I get a strong suspicion that too many people are too overweight in Chinese stocks now. The reason for this is that after posting the China Tax and China Labour Law changes on a number of sites, there has been absolutely no response at all on most. High profile names ignore the posts, nobody commenting at all, either pro or against.

It therefore suggests to me that lots of people are presently very overweight in China stocks, they have got caught with the market weakness, and are now holding at a loss - waiting to sell any rise.

If, and its only an "if", the market weakness continues, and more and more of these people are trapped into China plays - you can foresee, imv, a lot of weakness coming into that sector, as more and more give up and bail out.

Quite remarkable that so many got duped into buying "China" as a safety against US/EU credit fears and recessions - only to now find its not as safe as they thought, and China stocks are also falling.

My own suspicions were that the China stock dream would go into breakdown and start its fall once the 2008 Summer Olympics had passed and the government can afford the luxury of upsetting lots more people and not caring about "face" during the Olympics that the world will be watching.

Is there another boom left in them before the Olympics comes and goes ? Will the boom not happen as its sold into ? Will they all meakly fade now and continue to do so ? Will they just keep on booming and not fall back again ?

Please discuss !!

http://www.wsws.org/articles/2008/mar2008/chin-m17.shtml

Rising costs throw Chinese manufacturing into crisis
By John Chan

17 March 2008

For years, Chinas cheap labour has helped global corporations push down the wages and conditions of workers around the world. Cheap goods churned out by sweatshops based in China also kept inflation low internationally and underpinned the low interest rate policy in the US that fuelled its financial and housing bubbles.

All this is coming to an end. Thousands of manufacturers have shut down or moved out of China because of rising raw materials costs, higher wages and the rise of the yuan against the US dollar. These processes are in turn accelerating inflationary pressures, not just within China, but internationally.

Small and medium firms (with capital under $US3 million) in Chinas light industries, such as shoes and textiles, have been hard hit. The Financial Times (FT) on March 2 reported that one in six Chinese textile companies lost money last year, even though export prices increased 8 percent. According to the China National Textile and Apparel Council, growing wages and a weaker US dollar are squeezing the textile industrys profit margins.

The textile sectors average profit margin is 3.9 percent, but the bottom two-thirds of companies are struggling on an average margin of just 0.74 percent. While textile exports grew 19 percent last year to $US175.6 billion, national textile council chairman Du Yuzhou told the FT the industry was relentless at weeding out the weak, with large corporations absorbing smaller bankrupt firms. Amid a wave of industrial restructuring, many corporations are shifting production to inland provinces or countries such as Vietnam, Indonesia and India, seeking cheaper labour.

The Asia Footwear Association estimates that about 15 percent of shoe makers in Dongguana major export hub in Guangdongs Pearl River Deltahave shut down or relocated in the past year. During that time, more than 1,000 mainly small and medium footwear factories have closed throughout the provinceout of a total of 7,000-8,000. The Federation of Hong Kong Industries predicts that 10 percent of the 60,000-70,000 Hong Kong-owned factories in the delta will close this year. Many factories chose to shut before January 1when limited new labour laws take effect, requiring employers to sign long-term contracts with workers, pay social security insurance premiums and provide higher compensation for layoffs.

A Hong Kong shoe factory owner, Leung Ka-yiu, who was planning to move his operations to Vietnam told Asia Times that since 2006 the Chinese government had been implementing polices that were unfavourable to the export processing. The measures included heavier taxes for foreign investors and reduced tax rebates for exports. The labour law can be said to be the last push for me to leave, he said. If the law is strictly followed, my factorys labour cost will increase by 20 percent, which many shoe factories like mine cannot afford, given our profit margin of about 8 percent. He laid off two-thirds of his workers in December.

Zhu Yongxin, a shoe factory owner in Foshan, Guangdong province, complained that the cost of steel for buttons had trebled from 20,000 yuan a tonne in 2004 to more than 60,000 yuan. Oil for sewing machines cost 75 yuan a barrelup from 60 yuan a year ago. The cost of unskilled labour had risen to around 1,200 yuan ($US168) a month from 800 yuan two years ago. Skilled workers must now be paid 1,500-2,000 yuan. Zhu said he planned to move the factory to inland Hunan province.

Many migrant workers lost their jobs when they returned to work after the Chinese New Year. Lu Yongyuan, from Guizhou province found that his employer, the Taiwanese-owned Dongguan Hongsheng Mould Factory, had closed. Lu told the FT on February 25: The government will auction the assets. Costs were just too high [to keep the business going]. A notice posted on the factory gate told its 300 workers to contact local village authorities to collect one months wage, although the new labour laws require 10 months redundancy pay.

Another factor is the rising yuan. Since the Chinese government delinked the currency from the US dollar in July 2005, it has risen by 16 percent against the dollar, placing enormous pressure on some exporters. Major Western retailers like Wal-Mart have refused to make any significant concessions on procurement prices from China. John Cheh, chief executive of Hong Kong-based Esquel, which makes more than 60 million shirts a year for major brands such as Nike and Gap, told the FT on March 2: Its very difficult to raise prices. We show [clients] the numbers and say: Hey, we are losing money on your orders.

