An epidemic has accelerated the production capacity transfer of Shaoxing Huitai Textile.
“The factories here in Zhejiang were closed in April this year, and the weaving, printing and dyeing and home textile production lines were all transferred to Henan.” Ma Xiang, general manager of Shaoxing Huitai Textile Co., Ltd. He told China Business News that the epidemic has caused a sharp drop in export orders and made many cost pressures including rent, taxes and manpower difficult. By moving all production lines to the central and western regions, not only can we save more than 6 million yuan a year in rent, but we can also obtain more abundant labor resources, “without worrying about labor shortages.”
Ma Xiang’s choice is neither typical nor typical.
This is a sample of the transfer of labor-intensive enterprises from the east to the central and western regions. It is also one of the paths for the transfer of traditional foreign trade manufacturing capacity in the context of the epidemic.
However, compared with most companies that have just started to think about transferring production capacity, Ma Xiang chose to buy in Henan as early as 2017 with the investment promotion of the local government of Henan. 200,000 square meters of land are needed to build factories, and the land price investment is only a quarter of that in Zhejiang on average. Because of this, after transferring all production capacity from Zhejiang to Henan, she can simply write off millions of high rents in her ledger.
For companies that have never purchased land at once, the difference in factory rent and land prices between Henan and Zhejiang is about 1:4 – it cannot be completely erased This cost can be saved by more than half.
On August 12, the General Office of the State Council issued the “Opinions on Further Stabilizing Foreign Trade and Foreign Investment” to encourage The central, western and northeastern regions will give full play to their advantages and undertake labor-intensive foreign trade industries.
Under the guidance of the state, what are the motivations and concerns for foreign trade companies to transfer their production capacity? The economic account behind it is ultimately the most realistic and critical.
Transfer the power of the Midwest
In the words of Ma Xiang , the transfer of production capacity to the central and western regions, the biggest attraction for enterprises is workers – the “labor shortage” problem commonly faced in Jiangsu and Zhejiang areas is no longer a problem in Henan.
“Except for a small number of skilled workers, 90% of the ordinary workers in our factory are from Henan.” Ma Xiang told China Business News, an example with Chinese characteristics Yes, since most workers are in their hometowns, workers’ holidays during the Spring Festival can be postponed or shortened. If you are in Zhejiang, because it is difficult to buy tickets to return home, you may have to give workers a holiday from half a month before the Spring Festival until the fifteenth day of the first lunar month. But after the production capacity is transferred to Henan, workers can be given holidays starting 5 days before the Spring Festival. The difference between the two is at least half a month.
In the textile industry, as far as skilled workers are concerned, there is almost no difference in wages between Zhejiang and Henan; the wages of ordinary workers in Henan are slightly lower than those in Zhejiang by 100 to 200 RMB per month. Yuan. For Ma Xiang, the difference is almost negligible.
In addition to the advantages in labor, the land resources in the central and western regions are also more abundant and the cost is lower. This is also the main driving force for companies to transfer production capacity to the central and western regions.
In terms of taxes and fees, in order to attract investment, the central and western regions often provide relevant tax exemptions and other preferential treatment to relevant manufacturing companies. However, in terms of preferential policies at the national level, the two places The difference is not big, “basically everything can be implemented.”
In Ma Xiang’s view, the subsidy policies related to investment promotion temporarily introduced by local governments are generally only for the first few years of setting up a factory. It is not clear how to change after that. Therefore, it will not become the main consideration for companies that focus on long-term development.
Business concerns and cost increases
“There is a company that provides Our company’s factory that supplies raw materials originally wanted to go to Henan with us, but later found that we might be the only customer if they moved there.” Ma Xiang said that compared with the eastern region, the central and western regions have a more complete and dense industrial chain. There is a gap between them. This company, which was originally located in the same park as them, gave up the idea of transferring production capacity.
Research shows that at present, the supporting rate of related industries in the developed eastern coastal areas has reached more than 96%, but this indicator in the central and western regions has not reached 30%.
In fact, in order to reduce the troubles caused by the imperfect local industrial chain to enterprises, Ma Xiang also spent a lot of time Energy, from raw materials to weaving, to printing and dyeing, to finished home textiles, the company has made arrangements in advance to continuously extend the industrial chain and strive to complete production in a “one-stop” manner.
It is precisely because of the relatively complete industrial chain and overseas layout for many years that Ma Xiang’s Henan factory has survived the most difficult off-season during the epidemic and ushered in a busy period. peak season. “We only need to purchase thousands of tons of raw materials from large raw material factories, produce them ourselves, and then ship them from Qingdao Port.” She said.
“When we first returned to Henan, we bought a weaving machine and later added raw material texturing equipment. This year’s epidemic has made our industrial chain more complete. I even Start thinking about buying various auxiliary materials.��equipment, we produce all kinds of auxiliary materials needed for home textiles by ourselves. “The reason that prompted Ma Xiang to continuously invest money to increase equipment is that in Henan, the concentration of upstream and downstream enterprises is not enough. If you go to the east to purchase, you have to face not only logistics costs, but also time costs. “Sometimes you have to wait 3 to 4 days, logistics It may not arrive yet.”
However, even if the logistics cost increases, Ma Xiang is now more willing to go back to the eastern region to purchase packaging cartons and other accessories – due to sufficient competition and mature suppliers, The procurement cost will be much cheaper than in Henan, “including freight, it is also cheaper than in Henan.”
