Domestic Shoe Enterprises "World Factory" Mode Will Come To An End.

Compared with three years ago, the industry is facing more serious difficulties.

Enterprises should cope with "lack of technology", "world factory"

In the Guangzhou Cowboy City of Xintang, the three cowboys in the world, the women workers who sit in front of the factory door and cut their heads in the sun are aware of the "European debt crisis".

"Overseas

The status quo of Xintang cowboy town is a microcosm of the industrial dilemma in the Pearl River Delta.

To date, the small and medium-sized enterprises based on processing trade are still an important pillar of the Pearl River Delta industrial economy.

Unfortunately, the order crisis in 2008 has now evolved into a more serious overall predicament.

Tens of thousands of small businesses engaged in low-end manufacturing industry are suffering from sharp reduction in overseas orders, rising costs and shortage of labor.

Three years later, SMEs have no new laws to deal with the crisis, or they are struggling to survive or escape from industry.

The pformation and upgrading of the "world factory" is still ahead.

Pessimists even believe that the Pearl River Delta's 30 year economic model is in the extreme.

Dongguan, known as the "world shoe capital", is located in High Town and small shoe factory in Houjie town.

The biggest shoe material center in Houjie is laoxia, which has hundreds of small family workshops. The first floor is facade, wholesale leather and finished shoes. The above two floors are used for small factories, making shoes or leather goods.

These small businesses shared nearly 30 orders for world famous shoes, accounting for 1/4 of Guangdong's footwear exports.

Yang Yan, 28, took a small stool and sat outside the shop. He dressed the beads in a leisurely way.

The shop she rented was 2000 yuan a month, 30% cheaper than when the market had just opened in April 2011.

"I used to make twenty thousand or thirty thousand a month, but since August 2011, I can only guarantee not to lose money."

Yang Yan said, "in past years, a few more people began to start a few months before Christmas.

But basically there was no order in 2011, and the workers went home early to celebrate the new year. I sold some stock here. "

About 1/3 of the shops in her market are closed, and the opening of the business is the Yemen Rowe.

An extreme tragedy took place in the afternoon of December 13th.

Owing to poor management, the supplier owed about 4000000 yuan of money, and the head of a leather goods factory in laoxia community lit up gasoline and died of self Immolation.

Since 2011, orders for footwear and clothing in European and American markets have gradually declined, and enquiries from these two regions have been further reduced in August.

At present, it is the peak season for Christmas in Europe and America, but the rate of shipment in the European market is still around 50%, and the shipment rate in the American market is less than 80%.

Although orders from the Middle East and Latin America and Africa markets increased slightly, they could not make up for the reduction of orders in Europe and the United States.

The wages of workers are basically "base salary + Royalty" mode.

The sharp reduction of orders resulted in a serious decline in workers' income and a large number of workers chose to leave.

This has aggravated the local "labor shortage".

In the cowboy city of Xintang, more than 90% of the small factories that are still open for business are hanging out "Recruitment" information at the door.

Yao Xi, a financial manager of a garment factory, told reporters, "three years ago, 800 yuan to 1000 yuan a month could recruit a worker. Now we need more than 1500 pieces of hand, and 3000 months of skilled month."

In October 2011, the National Development Research Institute of Peking University and Alibaba group jointly released the survey report on the operation and financing of small enterprises in Pearl River Delta (hereinafter referred to as the report).

The report points out that the wages of small enterprises in the Pearl River Delta region have increased by 20%-30% compared with 2010, and the wages of some senior technicians have risen by more than 100%.

Even at this price, few people ask for it.

In the cowboy town, Caixin "new century" reporter was asked at least five times in a half day, "do you want to work?" however, when Caixin "new century" asked reporters how many companies they wanted to recruit, and started several hours a day, the heads of several enterprises were at a loss.

"All of this depends on the amount of orders people give us."

A person in charge said.

According to the report, the average operating rate in the PRD region is 70.92% due to the decline in orders and the shortage of labor.

Among them, only 33.79% of the small enterprises with a rate of over 90%, 20.59% of the small enterprises with a starting rate of 50% and below, and the lower the scale of the enterprises, the lower the annual sales rate of the enterprises with less than 5 million yuan and below, and the enterprises operating at 50% or below can reach 27.29%.