Xu Jiangchang, general manager of a Ningbo-based garment exporter that employs 4,000 workers, told Reuters: Each percentage point rise in yuan [against the dollar] means a half percentage point loss in our foreign exchange earnings. Zhou Dewen, head of the Wenzhou Small and Medium-Size Enterprise Development Promotion Association, pointed out that Wenzhou, which is famous for its small to medium factories, saw half the companies that started in 2007 suspend operations before the end of the year. The average profitability of Wenzhou enterprises stands at only 3 to 5 percent of assets. A 3-percent yuan rise will wipe out profits in many firms here, in particular textile and shoe companies with low profitability, Zhou said.

The Chinese government has said these factory closures are part of President Hu Jintaos philosophy of Scientific Development for promoting technologically-intensive industries and moving up in the value chain. Tougher labour and environmental regulations are said to be efforts to build a harmonious society. Chinese officials have commented that large corporations should wipe out small firms with low added value and backward technology. Beijing is also encouraging factories to move to inland provinces, supposedly helping to narrow the vast economic gap between rural and coastal regions.


Global processes

The Chinese government, however, has no effective control over many factors behind the growing pressure on the manufacturing industry. Consumer demand in the US is slowing, with the subprime crisis and rising prices forcing many workers to cut back their spending. According to the Ministry of Commerce, Chinese exports to the US increased 20.4 percent in the first quarter of 2007, but the growth rate dropped to 15.6 percent and 12.4 percent in the following two quarters.

Nevertheless, Chinas rising production costs will be translated into higher consumer prices in the US and globally. Economic analysts have pointed out that China is likely to retain its position as the worlds largest low-cost manufacturing platform because its huge workforce and extensive infrastructure still enable it to provide competitive advantages over other countries. Vietnams share of the US apparel market jumped from 2.8 percent in 2005 to 6 percent this year, but Chinas share rose from 25 percent to 40 percent in the same period.

Wal-Mart vice chairman Michael Duke told the media on February 25 that his firm directly sourced $9 billion worth of goods from China in 2007. China will continue to be a major portion of direct purchases by Wal-Mart for a long time, he said, adding that although some imports from China may be decreasing, others were increasing. The largest categories of Chinese exports are now machinery and electronics, such as auto parts, computers and electrical home appliances, rather than shoes, textiles and toys.

Rising inflation in China was signalled last year by serious pork shortages. It is now clear that inflation is a far bigger world problem. There has been a wave of financial speculation in global commodities markets, from basic metals to grains. Major energy and mining corporations are demanding huge prices increases from manufacturers. In February, Asian steelmakers were forced to accept a 65 percent increase in iron ore prices, which will be passed onto other industries.

Under these conditions, Chinese workers are demanding higher wages. In an interview with Newsweek on February 14, Auret Van Heerden, head of the Washington-based Fair Labor Association, offered his impressions from a recent visit to China. He commented on the new labour law: At the factory level people are talking about it everywhere. One of the things about the law is it doesnt rely on outside labour enforcement... There have already been strikes about it; there have been employers who have been panicked by the commitment the law would require, so theyve tried to lay off or outsource workers. The workers struck, saying, No, were not going to accept that. There have been a couple of high profile cases of strikes against dismissal involving Hong Kong-listed companies. Take the richest woman in China [Zhang Yin, CEO of Nine Dragon Papers], who owns a huge paper company. She tried to outsource guards and security cleaning services, and didnt want to give contracts. The workers struck. Its been an emblematic case: if one of the richest and most powerful businesswomen in China couldnt sidestep the law, its a good indication of the signal the government wants to send.

As in the past, Beijing will not hesitate to use police-state methods to suppress unrest among workers. The real motive behind this legislation is fear of social instability. The intense exploitation of workers in sweatshops, coal mines and construction sites has created a climate for social explosions, worrying employers around the globe. Willie Fung, chairman of brassiere maker Top Form, told the Australian the biggest worry was not a cyclical US recession, but labour costs, which once jacked up, cannot go down.

While sections of manufacturers are leaving China for countries such as Vietnam, they face similar problems. A wave of unrest among Vietnamese workers demanding higher pay has shaken foreign investors, amid escalating inflation. The annualised rate was more than 15 percent in February. On February 28, 1,500 workers went on strike at a South Korean garment factory in Long An province, demanding $10 more a month. On March 5, 10,000 workers at Tae Kwang Vina, a South Korean shoe contractor for Nike in Dong Nai province, struck for higher wagesalthough they were already paid 20 percent more than the minimum wage.

