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monday3econlive · 2 years

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Oversea Manufacturing Migration Route: China to SouthEast Asia

Last year, we bought a plush toy from Jellycat and discovered that it was made in a Southeast Asian country we had never heard of. However, several years ago, all the toys we purchased from this brand were made in China. Since then, we have noticed that more and more products are being manufactured in Vietnam, Bangladesh, and Cambodia instead of China. This phenomenon has sparked our interest in the noticeable shift in manufacturing from China to Southeast Asia.

Concept Introduction

In this quarter, we are learning the idea that economics is about making choices. For firms, the most important factor they consider when making decisions is profit. To achieve profit maximization, firms aim to increase revenue and decrease costs as much as possible. In this case, we are talking about corporations that move their factories overseas to Asian countries for lower production costs. An important factor that causes the transition of factories from China to Southeast Asian countries is cheaper labor costs in the latter regions. Labor costs can be categorized into variable costs, which is another concept we learned this quarter indicating costs that are incurred that vary with the level of production. The lower labor costs and local government subsidies in Southeast Asian countries increase the gap between revenue and cost, thus impacting firms' decisions on relocating their factories.

Reasons for the shift in manufacturing

Rising labor costs: As China has become more prosperous, wages and other labor costs have risen, making it less competitive as a manufacturing hub for low-cost products.

Lower labor costs: Compared to China, many Southeast Asian countries and India have lower labor costs, making them more competitive for low-cost manufacturing.

Government policies: Many Southeast Asian countries have implemented policies to attract foreign investment and promote manufacturing, such as tax incentives, streamlined regulations, and infrastructure development.

Trade tensions: Trade tensions between China and other countries, particularly the United States, have led to increased tariffs and other restrictions on Chinese goods, making it less attractive for businesses to manufacture in China.

Benefits of exporting

The benefits of export are not only for China, which was a major exporter in the past few years, but also for other countries in Southeast Asia that are now transferring production.

Increased foreign exchange earnings: Exports provide countries with an important source of foreign exchange earnings that can be used to finance imports, service external debt, or invest in domestic development.

Job Creation: The expansion of the export sector creates millions of jobs in manufacturing and related industries, helping to reduce unemployment and improve workers' living standards.

Technological advancement: As it becomes more integrated into the global economy through exports, it is exposed to new technologies and management practices, which help drive technological innovation and increase productivity.

Overall, exports have played a key role in the economic development of developing countries and in Southeast Asia and are likely to continue to be the main driver of China's economic growth and prosperity in the coming years.

Production Costs

From a production cost standpoint, many companies have been choosing to shift their manufacturing operations from China to other East Asian countries such as Vietnam, Indonesia and Thailand. This is because labor costs and other production costs are lower in these countries compared to China. In economic terms, we can use a cost curve to illustrate this.

A cost curve shows the relationship between the quantity of output produced and the average cost of production per unit. The curve is typically U-shaped, with a minimum point known as the "minimum efficient scale" (MES), where the average cost is at its lowest.

When a company moves its production from China to another country, it is essentially shifting its cost curve to the right, The figure below illustrates this concept:

In the figure, the blue curve represents the cost curve for production in China, while the green curve represents the cost curve for production in another East Asian country. The MES for the green curve is lower than the MES for the blue curve, indicating that the average cost of production per unit is lower in the new country.

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Ziyi Huang(74944132) & Siyi Fang(40539719)

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newstfionline · 4 years

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Tuesday, March 2, 2021

Global defense spending, led by US and China, hits new high (Stars & Stripes) The U.S. and China led the growth in global defense spending, which hit a new high in 2020 despite the economic stress brought on by the coronavirus pandemic, a report said Thursday. In its annual report on military power, the International Institute for Strategic Studies said total military expenditures added up to $1.83 trillion in 2020, a 3.9% increase over the previous year. “This came despite the coronavirus pandemic and the subsequent contraction in global economic output,” the London-based think tank said in a statement. The United States remained the top spender, accounting for 40.3% of global spending. But China and other Asian powers concerned about Beijing’s rise also spent more, albeit at a somewhat slower pace than in 2019 because of the pandemic, IISS said in its “Military Balance” report. The Stockholm International Peace Research Institute pegged Chinese defense spending at $261 billion in 2019.

Almost a fifth of ALL US dollars were created this year (City A.M./UK) About 20 per cent of all US dollars were created this year. The Federal Reserve has printed unprecedented amounts of money to support the coronavirus-stricken economy. It has sparked debates about inflation and helped asset prices soar. Data from the Fed shows that a broad measure of the stock of dollars, known as M2, rose from $15.34 trillion (£11.87 trillion) at the start of the year to $18.72 trillion in September. The increase of $3.38 trillion equates to 18 per cent of the total supply of dollars. It means almost one in five dollars was created in 2020. The huge growth in the stock of dollars reflects the massive interventions in the economy by the Fed, which is in control of the US’s money supply. Although it is often described as printing money, the Fed in practice creates digital dollars to buy up government bonds and other securities in the secondary market. The policy, known as quantitative easing (QE), aims to flood the markets with cash to keep borrowing cheap. Banks also create money when they lend. Most money in the economy is created this way. Only about $2 trillion are in circulation as physical currency.

