
During our visit to few factories last weeks and around several cities in China, it becomes a fact now: more and more companies are suffering and closing in China, and most particurlarly in GuangDong Province. This may be the consequences of several things.
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Guangdong has been the richest province in China by exporting goods over the world especially in Europe and USA. Today, everything is slowing down and it's not Christmas which is going to make things better. Production have been divided by two and most of companies in the city such as Dongguan are closing. There are 8000 companies which may be closed in the next 2 months just because there is no demand anymore in USA and Europe for these companies. These companies are producing toys, circuit boards for electronics devices, electronics items...
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Suffering of the product "Made in China"
If the exportation has been less and less for the past 2 months, another reality for Chinese companies has been to be competitive. The "Made in China" become more and more expensive and it is difficult to export due to several reasons.
First, the salaries have been increased during the last 2 to 3 years in some part of China. An example in our company, most salary have been increased from 2 to 3 to keep our Technicians and Managers. More and more worker are leaving their work to earn 10 RMB more and some companies like ours must increased salary to keep their most skillfull workers.
Secondly, the first materials increased dramatically so the final product was 20 to 40% more expenvive with this factor. Now, material price decreased with the crisis because we finally saw that it was due to speculations.
Another problem become the rate between Yuan and other currencies. The high rate of Yuan make an inflation from 10 to 30% according to exchange rate between countries. So the chinese product become suddenly more expensive and have generate an inflation for its products.
If we consider some countries like USA which is going to protect more and more their industry; so we can believe that exporting for China will be more and more difficult.
Companies will have seriously to adapt and restructure themself to face these problems.
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New life and reality for Chinese workers
It's a fact, unemployment become more and more for a Province like Guangdong. More and more people are lay off or suddenly their companies have been closed. China does not have all social protection or retirement plan as in Europe or USA. Without work, a Chinese has completely nothing.
So we can imagine that, for these people, they will return to their hometown such as province of Sichuan, or Hebei. And for what? Simply to get a protection from their families which are farmers or have other small business. China could face a first unexpected migration.
Moreover, most of them I know, save and invest their money to the stock Shanghai Exchange. They though this way could be also a faster way to increase their money and be later a good retirement plan.
But during the last two months, most of them lost, at least, half or their savings, and some rich Chinese lost until 90% of their fortune.
That will have for sure an impact on the consummation and future investment inside China since most of them will feel poorer.
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New Population & Economical map for China
China could face to an internal migration and industry delocalisation inside its own territories for several reasons.
More and more people and companies in China will move to the North or Center part of this country. Province as Shandong, or Sichuan, could benefit to this new reorganization faster than we could imagine: cheaper manpower, cheaper land, cheaper transport, less environment rules for the companies to make their products still competitive.
Chinese young workers will follow the companies move, where there is work and money to make because they won't have other choices.
In Sichuan, government is investing 1000 billion Yuan to rebuild the region destroy by the earth quake last May so it could be one of the most attractive province in the future for tourism and industry.
But, that may not be enough to continue as before. This crisis happens 10 years too early for China since nothing was prepared for such a change and the cake won't be enough for everybody.
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.Chinese Government's action
Everything has been growing up so fast in this country: buildings, roads, railways, air transports. And it seems that one thing has been forgotten on this fast grew: Chinese people. Except to earn more money and have to spend more for foods and goods, they will notice that nothing was really changed for them when they wake up without work: no social insurance, no social protection, no retirement plan for this new social life that is for them.
China government is now helping most of the sectors of the economy to avoid an internal crisis and also save their country face. But that will be enough?
The economy grow could decrease from 9% to 6% next year: still a dream for Western countries but a danger for this machine named China.