China's manufacturing industry faces three major difficulties

Where is the manufacturing industry in China? A few days ago, at the Summer Summit of the China Entrepreneurs Forum, participating entrepreneurs and scholars discussed the future of “Made in China”. They believe that problems such as rising labor costs, overcapacity, and lack of brand influence have become obstacles to the development of China's manufacturing industry.

Rising labor costs

As a manufacturing giant in the world, the Chinese manufacturing industry's model of relying on low-cost, high-consumption, and high-emissions to promote growth has basically reached the end. The rise in labor costs has become a recognized fact among experts.

Cao Yuanzheng, chief economist at the Bank of China, said that the growth rate of China's minimum wage has exceeded 15% on average in the past three years, and inland provinces have risen even higher than the east, reaching 30%. In addition, average wages have also increased significantly in the past few years, and urban average wages have risen by 13%. Therefore, it is an indisputable fact that the increase in manpower cost is already an issue.

Due to rising labor costs, the cost of product production has also increased by 13% to 30%, and it has also affected the supply of products. Zhao Lijuan, director of Li & Fung Development (China) Co., Ltd., said: "Li & Fung does not manufacture, but it is a partnership with manufacturing. For Li & Fung, the labor cost of partners is high. Many European and American customers are reluctant to increase prices. , so we have to do a lot of coordination work in the middle and it takes a lot of energy invisibly.”

Overcapacity

Overcapacity is also a major issue facing China's manufacturing industry. According to statistics, there are currently 24 industries in China, but 21 of them have excess capacity. Textile, clothing and steel industries are representative industries with excess capacity.

Take the steel industry as an example. According to the statistics of China Iron and Steel Association, China's steelmaking capacity at the end of 2010 was 800 million tons. In 2011, the new steel production capacity was about 80 million tons. Taking into account the elimination of outdated production capacity of about 30 million tons, the end of the year, crude steel production capacity is About 850 million tons. The data from the Planning and Research Institute of the Metallurgical Industry shows that as of the end of 2011, China’s crude steel production capacity has reached approximately 900 million tons. However, last year, China's crude steel production was 683 million tons, and there was a serious excess of domestic steel production capacity.

In this regard, Cao Yuanzheng said that the Chinese market has the characteristics of low-cost labor and high resource consumption. "This feature is now undergoing changes. Overcapacity is backward production capacity, and backward production capacity requires technological progress and technological improvement to adjust. This is exactly what our company should focus on in the next step," said Cao Yuanzheng.

Brand lacks influence

In addition to rising labor costs and overcapacity, the lack of brand influence also affects China's manufacturing industry. According to statistics, 64% of the Chinese companies that have entered the world’s top 500 have not fully protected the brand. Among them, the proportion of large-scale industrial enterprises that have not fully protected the brand is as high as 80%, which is very worrying. Chinese companies have fewer internationally-known trademarks, and their gold content and influence are generally insufficient. In addition, the trademark strategy of a large number of companies lags behind and even ignores the contribution of brand value to the development of the company.

Cao Yuanzheng said that the creation of a brand is an important aspect of corporate competition. A brand is a good company.

“One reason why Chinese companies lack influential brands is that Chinese companies like to do everything. Western companies will focus on building their own important brands and outsourcing other brands, so this is where Chinese companies need to learn. Cao Yuanzheng said. (Cheng Tuo)