Pearl River Delta manufacturing failure survey: seven major industries become "hardest hit"

Abstract In the context of the downward pressure on the domestic economy, China's manufacturing industry is also struggling. Through incomplete review of public reports, the reporter found that 76 companies in the Pearl River Delta region have closed since the beginning of this year, including 27 in Dongguan and 1/3 of the total number of closed enterprises. ...
In the context of the downward pressure on the domestic economy, China's manufacturing industry is also struggling. Through incomplete review of public reports, the reporter found that 76 companies in the Pearl River Delta region have closed since the beginning of this year, including 27 in Dongguan and 1/3 of the total number of closed enterprises.

Has the Pearl River Delta manufacturing industry ushered in a crisis? Which industries are most affected? How should manufacturing be transformed? The reporter went deep into the Pearl River Delta region to answer your questions.

On October 24th, China ushered in the traditional “Colly Drop” solar terms, and the previous day, the People’s Bank of China announced that it would cut the benchmark interest rate for RMB loans and deposits.

The frost is followed by the winter. For many industries in China, the chill of winter has been felt. In the Internet field, Baidu stopped recruiting, merged with the US and the public, and merged with Ctrip; where the infrastructure materials, steel, cement, coal, non-ferrous metals, glass and other industries are in a difficult situation; light industrial manufacturing, furniture, clothing, ceramics, etc. The situation is not optimistic.

Through incomplete review of public reports, the reporter found that 76 companies in the Pearl River Delta region have closed since the beginning of this year, including 27 in Dongguan and 1/3 of the total number of closed enterprises.

From the perspective of the industry, seven labor-intensive industries such as furniture, textiles, electronics and ceramics have become high-income industries.

Labor-intensive industry is the most difficult
After an “Eleventh” holiday, thousands of employees of Dongguan Jinbao Electronics (China) Co., Ltd. did not expect it. The company has already moved some production lines away. After two days, on October 10, ZTE’s first-tier supplier Fuchang Electronics Co., Ltd. also closed down.

On October 19th, the data released by the National Bureau of Statistics showed that domestic GDP increased by 6.9% in the first three quarters, and the quarterly value fell below 7% for the first time in more than six years. Then on October 23, the People's Bank of China announced "double down."

In October, the Guangzhou Canton Fair and the Taobao Fair held in Guangzhou and Foshan made people feel the "chill" of the real economy.

The reporter combed the public report and found that since October 1st, 8 small and medium-sized enterprises in the Pearl River Delta region have declared bankruptcy, and two other large enterprises have caused employee disputes due to operational problems.

According to the reporter's incomplete statistics, there are 76 large and medium-sized factories that have been publicly reported in the Pearl River Delta this year, mainly in seven major industries such as ceramics, furniture, textile shoes, toys, paper packaging, electronics, and LED. These industries are labor-intensive industries.

At the just-concluded China (Foshan) International Ceramics and Sanitary Expo Fair, Su Yan, member of the Standing Committee of Foshan Chancheng District and executive deputy head of the district, also revealed at the opening ceremony, "We have preliminary statistics that at least 30% of enterprises have been seriously influences."

This year, a total of 12 ceramic enterprises in the Pearl River Delta have closed down, mainly in Qingyuan, Foshan and Zhaoqing. Overcapacity is the main reason for this round of ceramic shuffling. It is understood that the overcapacity in the ceramic industry is as high as 40%.

The downturn in real estate has also affected the furniture and LED industries. This year, 10 companies in the furniture industry in the Pearl River Delta region have closed down, and 6 LEDs have closed.

Beginning in 2010, the paper industry is also unable to escape the reshuffle caused by overcapacity. Since 2015, 10 paper packaging companies in the Pearl River Delta have closed down.

The Pearl River Delta electronics industry has caused bank failures or employee lockouts due to insufficient orders. According to incomplete statistics, 14 electronic enterprises in the Pearl River Delta closed or closed down this year, and four companies caused employee disputes due to insufficient orders. In July this year, Jiangmen Heshan Sihai Circuit Board Co., Ltd. posted a notice after two months of stoppage due to insufficient orders, saying that the company's problems have not been resolved. The company decided to close down and terminate the labor contract with the employees.

Affected by the serious shrinkage of foreign trade, there are 11 closed doors for clothing and footwear enterprises, mainly concentrated in Guangzhou and Huizhou.

It is worth noting that this is only the data that enters the media field of vision, and does not include those small factories that have quietly closed down because of external debt.