Another cost item that will increase when moving to the central and western regions is the transportation of export products from factories to Inland freight at the port.
Ma Xiang calculated the inland freight from the Henan factory to Qingdao Port or Lianyungang Port. If the company does not have that much profit, or the company If the scale is small, there will be losses.
For her, the factory’s production capacity is not small. The inland fee for 500 containers adds about 500,000 yuan in cost. ~1 million yuan, the overall profit can be covered.
Meng Zhuo, manager of Anhui Garment Import and Export Co., Ltd., told China Business News that the policy to guide companies to move to the central and western regions More research is needed to solve the real pain points of enterprises.
Zhuji Hangfeng Needle Textile Co., Ltd. specializes in providing pillows, blankets and other textiles for domestic and foreign airlines. Last year, its output value was about 2 billion. Mi Fengyun, general manager of the company, also told China Business News that the company has also visited the central and western regions in recent years. However, it concluded that the upstream and downstream supporting facilities are insufficient, transportation costs have increased, and local policies have continued to Safety, etc., are the main concerns of enterprises.
Who is suitable for production capacity transfer?
Based on multiple costs and factors, Ma Xiang believes that the transfer of production capacity cannot be just to save rent or labor, especially for smaller companies. “It is not appropriate to act rashly” unless the local government provides a complete supporting industrial park. Or the excipient market.
According to her experience, many companies have gone to the Midwest. The local policies are quite preferential and well implemented. However, local investment officials have little control over the market and business operations. The awareness is not sufficient, and it is easy to regret that “the company recruits back but cannot survive”.
Currently, the companies that are suitable for transferring production capacity to the central and western regions are those that themselves There are relatively large-scale enterprises with relatively complete industrial chains, as well as some e-commerce companies that operate in the domestic market and use domestic express delivery and logistics to operate normally.
In Meng Zhuo’s view, Whether they transfer production capacity to the Midwest or Southeast Asia, companies will inevitably consider input and output efficiency. He concluded that in the textile industry, cheap labor costs are not worth the low efficiency, lack of support from related supporting industries, and increased transportation costs. The cost will increase.
However, each company faces different customer groups, so the social environment and considerations it faces will also be different. Meng Zhuo believes that for those foreign trade companies facing the European and American markets, the transfer of production capacity to Southeast Asia can avoid the risks caused by trade frictions and increased tariffs, while manufacturing companies focusing on domestic sales can consider setting up factories in the central and western regions, because domestic Logistics and transportation are perfect enough, and related costs generally will not put pressure on enterprises.
For Ma Xiang, since the company’s overseas markets are mainly in developing countries, she has not built a factory in Southeast Asia Instead, because some of its customers are in South America, it set up factories in Paraguay as early as five years ago to enjoy the tariff preferences and conveniences of the South American Economic Integration Organization Mercosur.
She admitted that her team had visited India many times and wanted to establish a factory in India, but was unable to do so due to the fluctuations in Sino-Indian relations and the instability of local policies. .
In addition to “encouraging the central, western and northeastern regions to leverage their advantages and undertake labor-intensive foreign trade industries”, the General Office of the State Council issued the “On Further Stabilizing Foreign Trade” on August 12. The Opinions on Stabilizing Foreign Investment also proposes to encourage qualified places to support the gradient transfer of processing trade through funds and other means based on local realities. Cultivate a number of processing trade industrial parks jointly built by the eastern, central, western and northeastern regions. With the help of platforms such as the China Processing Trade Products Expo, we will improve the industrial transfer docking mechanism.
At the same time, enterprises exporting labor-intensive products such as textiles, clothing, furniture, shoes, plastic products, bags, toys, stone, agricultural products, and consumer electronics products are implementing We will further increase support on the basis of various inclusive policies such as tax reduction and fee reduction, export credit, export credit guarantee, stable employment, electricity and water consumption.
These policies gave Ma Xiang more and more confidence to set up factories in Henan. According to her plan, all production lines will be transferred to Henan, while the trading company will continue to stay in Zhejiang and retain a 1,000-square-meter office and showroom to facilitate negotiations with foreign merchants coming to China.
For Mifengyun, the most timely and effective way to deal with the challenge of exports plummeting to zero during the epidemic is not to transfer production capacity to the Midwest or Southeast Asia, but to Pay close attention to the layout of e-commerce and domestic sales markets.
After more than two months of testing the waters, Mifengyun’s e-commerce transformation has made progress. “Originally, we thought that by selling 200 pieces a day, we could maintain normal production at the factory. However, after a week, our average daily sales reached 1,400 pieces, and the output began to fail to keep up.” Mifengyun pioneered during the crisis of the epidemic. The emergence of new sales channels has turned the pressure of “supporting workers” a few months ago into the “sweet trouble” of recruiting more workers.
According to his prediction, as more airlines resume flying, domestic and foreign trade orders in the second half of this year are likely to experience explosive growth.
After more than two months of testing the waters, Mifengyun’s e-commerce transformation has made progress. “Originally, we thought that by selling 200 pieces a day, we could maintain normal production at the factory. However, after a week, our average daily sales reached 1,400 pieces, and the output began to fail to keep up.” Mifengyun pioneered during the crisis of the epidemic. The emergence of new sales channels has turned the pressure of “supporting workers” a few months ago into the “sweet trouble” of recruiting more workers.
According to his prediction, as more airlines resume flying, domestic and foreign trade orders in the second half of this year are likely to experience explosive growth. </p