The Vietnamese official statistics record that 387 strikes occurred last yearwith almost 300 in foreign-owned companies. Hanoi was forced to promise a 12 percent minimum wage increase this year. At the same time, the Vietnamese Stalinist regimes response to inflationincreasing interest rates and tightening money supplyhas led to a severe shortage of the Vietnamese currency, the dong. The global scale of inflation and the crisis in manufacturing industry demonstrates the need for workers in China, Vietnam, Asia and beyond to develop an international movement against the global capitalist system.

http://business.smh.com.au/costly-leap--pressure-on-the-factory-floor/20080314-1zip.html?page=fullpage#contentSwap2

Costly leap - pressure on the factory floor


March 15, 2008

Rising inflation and wage costs are transforming the Asian giant's industries and its role as the world's low-cost factory. John Garnaut reports from Shanghai.

The world's second largest sportswear company, adidas, is confronting a new and unexpected problem. The costs of labour, materials and red tape are spiralling upwards in its great production heartland in southern China.

It used to be that money made the rules and multinationals such as adidas could always extract a better deal by threatening to move offshore. The company runs more than 250 factories here, after all. And each clothing factory employs 3000 people, on average, while every shoe factory has seven times that number.

But the Chinese Government is no longer interested. It has recently abolished export rebates, introduced tougher environmental and labour laws and increased the minimum wage - squeezing production margins even tighter.

"The message coming from local governments and to a lesser extent the central government is very clear," says William Anderson, the head of Social and Environmental Affairs at adidas. "They're saying don't tell us about your problems, relocate."

For thousands of small and multinational manufacturers the story is the same. For them, the world economic order is turning on its head.

The endless, seemingly indomitable factories that stretch from the Hong Kong border north up the Pearl River delta in Guangdong province and through the coastal provinces of China are choking on their own success. They have exhausted what was thought to be a bottomless barrel of cheap labour. They have erected their sheds on the peasant farmland that is cheaply available. They have devoured so much oil, cotton, rubber, coal and steel that commodity prices have remained "stronger for longer" than the world has known. And they are rapidly using up China's political tolerance for filling the earth, sky and waterways with toxic waste.

There are no more obvious corners to cut and few remaining efficiency gains to extract. Low-end manufacturers are shutting down or moving out. A Hong Kong business association claims 3000 factories have shut down in the Pearl River delta this year. The Guangdong local media is full of reports and pictures of newly abandoned factory floors.

But a growing proportion of manufacturers are steeling themselves to push their rising costs through to the final stop on the production chain: the consumers.

About 100 million pairs of shoes and 125 million garments were sourced in China by adidas last year, which says it is packing up a large part of its Chinese production and moving it to the country's lower-wage but logistically challenging inland provinces. The company will not reveal any price-rise plans.

"We have no immediate plans to change the pricing policy of our products," says Anne Putz, the head of adidas corporate public relations at head office in Germany.

But other low-wage manufacturers are making their intentions clear. They are moving, skimping on inputs and fighting as to give consumers some of their pricing pain.

"The consumer, our customers, have pushed for years to get the lowest possible price and they feel because it's made in China it's got to be cheap," says Michael Morosin, who runs an electronics packaging company called PRT Manufacturing in Shenzhen. His main cost is plastic, derived from oil.

"The cost of oil is killing us," he says. "But we can never pass on more than 50 per cent because on the other end of the phone you hear these guys scream."

WESSCO International supplies a large proportion of the world's airline bags, with their disposable toothbrushes and socks, to companies such as Qantas. Last year, its managing director, Petros Sakkis, shifted his efforts from trying to squeeze ever-increasing quantities of cheap plastic goods at ever-diminishing prices out of his Chinese production lines. Instead, he's been roaming Vietnam, Thailand and India for factory space.

"Rising cost pressures are pushing us to be more aggressive in moving our production out of China," Sakkis says. "Where to? That's the big question. You've got to start from scratch because there is no paradise."

Sakkis will not talk about his prices, as each contract is negotiated individually. But Jo Austin, who edits a trade magazine called OnBoard Hospitality, spells it out.

"The rising costs will be passed on to airlines and airlines are passing them on again," she says. "But rather than pay more, airlines are reducing product, particularly at the back of the plane."

Whether consumers pay higher airfares or receive a lower-service flight, they are paying more for less. For decades, consumers have had the better of the world's manufacturers. But the tide is starting to turn. The battle between them will affect the political fortunes of leaders such as China's Premier, Wen Jiabao, who last week said inflation was the biggest concern of the Chinese people, and the Prime Minister, Kevin Rudd, who says the consumer price index is his biggest economic challenge.

This week, China's Bureau of Statistics shocked the economic world with consumer price index growth of 8.7 per cent for the year to February. Most of that was driven by food prices, but upstream inflation pressure is growing just as fast.

China's producer price index jumped 6.6 per cent in the year to February, from a virtual standing start in the middle of last year.

The United States Bureau of Labor Statistics reports import prices from China fell by about 1.5 per cent annually from 2004 through to mid-last year. But the latest annual figures show China import prices rising 2.5 per cent. Chinese statistics show its export prices are up 6.5 per cent in a year in US dollars, the currency in which most China export deals are set.