Countries call on drug companies to share vaccine know-how (AP) In an industrial neighborhood on the outskirts of Bangladesh’s largest city lies a factory with gleaming new equipment imported from Germany, its immaculate hallways lined with hermetically sealed rooms. It is operating at just a quarter of its capacity. It is one of three factories that The Associated Press found on three continents whose owners say they could start producing hundreds of millions of COVID-19 vaccines on short notice if only they had the blueprints and technical know-how. But that knowledge belongs to the large pharmaceutical companies who produce the first three vaccines authorized by countries including Britain, the European Union and the U.S.—Pfizer, Moderna and AstraZeneca. The factories are all still awaiting responses. Across Africa and Southeast Asia, governments and aid groups, as well as the WHO, are calling on pharmaceutical companies to share their patent information more broadly to meet a yawning global shortfall in a pandemic that already has claimed nearly 2.5 million lives. Pharmaceutical companies that took taxpayer money from the U.S. or Europe to develop inoculations at unprecedented speed say they are negotiating contracts and exclusive licensing deals with producers on a case-by-case basis because they need to protect their intellectual property and ensure safety. Critics say this piecemeal approach is just too slow at a time of urgent need to stop the virus before it mutates into even deadlier forms.

As School Closures Near First Anniversary, a Diverse Parent Movement Demands Action (NYT) Aquené Tyler, a mother and hair stylist in North Philadelphia, has been disappointed in her neighborhood’s public schools for many years. There were too few books and computers. Even before the pandemic, some schools were shuttered for asbestos removal. Now, her 9-year-old son and 13-year-old daughter have been learning online for nearly a year, even as masked children gather boisterously at local private schools. Ms. Tyler’s children are lonely, and Mya, who is in eighth grade, seems depressed and overwhelmed by her class work. She has begun seeing a counselor remotely. So Ms. Tyler is planning a radical change: moving her family to Florida, where the Republican-controlled state government has mandated that all districts provide in-person learning five days per week. A niece there is attending traditional public school in Sarasota, complete with sports, arts and music. A year into the pandemic, less than half of students nationwide are attending public schools that offer traditional, full-time schedules. Now many parents are beginning to rebel, frustrated with the pace of reopening and determined to take matters into their own hands. Some are making contingency plans to relocate, home-school or retreat to private education if their children’s routines continue to be disrupted this fall—a real possibility. Other parents are filing lawsuits, agitating at public meetings, creating political action committees, or running for school board seats.

Prince Philip moved to specialized London heart hospital (AP) Prince Philip was transferred Monday to a specialized London heart hospital to undergo testing and observation for a pre-existing heart condition as he continues to be treated for an unspecified infection, Buckingham Palace said. The 99-year-old husband of Queen Elizabeth II was moved from King Edward VII’s Hospital, where he has been treated since Feb. 17, to St. Bartholomew’s Hospital, which specializes in cardiac care. The palace says Philip “remains comfortable and is responding to treatment but is expected to remain in hospital until at least the end of the week.” Philip married the then-Princess Elizabeth in 1947 and is the longest-serving royal consort in British history. He and the queen have four children, eight grandchildren and nine great-grandchildren.

France’s Sarkozy convicted of corruption, sentenced to jail (AP) A Paris court on Monday found French former President Nicolas Sarkozy guilty of corruption and influence peddling and sentenced him to one year in prison and a two-year suspended sentence. The 66-year-old politician, who was president from 2007 to 2012, was convicted for having tried to illegally obtain information from a senior magistrate in 2014 about a legal action in which he was involved. The court said Sarkozy is entitled to request to be detained at home with an electronic bracelet. This is the first time in France’s modern history that a former president has been convicted of corruption.

China Appears to Warn India: Push Too Hard and the Lights Could Go Out (NYT) Early last summer, Chinese and Indian troops clashed in a surprise border battle in the remote Galwan Valley, bashing each other to death with rocks and clubs. Four months later and more than 1,500 miles away in Mumbai, India, trains shut down and the stock market closed as the power went out in a city of 20 million people. Hospitals had to switch to emergency generators to keep ventilators running amid a coronavirus outbreak that was among India’s worst. Now, a new study lends weight to the idea that those two events may well have been connected—as part of a broad Chinese cybercampaign against India’s power grid, timed to send a message that if India pressed its claims too hard, the lights could go out across the country. The study shows that as the standoff continued in the Himalayas, taking at least two dozen lives, Chinese malware was flowing into the control systems that manage electric supply across India, along with a high-voltage transmission substation and a coal-fired power plant. The discovery raises the question about whether an outage that struck on Oct. 13 in Mumbai, one of the country’s busiest business hubs, was meant as a message from Beijing about what might happen if India pushed its border claims too vigorously.

