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Adapt or die

  • Author:naky
  • Source:www.diecastingpartsupplier.com
  • Release on:2015-11-10
“Exports are not good and the domestic market is also bad,” says Mr Xu, throwing his hands up in resignation. “The price of shipping containers for export has fallen by half?.?.?.?and now freight companies as well as factories are worried about going bust.”

While they are accused of dumping on international markets, many Chinese metals producers have already gone out of business themselves because of massive oversupply, a slowdown at home and an uncertain global outlook. GKO, based in Zhejiang province, has responded by pushing its suppliers to cut costs and developing new, higher value products.

After riding China’s construction and car market booms, the company is now trying to tap into another part of the world’s second-biggest economy, one that is still growing: tourism.
GKO has recently started producing lightweight aluminium suitcases, similar in appearance to the luxury models made by Samsonite and Rimowa and adored by Chinese travellers, but at half the price. Having specialised in producing huge rolls of aluminium sheet, which were later made into car parts and building decorations, GKO invested in new machines to press its raw material into suitcases.

The government does not release comprehensive data on the nationwide scale of jobs losses and business closures. But factories have been shedding jobs for two years, according to the purchasing managers’ index produced by Caixin, a respected financial news organisation.
Caixin’s latest PMI, which incorporates more private sector companies, and the government version, tilted more towards larger state-owned industries, both indicated further contraction in the manufacturing sector in October.

Manufacturers are increasingly squeezed, having to negotiate a structural shift away from low-cost production at a time when they also face strong headwinds.
Xu Bing, a Canton Fair official, warns that “the traditional advantages of our country are weakening and the new competitive edge is not yet consolidated”. Since the opening up of the country accelerated in the 1980s, nimble factory owners — the street fighters of the Chinese economy — have always responded to changing consumer tastes and global demand. Now, more than ever, they must adapt or die.

Facing cut-throat competition and waning demand for its hedge trimmers and chain saws, toolmaker Gezhi decided to move in to self-balancing, one-wheel electric scooters. But what the Zhejiang-based company hoped would be a Christmas best-seller turned out to be an embarrassing flop.
“To be honest, they are too hard for many people to ride,” admits Jason Liao, sales manager for Gezhi. “After one month of trying, even I was still falling off sometimes.”

With the government’s reform drive stalled and no sign that the slowdown is going to reverse any time soon, much of the heavy lifting in terms of growth and rebalancing in China will have to come from the nation’s factories, which still account for just under 30 per cent of economic output, according to Mr Kuijs.
“With fashion becoming ever faster, it is hard for south-east Asian factories to deal with so many changes of style because they don’t have the experience,” he says. “In China, we can still get to sixth gear in a matter of minutes.”