Australia does not compile country-specific import price data. But a China economist for UBS, Jonathan Anderson, says China export prices are rising into the US, Europe and Japan - so it's a fair bet they are rising in Australia, too.

"It is accelerating," Anderson says. "And the reason we expect it to continue to accelerate is that labour pressure is unabated."

So far, the Reserve Bank Governor, Glenn Stevens, has been spared the added inflationary headache of rising Chinese import prices thanks to the mercurial Australian dollar. The rising dollar means Australia's purchasing power is rising faster than China's US dollar-denominated export prices. But that relief will last only for as long as the Australian dollar out-runs the Chinese yuan.

Macquarie Bank's China economist, Paul Cavey, says it is only a matter of time. "Whichever way you look at it, Chinese export prices are moving up," he says. "At some point, it must begin to have an impact on Australian inflation."

China's cost pressures are spreading deeper and further through the system. More than half of the increase in China's producer price index was caused by coal and steel, and those shocks will be amplified by a second round of cost increases as steel and energy-intensive producers pass their pain down the production chain.

Australian consumers and businesses have enjoyed an unprecedented, sustained rise in buying power because prices for the commodities that Australia exports to China are going through the roof and, at least until now, prices have been falling for Chinese goods that are coming the other way. But booming commodities prices are starting to embed themselves in many of the manufactured goods Australia buys from China.

China's steelmakers have more than offset the huge rises in iron ore and coking coal costs by simply pushing them down the line. Steel-intensive users, in turn, are pushing those costs on to the next line of producers.

An employee at Morimatsu Industry, a Japanese company that manufactures in Shanghai, says steel accounts for half of the costs of the huge steel tanks it makes for chemical and mineral processing. He said he will add the 20 per cent rise in steel prices this year directly onto his product prices - and charge it to customers that include BHP Billiton in Australia.

The tyre maker Goodyear, which also sells to Australian mining companies, says it is lifting productivity to absorb rising rubber, energy and shipping costs. Nevertheless, it is also asking customers to pay.

"But yes, eventually consumers bear the brunt, just like they pay for increases of other products from raw materials or natural resources," says Goodyear's regional communications director, Ron Castro.

It helps resource-intensive producers that they can easily point to record commodities prices in order to explain their cost problems to customers. It also helps they tend to sell to other producers, such as mining and Asian construction companies, which are flush with cash.

Philip Kirchlechner, a marketing director at West Australia's Aurox Resources, says prices for iron ore processing equipment such as crushers and ball mills have jumped about 30 per cent in three years and delivery times have doubled.

"This price and delivery situation will get worse by the end of this year,' he says.

Tom Ren, a Shanghai businessman who runs a chemicals company called FineKing, says his inputs are derived from oil and therefore getting more expensive. He sold the world Yuan300 million ($45 million) in polyurethane gap filler products last year - the stuff that builders use to seal the cracks between windows and walls.

Ren writes his key financial variables on the back of a notebook to show how rapidly his costs are rising. They are not rising as fast as his efficiency gains.

"Our cost keep going up and up and up, but so is our productivity," Ren says. And then he adds a crucial detail: the prices of the products he sells are slated to rise 20 per cent this year.

Makers of heavy machinery and equipment tend to start from a less efficient base than their labour-intensive cousins, meaning they have more room to raise their productivity and preserve margins. More importantly, they have pricing power.

One observer, whose private equity fund controls $US4 billion ($4.29 billion) in the Asian region, including in China and Australia, said rising costs are sorting Chinese exporters into three groups.

"The guy who sell products that are really super-commodities are passing their cost increases on because their customers understand what's happening in the world market," he says. "The low-end manufacturers like hardware, textiles and low-end auto-part suppliers, like cooling fans, are being hammered. But those who can differentiate on product or use a lot of technology are OK. Anybody who has a bit of technology in their product can pass that on."

It turns out that cost pressures are far from defeating China.

Meguri Aoyama, who is the head of China affairs at Keidanren, Japan's top business association, says China's labour-intensive manufacturers will struggle. But prices for resource-intensive products such as cement, paper and steel will keep going up. But the overriding theme of Chinese industry, he says, is that rising costs are pushing the world's most competitive manufacturers to scramble faster up the technology chain.

For Toyota, he says, rapidly improving technology will easily counter rising steel costs. The car maker, which is likely to overtake General Motors as the world's top car maker this year, is helping to turn cities such as Guangzhou from low-wage manufacturing centres into high-wage, high-tech capitals.

"Guangzhou's becoming the Detroit of Asia. In five years the situation has totally changed," says Atsuo Kuroda, who is responsible for China trade and investment at Japan's Ministry of Economy, Trade and Industry.

Other leading brands such as Canon, and Panasonic are steering clear of rising costs by using ever-improving technology to produce increasingly high-tech digital cameras, flat-screen TVs and industrial machinery.

