be continued.)
Let the numbers tell the story. Just in Guangdong province, there are shortages of 800,000 workers in Shenzhen, 200,000 in Guangzhou, and 150,000 in Quanzhou. Up north in Wenzhou city, Zhejiang province, that number has hit a million, according to labor bureaus. The steaming hot labor market has turned 180 degrees from a year ago, when factories laid off millions of workers. For the time being, at least, it looks like many of the migrant workers who lost their jobs and went back to their home villages are not returning to the host cities. "You can walk into any factory and get a job," a New York Times report quoted a 22-year-old plastics worker in Guangzhou saying. Manufacturing giant Foxconn Technology Group said it had 50,000 vacant positions after the Chinese New Year. In order to solve the problem, the company told Xinhua News Agency, a referral system was put in place, with on-site recruitment open even during the holidays. Companies and government officials expect more migrant workers to return after the Feb. 28 Lantern Festival. Shenzhen city is planning to organize 573 job fairs in the next two months.
While factories in China's manufacturing hub in the Pearl River Delta continue to suffer labor shortage, especially after the Chinese New Year, most companies are not willing to raise wages to attract workers. A recent survey by the local labor department in Shenzhen's Longgang district reveals that only 15 percent of the 103 surveyed firms plan to give very modest raises. Most of the surveyed companies are plastics and electronic manufacturers, according to a report from Nanfang Daily. These companies believe that the main reason for the latest labor shortage is limited supply of migrant workers. About 70 percent of these companies said their current headcount is lower than a year ago. Based on published data, the average monthly wage in Shenzhen was 1,600 yuan (US$234) in 2007 and 1,800 yuan (US$264) in both 2008 and 2009 -- overtime pay included. In other words, wages increased 12.5 percent in 2008 but became stagnant in 2009.
The biggest question hovering over any Western business looking for partners, suppliers or distributors in China probably is whether the Chinese candidate is trustworthy, reflecting the lack of credibility and a track record system in that nation. The question plagues Chinese domestic companies as well. The China Plastics Processing Industry Association, a quasi-governmental organization based in Beijing, has started to tackle that problem with an unprecedented "enterprise credit evaluation" program. According to CPPIA's official documents, with the approval from China's Minister of Commerce, the trade group is working with "third-party experts" to rate plastic firms on a voluntary basis. CPPIA said the program is not for profit, but to serve the industry. It charges a "preliminary rating fee" of 9,000 yuan (US$1,397), plus other fees in later stages, to initiate such a comprehensive credit evaluation of a business entity. The first group of 41 companies in the program all received AAA in the preliminary rating, I assume the highest score possible. The list was posted on CPPIA's Web site for public review and comments for 10 days.
Just like how oxo-biodegradable plastics recently raised debates in the U.S., household items that contain melamine, such as tray and plates, have been in the spotlight in China, fueled by the long-lasting quibbling between two Beijing-based trade associations in the past couple of years. A new round of debate started just before the Chinese New Year, as the International Food Packaging Association labeled melamine trays as potentially dangerous, which prompted a quick response from the China Plastics Processing Industry Association's subdivision of melamine plastic products. In a news release, CPPIA said the criticism of melamine products is unfounded. "As long as the consumer follow the manufacturer's instruction -- such as avoid using melamine products in a microwave oven and avoid exposing them to high heat, these products are safe." The release called IFPA's warning "misleading." IFPA, however, pointed out in a Dec 2009 research paper that the use of melamine is not its target of attack. The real problem lies in the widely available substandard "melamine" products in China. The manufacturers of these "fake melamine products" take short cuts by using cheaper urea-formaldehyde resin underneath a thin layer of melamine on the surface. Even though the Chinese government has been trying to regulate melamine household products by requiring production approvals, the measures have yet shown real effects in fending off subpar products. IFPA's warning to the public on melamine trays in general has some merit, but since the average consumer has no capacity to evaluate the quality, the warning could adversely affect those companies that make standard quality melamine products.
The global recession didn't make a dent in the dominance of Chinese products in the global market. According to a column (in Chinese only) on the Chinese Web site of the Wall Street Journal, however, Chinese exports are still in a "miserable" situation. The author, Liu Gang, defined the "misery" as an extracting but unrewarding task. On the surface, he said, the Chinese government subsidizes Chinese manufacturers to sell products at lower prices in overseas markets than in the domestic market. Ultimately, it is foreign consumers that Beijing really is subsidizing, while domestic Chinese consumers are charged premium prices for the same products. "We use our money to subsidize foreign consumers and still get criticized by them, why both?" Liu was quick to answer his own question: "The only benefit is domestic jobs." Then, why doesn't China replace these export-focused jobs with positions that serve the domestic market? The reasoning usually stops at an ostensible statement: domestic demand is still limited. Is that really so? Beijing, as I see it, has been making efforts to boost domestic consumption, by providing subsidies to auto and appliances purchases, for instance. But the best way to bolster Chinese purchasing power is to reduce the non-manufacturing costs associated with an inefficient distribution/retail system and the lack of trust and credibility. Why would shrewd Chinese factories export their products for razor-thin profit, when the same products are sold for significantly higher prices in the home market? Because it's a headache to get paid by domestic buyers, companies have told me over and over. Liu called for the government to take real action to reduce distribution costs and restore business credibility and trust. He even suggested using export subsidies to vouch for domestic payments. That way, he said, made-in-China products will be able increase sales within China, rather than suffering low margin and getting scolded overseas.
For those who are like me -- struggling with my 2010 New Year's resolutions, let's give ourselves a second chance, with the lunar New Year, also called the Chinese New Year or the Spring Festival -- for it's the start of the spring season on the lunar calendar. The zodiac sign for 2010 is the fierce, brave and competitive tiger, boding well for the year to come, which, coincidentally, will kick off on Sunday Feb 14, also Saint Valentine's Day. I'd like to take this opportunity to thank you, our readers, for your continued interest in Plastics News, the PN China sites, and the China Blog, and wish you a prosperous lunar New Year!
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Since the launch of our Plastics News China eWeekly newsletter and related Web site in June 2005, I've been receiving e-mails and phone calls from readers who would like to discuss news events and industry trends with me. This blog is to provide a platform to facilitate such communication. I invite you to come here often, read about the latest happenings and discuss them with me as well as with industry friends all across the globe. I welcome your comments and opinions.