Rogue ATMs (Nikkei Asia) Fully 2,956 ATMs out of 5,395 machines operated by Mizuho Bank in Japan have gone rogue, with the machines unable to dispense cash and devouring cards. The bug is related to an issue that popped up when the bank was updating its data, and 55 percent of Mizuho’s branches have been forced to shut down.

Pope’s risky trip to Iraq defies sceptics (Reuters) Rockets have hit Iraqi cities and COVID-19 has flared, yet, barring last-minute changes, Pope Francis will embark on a whirlwind four-day trip starting on Friday to show solidarity with the country’s devastated Christian community. Keen to get on the road again after the pandemic put paid to several planned trips, he convinced some perplexed Vatican aides that it is worth the risk and that, in any case, his mind was made up, three Vatican sources said. The March 5-8 trip will be Francis’ first outside Italy since November 2019, when he visited Thailand and Japan. Four trips planned for 2020 were cancelled because of COVID-19. “He really feels that need to reach out to people on their home ground,” said a Vatican prelate who is familiar with Iraq and who spoke on condition of anonymity. “The pope knows where he is going. He is deliberately coming to an area marked by war and violence to bring a message of peace,” Archbishop Bashar Warda of Erbil told reporters on a recent conference call.

Iran insists U.S. lift sanctions first to revive nuclear deal talks (Reuters) Iran said on Monday the United States should lift sanctions first if it wants to hold talks with Tehran to salvage the 2015 nuclear deal with world powers that former President Donald Trump abandoned. President Joe Biden has said Washington is ready for talks about both nations resuming compliance with the pact, under which Tehran secured an easing of sanctions by limiting its nuclear work. But each side wants the other to move first. The West fears Iran wants to build nuclear weapons, while Tehran says that has never been its goal.

Netanyahu accuses Iran of attacking Israeli-owned cargo ship (AP) Israeli Prime Minister Benjamin Netanyahu on Monday accused Iran of attacking an Israeli-owned ship in the Gulf of Oman last week, a mysterious explosion that further spiked security concerns in the region. Without offering any evidence to his claim, Netanyahu told Israeli public broadcaster Kan that “it was indeed an act by Iran, that’s clear.” “Iran is the greatest enemy of Israel, I am determined to halt it. We are hitting it in the entire region,” Netanyahu said. The blast struck the Israeli-owned MV Helios Ray, a Bahamian-flagged roll-on, roll-off vehicle cargo ship, as it was sailing out of the Middle East on its way to Singapore on Friday. The crew was unharmed, but the vessel sustained two holes on its port side and two on its starboard side just above the waterline, according to American defense officials. It remains unclear what caused Friday’s blast on the Helios Ray. Iran responded to Netanyahu’s statement saying it “strongly rejected” the claim that it was behind the attack. In a press briefing, Foreign Ministry spokesman Saeed Khatibzadeh said Netanyahu was “suffering from an obsession with Iran” and described his charges as “fear-mongering.”

Thousands flee rebel violence in Central African Republic (AP) Monique Moukidje fled her home in Central African Republic’s town of Bangassou in January when rebels attacked with heavy weapons, the fighting killing more than a dozen people. “I ran away because the bullets have no eyes,” the 34-year-old said sitting in the shade while waiting for water purification tablets, a tarp, and other supplies to help her in Mbangui-Ngoro, a village where she and hundreds of other displaced people are sheltering. She is among an estimated 240,000 people displaced in the country since mid-December, according to U.N. relief workers, when rebels calling themselves the Coalition of Patriots for Change launched attacks, first to disrupt the Dec. 27 elections and then to destabilize the newly-elected government of President Faustin Archange Touadera. The rebels’ fighting has enveloped the country and caused a humanitarian crisis in the already unstable nation. Hundreds of thousands of people are also left without basic food or health care, and with the main roads between Central African Republic and Cameroon closed for almost two months, prices have skyrocketed leaving families unable to afford food.

Nigerian governor says 279 kidnapped schoolgirls are freed (AP) Hundreds of Nigerian schoolgirls abducted last week from a boarding school in the northwestern Zamfara state have been released, the state’s governor said Tuesday. Zamfara state governor Bello Matawalle announced that 279 girls have been freed. The government last week said 317 had been kidnapped. Gunmen abducted the girls from the Government Girls Junior Secondary School in Jangebe town on Friday, in the latest in a series of mass kidnappings of students in the West African nation.