It is a little more than a decade since China cemented its name as "the world's factory" for being the home of simple, low-wage manufacturing. But the country is moving on.

Rising costs are igniting yet another round of creative destruction. They are forcing some firms out of business, others deeper into China or into southern or South-East Asia, while giving others the impetus to advancing up the technology ladder.

The Chinese Government is encouraging the transition. "They're saying, 'We want to move up-market, upscale, we prefer auto to apparel,"' says Anderson at adidas. And so his company is shifting its China manufacturing inland, where it can provide jobs to China's remaining low-wage workers and direct its products towards the country's rapidly growing domestic market.

China is treading a similar path to Japan, Korea and Taiwan before it, albeit on a much larger scale. With these precedents, economists expect consumers might hurt a bit during the transition but will end up back on top.

"Cost pressures are rising so everybody is talking about whether China will push up the prices of its products and therefore inflation everywhere," says Huang Yiping, the chief Asia economist at Citigroup. "But I don't think that will happen. If China succeeds in exporting autos, for example, then China will remain a deflationary force for a long time to come."

The times of an ever-falling "China price" for labour and resource-intensive manufactured goods is probably over. But the era of a new China price for cars, sophisticated electronics and even aircraft is probably around the corner.

Seems PP is a nuisance everywhere.

http://www.advfn.com/cmn/fbb/thread.php3?id=16752016&fav=add

no idea and don't care .... i actually can't be bothered to read most of the stuff he posts, but that is just because i am lazy and/or my senile brain falls apart in the effort.

for all that, you will note that SOLA was a very profitable short (for me) today.

Cynic well done quite extraordinary considering the numbers produced by SOLA.

Well done cynic if you've made a profit....at the moment it doesn't matter what I pick it goes down the spout !

Frankly...I think shorting will be the only thing to do now !

LOL, I cannot read the thread as its creater is in my filtered list, however, given the multiple alias nature of ADVFN's worst, its likely to contain posts from 2 or 3 people who are logging in under 30 different names each......LOL :)


zscrooge - 19 Mar 2008 15:33 - 28 of 32
Seems PP is a nuisance everywhere.

http://www.advfn.com/cmn/fbb/thread.php3?id=16752016

My estimations way back were of major problems for China in 2009.........the "end of Olympics" effect. Too much speculation that will eventually come to end, and normally at the top of the bubble. Bad news is normally worked into the markets via the official mouthpieces of the Communist Party, so its worth taking note that one of the official mouthpieces is now warning......... They were happy for it to pile in and make certain parties lots of money....but they know its going to have to depart before too long....thats the warning imv.



http://www.chinadaily.com.cn/bizchina/2008-03/18/content_6546681.htm

China warned of sudden retreat of hot money

By Ding Qi (chinadaily.com.cn)
Updated: 2008-03-18 16:30

A huge amount of speculative capital has poured into China over the past few years, and its sudden retreat could wreak financial havoc, warned a research report from an unnamed authoritative institution in China.

The report, acquired by 21st Century Business Herald, said that over US$460 billion worth of speculative money from overseas poured into China last year. The figure is four times larger than that of 2006 or twice the total from 2002 to 2006.

At the end of last year, China's foreign reserves totaled US$1.53 trillion, up US$461.9 billion over the end of 2006. According to the report, there is a large part of speculative money entering China via fake trade and non-trade channels.

The changing foreign exchange rate between the yuan and the US dollar, the China-US interest rate gap, and a potential US economic recession are three major reasons behind the huge capital influx, it said.

However, there are possibilities that this huge amount of funds may simultaneously leave China in a very short period of .....................................

http://english.vietnamnet.vn/biz/2008/03/774114/


Tens of electronics giants to enter Vietnam

10:21' 19/03/2008 (GMT+7)

In recent years, electronics and IT industries in Vietnam have recorded the average growth rate of 25-40% a year

VietNamNet Bridge A series of big electronics manufacturers have stated they will withdraw from China to move to Southeast Asia, including Vietnam.

In late February, the Taiwanese Printing Circuit Manufacturers Association decided to build a 300ha complex in Hanoi, which can serve 10-20 manufacturers. The project will begin this August. Some big Taiwanese companies like HannStar Board, Gold Circuit Electronics (GCE), Unimicron Technology, Tripod Technology and Compeq Manufacturing have sent representatives to Vietnam to survey.

In early March, the worlds fourth-largest LCD screen producer, Taiwans Chi Mei Optoelectronics, announced its plan to build an LCD factory in Vietnam. Chi Mei hasnt revealed the detailed plan but according to Taiwanese newspapers, Chi Mei will cooperate with Wistron Corp, a laptop producer, to invest in Vietnam, which has cheaper labour costs than China. Moreover, Chi Meis clients, Compal Electronics, Acer and Foxconn, have plants in Vietnam already.