According to customs statistics, the total value of China's imports and exports in the first three quarters of 2015 was 17.87 trillion yuan, down 7.9% from the same period last year. Among them, exports were 10.24 trillion yuan, down 1.8%; imports were 7.63 trillion yuan, down 15.1%.

The company is closed in the normal range
A local P2P Internet finance company in Dongguan invested in online investment network. As early as December last year, it began to consciously compress the local business of Dongguan, expand its foreign business, and move to the Pan-Western region.

Wang Yao, CEO of Net Investment Network, told reporters that traditional industries such as steel trade, furniture and textiles are industries that the company will not touch.

Wang Yao said that in fact this year's collapse is not an unexpected situation, but the accumulation and continuation of the real economy in the past few years. "The industry in Dongguan is quite special. It may be a core enterprise. There are dozens of hundreds of companies around it. The service, the big business has fallen, and it is implicated in dozens of hundreds of companies."

Gong Jiayong, deputy director of the Guangdong (Dongguan) Strategic Emerging Industry Research Center, said that the reasons for the closure of the Pearl River Delta enterprises are manifold. On the one hand, shoes and hats, furniture, etc. are labor-intensive industries. As labor costs continue to increase, the low-cost advantages that originally relied on survival disappeared. In addition, entrepreneurs lack the vision of transforming to the brand and the high-end in their operations. Therefore, this situation has been caused by the fact that this foreign trade economic situation and the domestic economic situation are not particularly good.

"The survival rate of SMEs is a common problem. Even in the United States, most companies do not have a five-year time. The closure is always there."

He believes that the reason why this year's bankruptcy has received special attention from the outside world is because in the case of such an international economic situation and the overall economic growth of the country from high-speed to low-speed development, everyone's operating efficiency is not very it is good.

According to the "Southern Daily" reported on October 26, the Dongguan Municipal Bureau of Commerce said that from the field of responsibility of the bureau, the foreign-funded enterprises that have been shut down in Dongguan are in the normal range, regardless of their scale or quality. The so-called "relocation tide" phenomenon.

The relevant person in charge of the Guangdong Provincial Small and Medium Enterprises Bureau told the reporter that there is no specific statistical data yet.

In March of this year, Zhao Qingming, an expert on international financial issues and an adjunct professor at the School of Economics of the University of International Business and Economics, went to Dongguan and Shenzhen to conduct research on manufacturing in both places. At that time, he came to the conclusion that "the most difficult time has passed." Zhao Qingming said in an interview with reporters, "According to the follow-up feedback from several entrepreneurs in Dongguan, the situation in Dongguan is not worse than that in March."

However, a ceramic industry person in Foshan who did not want to be named told reporters that for most ceramic industries, the most dangerous thing is not to stop the kiln, and not to stop the kiln is the most terrible. The ceramic manufacturer defaults on the supplier's payment, and the 6-month and 9-month repayment period is the normal state. “The ceramics factory will not stop the kiln, but there will be a kiln holiday before the Spring Festival, and the supplier will collect the New Year. Therefore, the real test is after the Spring Festival.”

In-depth analysis of 2015 comparison 2008: labor costs doubled corporate financing is still difficult After Fan Youbin finished his MBA in 2008, he returned to Foshan to start a clothing company. Although it coincided with the global financial crisis at the time, Fan Youbin clearly felt that this year was far more difficult than in 2008. "The domestic 70% garment processing factory is mainly exported, and the biggest impact this year is from the competition of Southeast Asian countries."

According to Gong Jiayong, deputy director of the Strategic Emerging Industry Research Center in Guangdong (Dongguan), the situation faced by SMEs this year is more complicated than in 2008. As labor costs continue to rise, traditional labor-intensive industries are losing the advantage to survive.

It is understood that from 2008 to now, the minimum wage in a first-class city (Guangzhou) in Guangdong Province has increased from 860 yuan / month to 1895 yuan / month. According to the report “The Big Move of Global Manufacturing Industry” issued by the Boston Consulting Group (BCG), the manufacturing cost in China is almost the same as that in the United States.

Production costs have increased significantly <br> Le Jianbo, a small garment processing factory owner in Humen Town, Dongguan, has had a bit of awkwardness this year. His factory is mainly engaged in the processing of high-end garments, but more and more foreign orders have been transferred to In Southeast Asian countries such as Vietnam, domestic orders have also been depressed, and rising wages have reduced production profits. "The number of foreign orders this year is three or four percent less."