This is not the same as the situation of overtime production in PRD enterprises in the past years.

Financial throats

The situation is familiar.

However, the report on the implementation of the national economic and social development plan for the first half of 2011 in Guangdong pointed out that the difficulties faced by SMEs in Guangdong are not the same as those in the 2008 financial crisis.

In 2008, businesses cleaned up inventories, although orders fell sharply, but if companies had orders to connect, production still had profits.

But now, "even if there is an order, I dare not answer it, and it is hard to get profits."

50% of the surveyed enterprises indicated that they were in a state of loss or profit margin was less than 2%, while only 22.2% of the enterprises indicated a profit margin of more than 5%.

Shenzhen Datong Enterprise Service Co., Ltd. provides foreign trade services to more than 4200 enterprises in the Pearl River Delta region.

Xiao Feng, deputy general manager of the company, told Caixin "new century" reporter that after investigating more than 1000 enterprises, he found that the current trade environment was becoming worse and worse, and the lack of financial instruments to resist default and exchange rate risks became one of the main reasons why enterprises did not dare to take orders.

Xiao Feng said that a new situation is that more and more foreign buyers are affected by the financial crisis in Europe and the United States, unable to pay cash when they get the goods, but rather want to pay by letter of credit, and then pay after the sale of goods.

However, most of the small and medium-sized enterprises in China are unable to obtain letters of credit from banks because of their light assets and inability to provide book information.

"Even if a letter of credit is available, the bank is willing to take 80% of the risk of default. If the foreign trader fails to pay, 20% of the loss will kill the small business."

The fluctuation of RMB exchange rate is another factor.

In the Zhongshan area, a number of garment enterprises have told the new century reporter of Caixin that since 2010, influenced by the appreciation of the renminbi, they are often unable to determine the price when accepting orders.

A business owner said, "once the goods are ordered to be wrong, the delivery of the US dollar after two months will be left to the bank, and it will be painful to change to RMB."

Zhang Jingqiang, vice president of China's small and medium sized enterprises, also told Caixin "new century" reporter that although there are some foreign exchange hedging tools including long-term foreign exchange, there are few SMEs who understand or can use these tools.

Xiao Feng pointed out that some enterprises of their services had tried to conclude long-term foreign exchange contracts with banks, but the threshold price of 1 million yuan kept the SMEs far from the door.

The difficulty of financing is another headache for SMEs in the Pearl River Delta region.

A survey of Guangdong SME network shows that 43.31% of the 4869 companies surveyed believe that the most difficult situation for enterprises is financing.

The report shows that 53.03% of small businesses in the Pearl River Delta have never borrowed money.

At present, the supply and demand gap of financing has been enlarged under the circumstances of tight money, short procurement period and prolonged supply period.

On the other hand, there is a lack of financial institutions for small businesses, especially micro enterprises in the PRD region.

Xie Zhijun, manager of the small and Medium Business Department of Shenzhen branch of Bank of China, told the new century reporter of Caixin, although the State Council promulgated the "nine countries" in October to support small and micro enterprises, including the assignment of loans to banks.

But the relevant regulations are guiding principles, and no specific operation rules are given.

Banks still face two basic difficulties in lending to SMEs. One is that small and medium enterprises are mostly light assets and unsecured. They can not provide book information in the case of reasonable tax avoidance. Bank lending is not a small risk. The other is, for bank account managers, the cost of manpower and the income of a small and medium-sized enterprise are quite different from that of large enterprises.

Under the background of tight money, loans naturally flow to large enterprises.

So far, the bad debt rate of SMEs in the Bank of China Shenzhen branch is almost zero.

"Lending to small and medium-sized enterprises actually allows a certain proportion of bad debts, which reflects that banks are still very cautious in lending."

Even if loans can be made, interest rates will discourage many companies.

Recently, the Guangdong SME association has found that the comprehensive interest rate of private enterprises loans ranges from 15% to 18%.

Xie Hong, Secretary General of the association, told Caixin "new century" reporters that according to regulations, loans to small and medium enterprises, banks could float 50% on the basis of the benchmark interest rate, but if SMEs want loans, in addition to the names of consulting fees and so on, some banks will also require enterprises to take part of their loans into banks, and even take interest deducted or repeated calculations to raise interest rates in disguise.