#headlines #news

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newsmatters · 4 years

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Bangladesh eyes investment gain as Japanese firms exit China

Japan incentivizing its companies to shift manufacturing facilities out of China and adding Bangladesh to a list of preferred destinations for relocating the factories may give the South Asian nation’s economy a boost. “As the pandemic started in China, Japanese companies needed to diversify” their supply chains further, Naoki Ito, the Japanese ambassador to Bangladesh, said in an interview.…

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payroll2bangladesh · 2 years

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lollipoplollipopoh · 5 years

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Why are clothing brands shifting production to Bangladesh? by Al Jazeera English More winners are emerging from the US-China trade war. To avoid the effects of the trade war, Chinese factories are relocating elsewhere in Asia. Bangladesh's large workforce and low wages give it a competitive edge in this labour-intensive industry. Bangladesh is seeing a boom as businesses shift production but workers say they are struggling to survive on the government-set minimum wage. Al Jazeera's Tanvir Chowdhury reports. - Subscribe to our channel: https://ift.tt/291RaQr - Follow us on Twitter: https://twitter.com/AJEnglish - Find us on Facebook: https://ift.tt/1iHo6G4 - Check our website: https://ift.tt/2lOp4tL #AlJazeeraEnglish #USChinaTrade #Bangladesh

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textiletoday · 6 years

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The ready-made garment sector contributed $20.21 billion to Bangladesh’s total export earnings in the July-January period of the FY19. Bangladesh ready-made garment (RMG) sector has earned $20.21 billion in the July-January period of the fiscal year 2018-19 up by 14.51% from $17.65 billion during the same period of the previous fiscal year. The sector has exceeded the export target set for the period. The earnings from the sector were 7.65% higher than the target of $18.78 billion set for the period. Of the total export earnings by the apparel sector, knitwear products earned $10.14 billion, which is 13.86% higher than the $8.90 billion earned during the same period of FY2017-18. Woven products earned $10.07 billion, up by 15.18% from $8.75 billion during the same period of the previous fiscal year. Calmness in the country's political arena, the US-China trade war, and improvement in safety conditions in the ready-made garment factories were main reasons behind the increase of RMG export, opined economists and business leaders. Former caretaker government adviser AB Mirza Azizul Islam said, "In the July-January period of the current fiscal year, Bangladesh’s business environment was calm despite the national election held in December last year." "Moreover, the US-China trade war was a blessing for Bangladeshi apparel makers," the economist explained, adding that US retailers relocated its business from China to Bangladesh because of the trade war. "However, Bangladesh has to be well-equipped to retain the work order flow for further growth," he added. On the other hand, the specialized textile sector saw a 41.11% growth to $84.03 million from $59.55, while home textile products saw negative growth of 0.79% to $490 million from $494.09. However, earnings from leather and leather goods witnessed an 11.71% negative growth to $626.42 million during the period from $709.51 million during the same period of FY2017-18. Jute and jute goods, the third export earning sector, registered a 24.66% negative growth to $498.66 million, which was $661.86 million during the same period in the previous fiscal year.

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sunesenonoutfit61 · 4 years

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'The True Cost' docudrama tallies worldwide impact of inexpensive clothing