“In Bangladesh and Cambodia, each employee earns less than $130 a month, and each worker can produce clothes at a cost of less than 1,000 yuan. But China is different. China’s per capita wage is 600-800 dollars. From a global perspective, China’s labor cost advantage is gone.” Fan Youbin told the Daily Economic News reporter.

Since 2008, the minimum wage in a first-class city (Guangzhou) in Guangdong Province has increased from 860 yuan/month to 1895 yuan/month, a 1.2-fold increase. The minimum wages for the second-class cities such as Dongguan and Foshan are also raised from 770 yuan/month to 1510 yuan/month.

BCG’s “Great Economic Migration in the Global Manufacturing Industry” released in August this year pointed out that the US manufacturing cost index is 96 based on the US (100). In other words, the same product, the US manufacturing cost is 1 US dollar, China It costs $0.96. The report believes that China's manufacturing industry is under great pressure, as labor costs have risen from $4.35 in 2004 to $12.47 in 2014, an increase of 187%.

“From 2008 to now, workers’ wages have been doubled at least.” Le Jianbo told reporters that in his factory, the monthly salary of a skilled worker is about 5,000 yuan, while the average worker’s monthly salary is 3,000 yuan.

Wang Xin, who owns an LED equipment company in Dongguan, also said that since 2008, the monthly salary of equipment technicians has risen from 3,000 yuan to 6,000 yuan, double the increase.

Lin Jiang, director of the Finance and Taxation Department of Lingnan College of Sun Yat-Sen University, said that more than 80% of enterprises in the Pearl River Delta are processing trade enterprises, and rising production costs will only promote order transfer.

The reporter noted that in the apparel industry, Uniqlo, MUJI, Tokyo style, and honeys are significantly reducing orders placed in China and sending them to large-scale businesses in Southeast Asia and India.

SMEs' financial difficulties
Since last year, LED phosphor supplier Li Wei has clearly felt that the cash handling is getting less and less, and the number of checks is increasing. This year, Li Wei’s basics are all checks, and it’s not the original ticket. It’s been a few hands before he got to him.

"At this current situation, I can only selectively do some customers. Cash is more important than profit. New development customers must be cautious. If they do not receive the money, it does not make sense." Li Wei said.

Fan Youbin said that the SMEs in the apparel industry are more difficult to borrow this year than in 2008. In his view, most of the business failures are due to the break of the capital chain. If there is sufficient bank credit, the enterprise can come over.

"As long as it is a factory, basically you ask, you will say that you need financing." Duan Lian, assistant to the president of Net Investment Network, told the reporter of "Daily Economic News".

In Duan Lian's view, bank lending is a trigger for the status quo of Dongguan's real economy.

According to him, in 2012, the decline of Dongguan Juqian Furniture Co., Ltd. was related to bank lending. At that time, the bank had a loan of 50 million yuan, which made Juqian Furniture unable to pay wages, and finally failed to hold on. Finally, I had to be reorganized and auctioned.

"This is a vicious cycle. The bank feels that the risk will be a big one. If the loan is used, the industry will be even worse." Wang Yao, CEO of Net Investment Network, said.

It is understood that bank loans are generally large and medium-sized enterprises. Small and micro enterprises are not easy to apply for loans. Some enterprises have to seek private loans with higher financing costs than banks in order to supplement their working capital.

“The cost of private lending is 5 to 10 times that of banks. SMEs are looking for high-cost financing, but in fact they have only survived this period of time, but the hole is still there.” Wang Yao told reporters.

Gong Jiayong said that the financing difficulties of SMEs have always existed. However, with the increase in labor costs, the profits of enterprises are relatively thin. At present, the profit rate of many industries is only 2% to 3%. Under such a profit level, there is a great demand for cash.

"Small and medium-sized enterprises have developed on the basis of policy advantages before, and the development is not very standardized. Credit system or fixed assets and other related items are difficult to impress banks to lend." Gong Jiayong said.

Lin Jiang also told reporters that for most of the processing trade enterprises in the Pearl River Delta, because there is no corresponding collateral, they are generally difficult to borrow from banks.

Wang Yao said that most small and micro enterprises have weak financial management capabilities and insufficient control over cash flow. "They basically have no financial advice, and the boss is managing the accounts. I also often remind them that if financing is necessary to improve financial management, they often say that they want to avoid taxes."