Not only Taiwanese electronic groups are withdrawing from China. The worlds fourth-largest camera producer, Japans Olympus group, has decided to close a factory in China and open one in Vietnam to cut risks and costs. This $44.35 million project is expected to begin in late 2008.

According to the Vietnam Electronics Industry Association, the Netherlands Philips is seeking component part suppliers in Vietnam to move its factory from China to Vietnam. Philips representatives met with some member firms of the association, Mitsustar, CMS and some others in Vietnam. This group currently places orders worth $8 billion in China.

STMicroelectronics is currently organising a workshop to offer technology and solutions to Vietnamese partners. According to Do Tien Dung, STMicroelectronics Executive Manager in Asia Pacific, this group hasnt thought of building a factory in Vietnam yet but it is seeking partners to transfer technology and solutions in manufacturing fluorescent lamps, electric meters, and TV signal processors.

Canon group has stated it will build a new printer factory in Vietnam. According to Reuters, Canon will spend around $50 million on this project, which is scheduled to be erected in northern Vietnam. This plant will specialise in assembling low-cost printers to sell in developing countries.

The electronics industry of Vietnam is quite attractive to foreign investors because China, the worlds factory, is losing its advantage. Stricter laws on the environment, the revaluation of the yuan, the increase of the minimum salary and the new labour contract law which took effect in early January 2008 are creating difficulties for employers to fire workers and hindering production expansion in China, said Dung.

However, Truong Gia Binh, FPT General Director, said the move of electronic groups to Vietnam is the result of many reasons, for example Vietnams favourable geographic position, stable politics, impressive economic growth, cheap labour cost and high potentials for hi-tech development. In recent years, electronics and IT industries in Vietnam have recorded the average growth rate of 25-40% a year.

http://news.yahoo.com/s/nm/20080323/lf_nm/china_korea_dc


South Korean investors quit China over rising costs By Langi Chiang

Sat Mar 22, 8:27 PM ET

QINGDAO, China (Reuters) - Scores of South Korean-owned factories are closing surreptitiously in eastern China as their owners flee rising costs, leaving behind embittered workers like Li Hua.

Li and more than 200 colleagues have been fighting for a year to get the six weeks' wages they were owed when the owner of the toy factory where they worked fled during the 2007 Lunar New Year holidays.

"I went to work on the first day after Spring Festival, only to be told that the Korean boss had run away and the factory had been closed," Li, a 30-year-old mother of a little boy, recalled.

Her case is not a rarity in Qingdao, a major seaport and industrial city in eastern China which sits across the Yellow Sea from South Korea. A two-hour flight from Seoul and home to about 100,000 South Koreans, the city is a hub for South Korean factories benefiting from cheap labor.

But lately, a growing number of South Korean factories have abruptly closed down and the South Korean owners have disappeared as a slew of policies, including rising labor costs and an end to tax breaks, bite into their profit margins.

Many of the factories ............

PP I am worried about your state of mind. Over on a rival site you make over 200 posts a day, host 90 threads and regularly post on 5 different sites. You have set up duplicate threads for Chinese stocks, wiped many of your own posts (to eradicate any possiblility of criticism)and constantly change your mind. This behaviour would seem to be obsessional, manic and delusional. Not to mention the fact that you need to get a life.

pp is my hero ok. You can get lost, zscrooge

zscrooge, I am more worried about those people who now follow and post about posters, as opposed to discussing stocks and shares and markets and sentiment.

Although it is possible to understand that the present market falls have pushed some into financial oblivion, and with that perhaps immense personal stress, which is perhaps making them turn their "anger" on to BB posters.

Sad, but true.

As it seems "zscrooge" is going to be "stalking" me with abusive posts etc... I will add them to the "Squelch" facility. I really do not want the threads to fill up with nonsense posts by zscrooge.

What that means is I will be unable to read their posts.....so don't expect any responses to anything they post in future. If you find they are still filling the boards with nonsense posts, I would suggest emailed Moneyam support and complaining.

If anyone wishes to "Squelch" this poster then click on the link below, and add their name to your "Squelch" list.

http://www.moneyam.com/InvestorsRoom/squelch.php

An interesting article that highlights the ongoing changes and challenges :

http://www.chinatradeinformation.net/macro-economy-report/next-generation-of-light-industry-in-china-2.html


Next generation of light industry in China

For three decades, China has reaped the benefits of the decision to open up its economy. In many years, exports grew more than 20 percent and large swathes of south China became developed and affluent in the process.

But this very successful model faces an array of challenges, foreign and domestic, in a changing world. What worked in 1978, and for so many years thereafter, isnt working the same way anymore and China has the task of reshaping its economy to generate the next round of growth.

Processing trade, which provided jobs for as many as 35 million to 40 million workers, many of them migrants, has accounted for 51percent of Chinese exports. Its role and structure are about to change.

Exports have been hailed as one of the three economic growth engines, together with consumption and investment, of Chinas development. Exports contributed 2.5 percentage points, or 22 percent, to gross domestic product growth last year.