Go to any kind of buying mall, as well as inexpensive clothing are plentiful-- $4.99 T-shirts, $7.90 skinny pants, $8.90 shoes. As we load our closets, that pays the rate? That concern is answered in the wide-ranging new film "The True Cost." In the wake of the 2013 Rana Plaza manufacturing facility collapse in Bangladesh, which killed more than 1,100 garment factory workers, Los Angeles-based filmmaker Andrew Morgan laid out to make a documentary regarding the human and ecological expense of buying at H&M, Forever 21, Topshop, Zara as well as various other shops related to the $3-trillion fast-fashion market, in which shops receive trendy brand-new product daily. The movie, which opens May 29 in movie theaters, on video as needed and iTunes, was fired in 13 nations, from the slums of Dhaka, Bangladesh, to the cotton areas near Lubbock, Texas. It includes meetings with style developers, factory employees and also proprietors, cotton farmers, labor protestors, scholastic specialists on usage, sustainability and even more, to radiate a light on the "completely crafted headache" that feeds consumers' insatiable hungers for low-cost elegant. , I looked down as well as understood I had never ever believed about where garments come from," claims Morgan, 28, who lives in Sherman Oaks. "When you grow up looking only at a store home window as well as just thinking concerning your side of the formula, it leads to an extremely unsafe set of effects." He began studying into the reasons for the fast-fashion problem. Among the first individuals he called was Livia Firth, creative director of London-based sustainability brand name working as a consultant Eco-Age as well as founder of the Green Carpet Challenge (which motivates lasting clothing on high-profile red carpetings to focus interest on the concern), that concurred to be an exec manufacturer, as did British journalist Lucy Siegle, that has actually blogged about the ecological effect of the apparel industry. The movie comes on fast and also angry with staggering stats about the rise in consumption: 80 billion pieces of apparel are bought worldwide each year, which is 400% even more than a years ago. The year after the Rana Plaza catastrophe was the fast-fashion market's most lucrative yet, as well as the world's leading four fast-fashion brand names-- Zara, H&M, Fast Retailing (which owns Uniqlo) and also Gap-- had sales in 2014 of more than $72 billion, compared with $48 billion in 2013. " Major fast-fashion firms have actually come to be investment lorries," Morgan claims. "These organisations have actually been on a trajectory for greater than 5 years of 15% growth yearly, which is unbelievable. H&M is opening up a brand-new store every day this year." The movie does not position blame on any kind of one seller (Morgan reached out to a number of however had not been able to get any kind of to comment), yet all the major labels are name inspected in video footage of runway programs, advertising and marketing as well as Black Friday sales, along with YouTube purchasing haul videos. Fueling the frenzy are more affordable costs, made feasible because clothes production has actually been contracted out to nations such as Bangladesh, China as well as Cambodia, where earnings are low, functioning problems less managed as well as manufacturing facility disasters accepted as the cost of doing service. The film puts a human face on how the world's 40 million garment workers are feeling the press as developing nations, desperate for economic chance business offers, fall short to apply wage as well as labor regulations, while big fashion brand names maintain their hands tidy. Morgan zeros in on Shima Akhter, 23, that moved from her neighborhood village to the city of Dhaka, Bangladesh, at age 12 to function in the factories. Unable to pay for day care, she is compelled to leave her daughter behind to be increased by family members. After the Rana Plaza disaster, Akhter was relocated to start a union and send a checklist of demands to her company, which resulted in a violent altercation in which she as well as other employees were held behind secured doors in the manufacturing facility and beaten. " I believe these clothing are created by our blood," she claims, cleaning away tears, in one of the film's most emotional minutes. " One of things I wish gets interacted in the film is that these ladies, at excellent risk to their own health and family members, are starting to stand up as well as truly defend and case basic self-respect as human beings," Morgan claims. "I wish we can obtain behind them in their battle." As a customer, don't assume you are doing your part to counter raised usage by giving away excess clothing to charity. Morgan eliminates that misconception, showing that while the average American discards 82 extra pounds of fabric waste a year, only concerning 10% of what's given away gets sold in thrift shops. The rest is disposed right into garbage dumps (" the unclean shadow of the fast-fashion market") or right into Third World countries like Haiti, where the castoffs can understandably wind up being used by the very individuals who made them. " I almost wanted to overwhelm the visitor with just how enormous the problem is," Morgan claims. Goal achieved. As a counterpoint to the fast-fashion transgressors are several services that sign up for one more method of making clothes, including British fair-trade fashion brand People Tree and also California-based Patagonia, which encourages its customers to acquire much less. In spite of the major ecological and human results of fast fashion, which are outlined in terrific detail, the film suggests we could be on the verge of a turning point. " What we require currently is a greater recognition of what's a risk. It's not just brainstorm time, because there has actually been pioneering already. To make use of a service term, currently we're prepared to range," Morgan claims. "You do not have to enjoy style any kind of less. Commemorate the elegance and creativity of apparel as well as invest in things you really love and also will certainly use and take treatment of a very long time. That in itself is lasting."

#update #dress #clothes

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kalerkhobor · 4 years

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Japanese firms eye expansion, not relocation

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Following the advent of the coronavirus pandemic in Wuhan, China last December, it was assumed that a number of Japanese companies based in the East Asian nation would shift their factories to less affected countries like Bangladesh and Vietnam.

However, Bangladesh might not benefit greatly after all as a very few of the Japanese companies want to relocate from China, said a senior…

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businessliveme · 5 years

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Why Factories Leaving China Aren’t Going to India

(Bloomberg Opinion) — Vietnam seems to be the consensus pick for winner of the U.S.-China trade war, as Chinese and other manufacturers shift production to the cheaper Southeast Asian nation. If there’s a loser, at least in terms of missed opportunities, it may be the countries of South Asia.

To understand why, remember that the trade war has only accelerated an important trend a decade in the making. Faced with rising costs, Chinese manufacturers must decide whether to invest in labor-saving automation technologies or to relocate. Those choosing the latter present an enormous opportunity for less-developed countries, as Chinese companies can help spark industrialization and much-needed economic transformation in their new homes.

There may not be another such chance this generation. The only proven pathway to long-lasting, broad-based prosperity has been to build a manufacturing sector linked to global value chains, which raises productivity levels and creates knock-on jobs across the whole economy. This was how most rich nations, not to mention China itself, lifted themselves out of poverty.

Yet the evidence suggests that South Asian countries are lagging behind in attracting manufacturing investment. It’s not just Vietnam that’s racing ahead. African countries, too, are making manufacturing a top priority. Ethiopia alone has opened nearly a dozen industrial parks in recent years and set up a world-class government agency to attract foreign investment. The World Bank has lauded sub-Saharan Africa as the region with the highest number of reforms each year since 2012.