Entrepreneurs say that LED equipment owners: always vigilant crisis is also a business opportunity
Although I heard the bad news from time to time, Wang Xin didn't have the heart to pay attention to it after the 80s. He spends most of his time in the car every day and explores new customers everywhere. He only pays attention to his own good life.

Wang Xin’s LED equipment company in Dongguan has been in operation for several years. Under the support of the previous national policies, their generation of SMEs did not really have a hard time. “It used to be what others did, and then you can do it. But now it’s not working, now I’m going to think about how to differentiate.”

Beginning this year, Wang Xin also began to ponder the "legs walking", thereby reducing the risk of bankruptcy. But in the future, he should not see clearly where to go. "Like a plane, suddenly there is no navigation, I don't know where to go."

Start thinking about "leg walking"

Wang Xin ridiculed himself that his experience was "I worked in the era of the worst job. When I was not doing business, I did business."

In 2008, he left a deep mark on him. That year, his factory in Shenzhen was working because of a batch of products that were not mature enough to produce goods, causing the capital chain to break and the factory to declare bankruptcy. The company owed him half a year's salary, and finally he only got one-third.

However, fortunately, before his factory collapsed, he was doing a batch of equipment for a Foshan company. With his relationship with Foshan customers, Wang Xin won the order and started his own business.

However, his entrepreneurial path is not smooth. A few years ago, his factory cash flow had problems, and even could not afford workers' wages. At that time, he took a property worth one or two million to mortgage, and only borrowed a loan of 200,000 yuan from the bank. "We can only raise money around, but it's good to come over."

In 2012, Wang Xin went out of the partnership and opened the factory that is now the LED lighting packaging automation equipment.

"This year's lights are definitely not good, but relatively speaking, we will be better at making equipment." Wang Xin told the "Daily Economic News" reporter that this year's LED lighting season came early in mid-May, until now Not prosperous. At present, many LED manufacturers are still in the rest period. "I have a Zhongshan customer. I will put it on September 1st in August. The last two days, I will start again on September 3, and I will put it on National Day."

With the rise of Dongguan automation, Wang Xin’s sales this year have increased by about 30% year-on-year. “The industry was an early stage last year and this year is booming.”

But in Wang Xin's view, the equipment is also the shortest. The process of a device from market blank to saturation may be 2 to 3 years. When the company was founded, it was a traditional LED light-cutting dispenser. This year's LED lights are not good, Wang Xin realized that "traditional LEDs have no way to do it."

After targeting the market prospect of LED "candle light", Wang Xin began to develop automated packaging equipment for this "candle lamp" product, and achieved mass production sales.

"Before we basically didn't use our brains, we have to do it when we have an order. But we can't do it now. We have to think about how long this thing can be done, and we must think about which direction to turn. We always keep it. With such vigilance, I am in danger." Wang Xin told reporters.

Someone is going out of business and some people are making money.
Wang Xin believes that the reason why China's SMEs are short-lived is mainly because an industry can only die if it cannot change. He began to realize that at least the development of the dual industry, the company can be healthier. "Beginning this year, I feel that I can't just make one device."

When they started to do the dispenser last year, the dispenser had a market share of 3 billion yuan, but the market scale was reduced to 30 million yuan. “How many points can you divide into dozens of companies?”

At present, Wang Xin's factory has also started to do a small amount of wick packaging business for "candle lamps". "As far as the market is concerned this year, the sales of this bulb are in the mainstream, and the wick is developed by us."

Seeing that the closure of small and medium-sized enterprises has closed down, Wang Xin is not worried about this. In his view, the crisis is a business opportunity. The company's positioning and development direction is the most important. There are companies that have closed down, and many companies make money.

"The opportunity to seize the crisis is a business opportunity. If the factory that I was not working for was closed down, I would not be able to receive an order from Foshan, and step by step."

In addition to getting involved in the wick package, Wang Xin is also thinking about getting involved in the mobile phone industry, "prepare to do something else and innovate in business."

Wang Xin told reporters that he could not see the future and could only do it while walking.

This is also the confusion of Fan Youbin, the chairman of another entrepreneur, Guangdong Astar Intelligence Technology Co., Ltd. “In 2008, influenced by the international situation and policies, when the market was full of gold, entrepreneurs had many choices for cross-border investment, but this year’s In the same way, we are faced with a lot of uncertain factors. The company is like having no navigation when flying, and we don’t know where to go."

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