The trade engine is running more slowly. The monthly trade surplus came to 8.56 billion U.S. dollars in February, less than half the January figure of 19.49 billion U.S. dollars. Certainly, some of the decline was caused by an unusual convergence of events.

The Lunar New New holidays and the severe winter weather that disrupted transportation contributed to the sharp decline in February, but the trade gap had been narrowing since October, according to official figures.

THE NEXT GENERATION OF LIGHT INDUSTRY

Chinese exporters face a new round of challenges. Just as China once took over from former cheap manufacturers in Japan or the Republic of Korea (some of whose manufacturers themselves came to China for lower costs), a new group of competitors is making itself felt: Vietnam, Bangladesh, even some nations in Africa. Some manufacturers in China, foreign and domestic, will end up going overseas to cut costs.

Other challenges include labor, which is becoming costlier and could become scarcer within a few years; higher costs for all manner of inputs as world commodity prices surge; a stronger currency and higher interest rates, and weakening economies in major overseas markets.

Many of these factors were at work when deals were signed at the 18th East China Fair held in Shanghai earlier this month. Orders at this annual event, seen as a barometer of foreign trade trends for the coming year, only grew 3.52 percent year-on-year to3.67 billion U.S. dollars. Orders from the United States even contracted, by 1.5 percent.

Our company got only slightly more than 800,000 U.S. dollars worth of contracts, barely half that of last year. It was my worst experience since I began attending the fair three years ago, said Ma Tao, a salesperson for a glassware maker from east Chinas Shandong Province.

Theres little that export-oriented garment manufacturers and ceramic makers can do. They have become used to doing processing trade, which means taking orders from overseas companies looking for a cheaper place to produce. Costs in China have been kept low primarily through cheap labor.

But labor is no longer so cheap. A new labor law, which took effect on Jan. 1, has already significantly raised wages. Companies in Guangzhou are paying 1,160 yuan (about 165 U.S. dollars) per month, 13 percent more, for new staff this spring.

The traditional cost advantage has been further eroded by the faster appreciation of Chinas currency. Exporting companies have had to raise their prices.

Another issue is higher input costs: inflation and surging world prices for commodities are hitting light industry hard. The producer price index for Chinas industrial products rose by 6.6 percent in February over the same month last year. The overall cost of raw materials, fuel and power surged 9.7 percent from a year earlier. Analysts forecast that textile prices would rise another 5 percent to 10 percent after March as a result of more expensive cotton and nylon yarns.

Now that Made in China is no longer so cheap, old clients are looking for new suppliers in surrounding countries. The pressure is particularly severe on the textile industry, a typical labor-intensive business that depends largely on exports. Equipped with few advantages but low prices, garment makers have been trapped between two unpalatable choices: losing orders or taking lower profits.

Chinas textile and garment exports in February dropped 32.9 percent from 10.3 billion U.S. dollars in the previous month, largely due to weakening U.S. and European demand and the severe winter storms, customs authorities said. The total for the first two months was 25.6 billion U.S. dollars, up only 9.6 percent from a year earlier, compared with an increase of about 20 percent in the past years.

There are so many choices. Companies can move overseas or go to cheaper locations in Chinas inland areas. They can try to re-orient their sales toward domestic consumers, whose incomes are rising. They can go into other lines of business. Or they can go out of business, as many already have.

In only half a year, our export cost was pushed up by 10 percent and profit reduced by 40 percent, said Shen Yaoqing, vice-president of Shangtex Holding Co., a major Shanghai-based textile manufacturer that exports about 2 billion U.S. dollars worth of products annually.

Our company is on the brink of failure, Shen said.

In the Pearl River delta, companies with overseas investment, mainly those from Taiwan, Hong Kong and Macao, have been leaving. According to preliminary figures from the Shenzhen Bureau of Trade and Industry, more than 500 companies, whose annual production was valued at 15 billion yuan, have left the city since 2005.

More than 1,000 smaller shoe makers out of some 6,000 went bankrupt last year, said Asian Footware Association secretary general Li Peng.

TIME FOR A NEW PARADIGM

Smarter and nimbler companies are revising their strategies. They have shifted away from quantity and to quality. Hodo Group, a garment maker in eastern Jiangsu Province that also has a domestic brand, said it had shifted last year to higher value-added garments.

Lu Li, assistant manager, said We developed new textiles and designs, which would help us lift export prices.

But even strong companies are seeing their profit margins squeezed as the government scales back preferential policies for labor-intensive and export-oriented processing industries. For example, China cut export tax rebates on garments by 2 percentage points to 11 percent, last June.

A joint study by Booz Allen Hamilton and the American Chamber of Commerce in Shanghai found that 54 percent of the overseas manufacturers that had solely-owned or joint-venture bases in China said that China is becoming less competitive, and 20 percent had already decided to move at least part of their operations in China to such places as Vietnam or India.