By contrast, in terms of foreign direct investment as a percentage of GDP, South Asia lags both the global average for least-developed countries and sub-Saharan Africa. While South Asia’s total GDP is more than 70% greater than Africa’s, the continent received three-and-a-half times the investment from China that South Asia received in 2012, the most recent year for which the United Nations has published bilateral FDI statistics. In the last five years, the American Enterprise Institute’s China Global Investment Tracker has recorded 13 large Chinese investment deals in Africa and only nine in South Asia.

Bangladesh is a striking illustration of the problem. The country needs to create 2 million jobs per year at home just to keep up with its growing population. Yet, despite a world-class garments manufacturing sector, it seems unable to cut red tape and enact the reforms needed to attract investment to diversify beyond apparel. In the past few years, Bangladesh has fallen to 176 out of 190 countries in the global Ease of Doing Business country rankings. DBL Group, a Bangladeshi company, is investing in a new apparel manufacturing facility that will generate 4,000 jobs — in Ethiopia.

The fantasy, most common in India, that a country might somehow “leapfrog” from a rural, agriculture-heavy economy straight to a services-based economy is just that: a fantasy. South Asia can’t afford to lose this chance to grow its manufacturing sector.

Attracting manufacturing investments will require, first and foremost, that governments in the region acknowledge the competition is passing them by. India, for example, must abandon its overconfidence that investors will come simply for its large population. Pakistan needs to stop relying on its government-to-government friendship with China. Chinese state financing of infrastructure won’t automatically lead to manufacturing investment, most of which is dominated by private Chinese companies motivated by competitive forces, not government diktats.

Secondly, South Asian countries need to undertake a concerted, whole-of-government push to boost investment levels. Specifically, they need to create the conditions manufacturers need to thrive, from steady power supplies to efficient port operations and customs clearance.

Moreover, they need to understand the specifics of these businesses. Factories have unique requirements depending on what they make. For example, cloth and clothing factories, despite their seeming similarities, have extremely different requirements: The former is capital-intensive, with huge amounts of power-hungry machinery churning out bolts of cloth, whereas the latter is labor-intensive and features rows of workers cutting and sewing.

Countries need to analyze which manufacturing sub-sectors they are best positioned for, meet the requirements those manufacturers have in order to set up shop, and target the regions of China (and elsewhere in the world) where those types of manufacturers are to be found.

The good news is that all of these measures are eminently feasible. And in many cases, the first steps are already being taken, such as with the construction of Bangladesh’s first deep sea port at Matarbari. The bad news is that unless South Asia moves faster, others may have already seized the opportunity to industrialize.

The post Why Factories Leaving China Aren’t Going to India appeared first on Businessliveme.com.

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deniscollins · 5 years

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Make Shoes in U.S., or Pay Tariffs? A Footwear Company Seeks a Third Option

The U.S. is placing a 15% tariff on labor-intensive shoes made in China. If you were the American owner of Xero Shoes, which are made in China, as are 70% of shoes sold in the U.S., what would you do: (1) remain operating in China and increase your prices, (2) move Chinese facility to Vietnam, which would be a new business culture to learn and investment, or (3) relocate to U.S. and invest in new technology to produce the labor-intensive shoes, (4) something else, if so what? Why? What are the ethics underlying your decision?

Before the trade war threatened to upend everything, Lena Phoenix spent most of her hours puzzling over how to expand the thriving footwear business she and her husband had founded in their home in Colorado.

Now, she is mostly consumed with finding a way around the tariffs that President Trump just imposed, bringing expensive complications. The latest round took effect on Sunday, increasing the costs that Americans pay for $112 billion worth of goods imported from China, among them the shoes and sandals designed and sold by Ms. Phoenix’s company, Xero Shoes.

Mr. Trump has hailed his tariffs as a means of forcing American companies to abandon China and make their goods at home. Ms. Phoenix has taken the trade war as impetus to seek alternatives to the Chinese factories that now make her company’s products. But the United States presents no viable options, she says. The tariffs have forced her to slow her business while exploring manufacturing plants in Southeast Asia.

“It’s just crazy,” Ms. Phoenix said. “There’s a lot of scrambling going on, and a lot of figuring out what to do.”

The story of Xero Shoes presents a challenge to Mr. Trump’s notion that tariffs are the key to an American manufacturing revival, revealing how they can jeopardize existing jobs by disrupting access to the global supply chain. Many American brands use Chinese plants to make their goods. American factories depend on China to ship parts and electronics.

“It’s hard to imagine shoes and clothing coming back to the United States just because they are so labor intensive,” said Chad P. Bown, an international trade expert at the Peterson Institute for International Economics in Washington. “What matters is wage costs. It’s just cheaper to make those things in other places.”

Even if tariffs succeed in forcing production back to the United States, Mr. Bown added, human beings are unlikely to secure the jobs. “The companies will figure out how to do the work with robots and technology,” he said.