"An enterprise loans 10 million yuan, light interest will be removed 1 million 500 thousand yuan, for gross profit is not high industry is definitely very difficult."

Xie Hong said.

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Leaving the PRD?

The decline of small businesses in the Pearl River Delta has gradually changed the local economic ecology.

In 1994, a dozen cities such as Guangzhou, Shenzhen, Foshan, South China Sea, Dongguan and Zhongshan along the Pearl River were designated as "Pearl River Delta economic zone".

The land, which covers less than 24 thousand and 500 square kilometers, has reached 2 trillion and 974 billion 558 million yuan (US $434 billion 284 million 300 thousand), or 10% of the total, even in 2008, when the economic crisis happened in the year of GDP.

According to the "2007 Guangdong regional comprehensive competitiveness report", the real large and medium-sized enterprises in Guangdong account for only 8% of the total number of foreign-funded enterprises, and a large number of small enterprises that undertake incoming and processing materials.

At that time, these labor-intensive enterprises relied on cheap land, labor and logistics costs in the Pearl River Delta.

However, as land prices soared and manpower costs rose sharply, the Pearl River Delta rapidly lost its comparative advantage.

The trend of personnel, orders and funds leaving the PRD is becoming clearer.

A towel factory owner in Shenzhen, about 30 workers, told reporters that in 2011, foreign trade companies would make inquiries to many countries before placing orders for them, but this situation was less in previous years.

Recently, they quoted 2 yuan for a foreign trade company, and the profit margin was only 2 -3 percentage points. "But the first bid of a Vietnamese company is 1.9 yuan / piece, which is lower than our cost. We simply can not compete."

The official said, "though we haven't received the bill for a long time, we can't produce it below cost."

For a long time, Nike, a multinational giant in the Pearl River Delta and other places, has also revealed in the fourth quarter of fiscal year 2011 that Vietnam has replaced China as Nike's largest sports shoe production base in the world.

The medium-sized private enterprises in the Pearl River Delta region are also strong enough to go abroad.

Huajian group, the largest private shoe manufacturer in Dongguan, decided to set up a branch plant in Ethiopia.

"We said to the Prime Minister of Ethiopia that if we give us a piece of land, a good policy, no other need, we will create billions of dollars of export earnings for them in ten years."

In December 8th, at the third world footwear development forum held in Houjie Town, Zhang Huarong, President of Huajian group, said.

Tedson, Vice Minister of Industry Ministry of Ethiopia, also went to the scene to invite Merchants: "China is the most populous country in East Africa, with stable political situation, abundant labor resources and low wages. If Dongguan and even China want to pfer industries, we will be more suitable.

At present, factory workers in Ethiopia earn about $50 a month, and skilled workers can reach US $150 to $200.

Entrepreneurs also aim at the mainland.

Hefeng textile and garment factory in Zengcheng, Guangzhou, which has 600 workers, set up a branch factory in Jiangsu because its general manager, Yue Liang, is from Jiangsu.

The company, which mainly undertakes American orders, has gradually diverted its orders to Jiangsu.

Yue Liang said, "in Guangdong, the cost of human resources and factory buildings has been too high, and profit margins have been reduced very little.

But there is still room for Jiangsu. "

However, for smaller factories, they do not have enough capital to complete the pfer.

"Almost waiting for death."

The owner of a garment processing enterprise in Xintang said.

The characteristic towns like Xintang and Houjie are about 1/4 of the more than 400 towns in the Pearl River Delta.

All these towns have formed a small and medium-sized industrial cluster. "The advantage is that all the big cities are in the town, and everyone can get a share. The disadvantage is that competition can be described as tragic, homogenization is too serious, and the cost is too pparent, so that foreign investors are very thin and completely lose their pricing power."

The financial manager of a company said.

Because profit margins are too low, any price fluctuation of production factors may lead to corporate profits being totally eroded.

In 2008, when the economic crisis happened, orders fell; in early 2011, the yuan appreciated and the raw material prices rose by 20%-50%; in the second half of 2011, the cost of manpower increased sharply. When almost every production and price factor fluctuated, there were reports on the collapse of small and medium-sized enterprises in the Pearl River Delta.

