How to benefit from the sudden end of rising labor costs in China.
September 11, 2015
JADE builds injection molds in Zhongshan City for our customers in North America. Much has been written recently about China’s rising labor costs and the inflationary pressure on Chinese goods. That story has ended. Here are the facts:
The economy is worse than what is reported on the news. Expect to see revised estimates of Chinese growth from 7% to less than 3%.
Forget anything you’ve heard about rising wages and hard to find labor. Both large and small shops are closing all over leaving a surplus of workers. Near us, we know of 20 factories, from small to large, that have closed in the last six months. The largest and oldest manufacturer in our area is considering closing its doors. In our 8 years of owning a factory, it’s never been easier to find workers. We used to recruit aggressively to fill a position. Now we have about 20 applicants for each opening.
The rules of doing business in China have changed not only rapidly but significantly.
The market has gone from a sellers market, where high demand allows sellers to pick their clients, to a buyers market, where buyers can dictate prices, as sellers are eager for work. In the new China normal, buyers can be proactive about negotiation and executives should expect improvements to the bottom line.
In our business, prices for molds should are falling dramatically for you the buyer.
The RMB drop alone means that buyers should be paying 7% less for tooling – but there’s more.
Demand is way down. Mold bases, steel, ejector pins, services & components have all fallen 10% – 20%.
All these facts combined mean a savings of 15% – 20% for U.S. Buyers.
If you are not seeing these savings, talk with JADE, we can advise you on how to win negotiations with Chinese buy using their negotiations strategies. If you buy injection molds or any other products from China, now is the time to take another look at your business. The bottom line is tool makers and all factories are hungry, and there’s a “new normal” that you should take advantage of to improve your profitability.