In recent months, Xero has reacted to Mr. Trump’s threats in the very way he hoped: It has contemplated moving away from China.

But it has not considered the United States. “There’s no capacity,” Ms. Phoenix said. She and her husband started their business a decade ago using credit card debt. They do not possess the tens of millions of dollars required to construct their own plant.

Instead, Xero has been researching alternatives. Vietnam is the obvious place, a country that has been gaining investment as multinational companies shift manufacturing work outside China to avoid American tariffs. But space has gotten tight there.

Xero’s manufacturing agent in Asia has suggested that the company consider Bangladesh, Indonesia and Kenya. Ms. Phoenix, 51, knows nothing about these places, and the thought of new variables fills her with dread. The company previously shifted production from South Korea to China, and then switched Chinese factories. In every move, mishaps cost time and money.

“It’s a really challenging and dangerous thing to do, and especially for a small business,” Ms. Phoenix said. “You’ve got to re-educate the factory. There are likely to be delays. You could run into quality problems.”

Her biggest source of frustration is the gnawing sense that the trade war seems not only futile but damaging. She and her husband have managed to forge a fast-growing business in Broomfield, a town of 69,000 people north of Denver. Now, ill-conceived government action is menacing their success, she said.

“When you are growing fast, it’s hair on fire a lot of the time,” she said. “These tariffs are putting an enormous amount of pressure on us.”

Like many small-scale entrepreneurial ventures, Xero Shoes was born by accident, as the outgrowth of the pursuit of a solution to a personal problem. Ms. Phoenix’s husband, Steven Sashen, was a serious runner who had reached his mid-40s and was suddenly suffering injuries like pulled hamstrings.

The running world was then in the thrall of the barefoot movement, spurred by the best-selling book “Born to Run,” which argued that ditching cushiony shoes would restore balance and eliminate muscle strain.

Mr. Sashen tried a pair of five-toed minimalist rubbers sneakers that were then selling like mad in response to the book. His own feet could not fit comfortably, so he sought to make his own.

He ordered sheets of rubber and cut them into shoes. He bought laces from Home Depot. To save on costs, he bought materials in bulk, which left him with more shoes than he needed. An internet marketer by trade, he made a website and sold the shoes there. Demand proved intense.

A pair of former executives from Reebok, the major running shoe brand, worked without pay to fine-tune what would become a line of minimalist footwear that landed just as the United States was embracing nontraditional approaches to wellness.

Ms. Phoenix had worked as a mortgage broker out of college. She had self-published a novel, traveled widely, studied psychology and generally “tried to figure out what I wanted to be when I grow up.”

She has an answer: She is the chief financial officer for this start-up footwear company.

Over the last four years, Xero’s sales have grown at an average annual pace of 84 percent, she said, reaching $8.8 million in 2018. The company employs 34 people.

It sells 90 percent of its footwear in the United States while shipping the rest to markets around the planet — to Japan, Singapore, Britain and the Czech Republic.

Growth had been poised to accelerate even more rapidly this year, as Xero wrapped up a test with REI, the outdoor clothing and equipment retailer, bringing an order worth $830,000 for the 2020 season.

“It’s by far our biggest order ever,” Ms. Phoenix said.

But the tariffs that hit Sunday could alter the economics of that deal. Xero could presumably try to renegotiate a higher price with REI that would cover the tariff, but Ms. Phoenix has been reluctant to pursue that route given the importance of the relationship. Instead, she has waited and hoped that a deal between Washington and Beijing would end the threat.

When Mr. Trump started the trade war a year ago, Ms. Phoenix and her husband assumed he would leave footwear out of it because China makes 70 percent of the shoes sold in the United States. How could a president seeking re-election next year put a tax on a product needed by everyone with feet?

But in early August, as the trade war intensified, Mr. Trump threatened to affix 10 percent tariffs on Chinese-made footwear. Last week, after China’s announcement of retaliatory tariffs on $75 billion worth of American exports, Mr. Trump took to Twitter to declare that the tariffs would be increased to 15 percent.

Even before those tariffs take effect, Xero is tallying losses from the trade war. Its new line for the spring of 2019 was delayed as American retailers placed a surge of orders from China to try to get ahead of the tariffs, resulting in congestion at ports.

Normally, Xero receives its new stock by late January. But this year, as the spring line sat in wait at the port in Long Beach, Calif., those goods did not reach its Colorado warehouse until late February. By then, the company had unleashed an advertising campaign to lure customers to its website.

“People were like, ‘Well, you don’t have our size, so we are leaving,’” Ms. Phoenix said. “We probably left at least $1 million on the table.”

The company’s fall line has been similarly impaired. When Mr. Trump first threatened shoe tariffs in May, a major international footwear brand that uses the same Chinese factory as Xero drastically increased production so it could stockpile in the United States.