According to the report, 72.45% of small businesses expect profits to be flat or small in the next six months, with less confidence in the next six months. 3.29% of small businesses expect to lose substantially or go out of business in the next six months, pessimistic about future business.

"At the end of 2011, there will be a wave of business closures, and the relocation of enterprises in the PRD and the hollowing out of industries will become more and more serious."

Xie Hong said.

Long road to pformation

In order to deal with the "collapse tide" that may come at any time, as early as the 2008 economic crisis, Guangdong put forward the double pfer policy of "changing the cage and changing birds" - the labor intensive industries in the Pearl River Delta shifted to the eastern and western parts of the mountains, and the labor force in the eastern and western parts of the mountains and the northern Guangdong mountains shifted to the local second and third industries on the one hand. On the other hand, some of the higher quality labor force moved to the developed Pearl River Delta region.

But in October 17th, "Guangdong, Hong Kong and Macao SME development and Financial Cooperation Symposium", Wang Min, a member of the policy and regulation department of the banking regulatory bureau, clearly stated that "the government needs to reflect on its original line of administration".

He said that the survey found that some small and medium-sized enterprises in the Pearl River Delta tried to pfer to the central and western regions, but because of "unfamiliar with their lives", business was blocked and they had to return to Guangdong. What's more, Guangdong's mature industrial chain could not be migrated as a whole.

It can not be moved out, and it is hard to upgrade locally. It can only shrink production capacity, maintain basic channels and customers, and some entrepreneurs even leave the industry.

He Xiaying, a business owner who runs jeans factories in Zhongshan, told Caixin "new century" that she will operate more than a year's factories in 2011, and now rely on shops to collect rents and invest in gold.

In Xintang, a "leasing shop" business executives said, "hard to invest in industrial production, profits are also thin, it is better to rent the plant, the income is stable and high."

Xie Hong also pointed out that some pristine enterprises in the PRD were reluctant to engage in industrial activities, and turned to real estate investment or set up fund companies for private placement or venture capital.

Some enterprises take the way of overseas migration, pfer money abroad, and acquire assets through acquisition of assets.

From the central government to the local government, the government hopes to support the development and pformation of small and medium-sized enterprises through subsidies and other policies. "The logic of the government is that if I subsidize 500 million yuan, I can pull 10 billion yuan, and spend 1 billion yuan to stimulate 50 billion yuan of private investment.

But the reality is, is the enterprise that can get your subsidy the most difficult business? "Xie Hong said.

A more effective policy is universal tax cuts.

At present, the tax reduction measures that can be seen are the increase in the monthly sales ceiling of the value added tax threshold from 5000 yuan to 20 thousand yuan.

But a business owner said, "monthly sales of 20 thousand yuan, which means that the average daily turnover is only 600 yuan. The turnover of a vegetable dealer is more than 600 yuan a day. Which small businesses can be saved?"

Xie Hong said that the pformation of SMEs in Guangdong is a complex issue.

First of all, in terms of intelligence service, social service organizations need to be helped in government management and technological innovation through government procurement and subsidies.

Secondly, banks need long-term capital projects to coordinate the pformation of enterprises, and the input and output of them will take some time.

Thirdly, the domestic market is still a market of regulation and license, and enterprises should deal with different government departments.

To the enterprises accustomed to the foreign trade market, it means pferring from foreign trade to domestic sales. The whole system should be adjusted from the management concept, talent reserve and capital reserve. This is a huge project.

Finally, China's taxes and fees are very high, and the whole tax system has not adapted to the needs of industrial pformation.

For enterprises, apart from "suffering", they do not have many choices.

On the way to the interview of the new century reporter, Caixin was constantly asked, "when will the European debt crisis end?" they still believe: "the European debt crisis is over, and orders will be better if we return."

However, time waits for no one.

Mo Shixiang, deputy director of the China Special Economic Zone Research Center of Shenzhen University, believes that the development of export-oriented economy in Taiwan, Hong Kong and Macau shows that the comparative advantage of relying on labor-intensive industries to develop economy is generally less than 30 years in his book "comparative advantage of the open economy, Pearl River Estuary and Taiwan".

If this rule is established, the "30 year limit" of the PRD has expired since the establishment of the Shenzhen Special Administrative Region in 1980.