A few Chinese companies are also moving manufacturing to Vietnam or Indonesia, which have cheaper resources and labor costs. China Customs said that in February, outsourcing trade was 31 million U.S. dollars, or 8.5 percent of total foreign trade.

Its certainly a marked turnaround from the wave of capital that flowed into coastal China 30 years ago.

Behind all these changes lies a shift in government policy, driven by a recognition that Chinas current export structure wont support economic development the way it used to.

China encourages technical innovation, which would help reduce the high energy consumption involved in manufacturing that had drawn international criticism.

China also has a persistent gap between its well-developed east and the poor central and western regions, which could be at least partially reduced if industry moved inland.

Another issue is the changing structure and, potentially, the size of Chinas labor force. The processing trade cant provide suitable jobs for millions of university graduates, whose number is expanding every year.

We are not moving labor-intensive industry out. It is our advantage, said a senior official with the Minister of Commerce. It is true that processing trade is restricted by the rising land, power and labor costs in eastern China. But the middle and western parts of the country have cheap resources. With government support policies, it is possible to move the processing trade industry inwards.

There wont be many companies moving out of China, especially with the right policies, Wei said.

Companies do face some higher costs if they move inland, such as those for transportation. But inland regions such as Qinghai, Gansu, Yunnan and Guizhou Provinces saw more than 100 percent increases in investment in garment and textile processing trade in the first half of 2007, according to the China Chamber of Commerce for Import and Export of Textiles.

As for eastern China, the government aims at promoting services, which would provide jobs for educated workers.

One example of such trade is a software development zone established in 1998 by the government of northeast Chinas Dalian City, which is getting orders from Japan and other countries.

Chinas 10th Five-Year Plan set a target for the foreign service trade at 400 billion U.S. dollars by 2010. The figure for 2006 was already half the way there, at 191.8 billion U.S. dollars.

Chinas exporters face an increasingly complex domestic and global situation. But, as Premier Wen Jiabao stressed in his government work report this month, China should speed up the transformation of foreign trade patterns and encourage the export of higher value-added name brand products.

A challenging year lies ahead. As earlier export orders are filled, its likely that Chinese exporters will feel the pinch of a slowing world economy. But Minister of Commerce Chen Deming remains optimistic, saying that China is expected to achieve steady growth in exports in 2008 despite the trade surplus shrinking last month.

http://www.spiegel.de/international/business/0,1518,543929,00.html

March 28, 2008

MANUFACTURERS STRUGGLE TO COMPETE

China's Factory Blues
By Dexter Roberts

Rising costs and regulation have led to shutdowns and restructurings in China like those that tore through America's heartland.

Multi-national .......................

A piece on BBC's newsnight last night may be of interest to thread readers. Should be available through BBC's iPlayer until the end of the week. Basically points out the human/environmental cost of Chinas great leap forward, and the associated economic risks if things go wrong (which there may already be signs of). Given the importance of China in the global economy it's probably worth a look........

Strawbs.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a0pqYaEyBKQY&refer=home

ADB Cuts Asia's Growth Forecasts, Warns of Inflation (Update1)

By Shamim Adam

April 2 (Bloomberg) -- The Asian Development Bank lowered its economic growth forecasts for the region as a global slowdown weighs on exports and..................



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http://moneynews.newsmax.com/money/archives/st/2008/4/1/110745.cfm

Chinas Inflation Obscuring Olympics

Tuesday, April 1, 2008 11:07 a.m. EDT

Investors who figure that the August Olympic Games will................................... The approximately $23 billion in Olympic-related investment wont have a big impact on the macroeconomy and total fixed asset investment, says Matthews China Fund manager Richard Gao.

Looming over other economic considerations is inflation, which threatens to become rampant despite the central bank's best efforts to control it.

China's consumer prices rose at their fastest pace in nearly a dozen years last month, climbing 8.7 percent from the same month last year and up from the 7.1 percent January rate.

Though only 5.4 percent of the 56 foreign-owned companies operating in China recently surveyed by the Nikkei Business Daily reported already feeling the ill effects of Chinas inflation rate, more than 70 percent fear they will feel it soon.

Nearly half of these firms expect China's blistering economic growth to slow after the Olympics end this summer, and almost a third are moving to shift their production outside of China due to concerns about foreign exchange rates, rising wages and employee retention difficulties.

A recent survey of 20,000 households in 50 mainland China cities showed that a record 49.2 percent of Chinese urban consumers think prices are unacceptably high, though fewer now.............................

Worth a read :

http://money.cnn.com/2008/04/02/smbusiness/rising_yuan.fsb/index.htm?postversion=2008040311

Rising yuan crunches outsourcers' bottom line

China's currency is hitting record highs against the U.S. dollar - a problem for apparel companies and others that rely on low-cost Chinese manufacturing.

Last Updated: April 3, 2008: 11:03 AM EDT

(FORTUNE Small Business) -- The Chinese yuan reached a record high against the dollar last week, the latest in a series of sharp rises that are changin............................