“We are small, so they stuck us at the back of line,” Ms. Phoenix said. “That probably cost us another $1 million in lost sales.”

The hardest part is figuring out what to do. Ms. Phoenix was contemplating factories in Vietnam when Mr. Trump tweeted that could be the next country to face tariffs.

“Do we make the move to Vietnam, and then we are right back to where we started?” Ms. Phoenix said. “How do you make a decision in this sort of environment?”

She has been huddling with consultants to explore slight design changes that could alter the classification of her products and incur lower tariffs. Substituting a vegetable fiber material for synthetic webbing can lower the tariffs rate, but will the new material perform as well? These calculations matter.

So does the pursuit of finance to enable the next order, a process rendered exceptionally difficult by the trade war.

“It’s been a question for every single lender,” Ms. Phoenix said. “They want to know about the tariffs and my plans.”

She was galled to learn that among the Chinese imports set to face higher tariffs is the machinery used to make shoes.

“Trump says he wants to bring manufacturing back to the States,” she said. “How does that work exactly?”

#Shoes #China

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whittlebaggett8 · 5 years

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Is Bangladesh Winning in the US-China Trade War?

As the U.S.-China trade war intensified, pundits on equally sides of the Pacific and somewhere else are calculating: Who is the real winner? In truth, it is not China or the United States, but international locations like Bangladesh, Vietnam, and Chile that could reward from the widening trade dispute in between the world’s two biggest economies. The impending impact of the trade war on supply chain dynamics and financial investment designs could assistance these nations around the world emerge as likely winners of the conflict.

For Bangladesh, China and the United States have been extended-time, secure trade associates. The quantity and values of trade are incredibly important with both equally international locations. On the other hand, the character of trade with both equally international locations is distinct. Bangladesh’s top rated import companion is China, with Bangladesh importing above $15 billion in Chinese merchandise, as of 2017. Meanwhile, the United States is the second major vacation spot for Bangladesh’s exports, taking in a lot more than $5.8 billion in 2017 (Germany was the biggest desired destination at just above $6 billion).

As the Asian Development Bank’s Main Economist Yasuyuki Sawada argued, “Trade war to deliver additional $400 million exports for Bangladesh.”

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The garment sector, which accounts for 80 % of Bangladesh’s complete exports, is anticipated to benefit the most. As the trade war escalates, American vendors are positioning more get the job done orders in Bangladesh in an effort and hard work to offset rising tariffs on merchandise produced in China. According to the Bangladesh Overseas Trade Institute, Bangladesh appreciated a 6.46 % expansion in sector share in the U.S. market place throughout the initially 3 quarters of 2018.

In 2012, a report by McKinsey forecasted that as completely ready-manufactured clothes from China declined, Bangladesh would be the up coming hot location, and the industry would triple in price by 2020, up from $15 billion in 2010. Even however this forecast was about China’s gradual stage out from labor-intense industries to higher worth-included, substantial-tech, cash-intense producing sector it appears to be that trade war is accelerating the development of Bangladesh to obtain just that.

To stay clear of larger tariffs, factories are relocating from China to elsewhere in Asia. Bangladesh has more aggressive pros than its competitors such as Cambodia and Vietnam. Owing to the presence of solid unions, environment up factories in Cambodia is far more tough. Moreover, in distinction to the 160 million Bangladeshis, Cambodia has a inhabitants of just 16 million, which gives Bangladesh a aggressive edge in this labor-intense business. Owing to increased wages and creation expenses, Vietnam also appears to be less eye-catching to buyers. The minimum amount wage in Bangladesh is now $95 for each month, which is just about 50 percent the $182 for each month it is in Cambodia and $180 per thirty day period in Hanoi and Ho Chi Minh Town.

Bangladesh can also benefit by increasing imports from the United States. In accordance to the U.S. Farm Bureau, soybean exports to China declined by 97 % right after China’s tariffs on U.S. soybeans came into result. At the moment, Bangladesh imports 2 million tons of crude vegetable oil, of which 30 p.c or 600,000 tons is soybean, 98 percent of people soybean will come from Argentina, Paraguay, and Brazil. If the country can redirect its supply chain from Latin The united states to the United States, it could have the opportunity to offer oil to people at more cost-effective costs with out sacrificing revenue in the extended-operate.

Furthermore, becoming the 51st biggest investing companion of the United States, Bangladesh enjoys $4. billion trade surplus. One particular of U.S. President Donald Trump’s passion horses is going after trade surplus nations around the world. By importing soybeans from the United States, Bangladesh can advantage each by having items at a much less expensive rate and lessening the trade deficit this might in the long run lead to more powerful bilateral relations. Additionally, Bangladesh and other lower-revenue nations in South Asia confront U.S. obligations of 15.2 per cent of the total benefit of exports, which has a likelihood to simplicity if the United States would like to improve imports from these international locations to lower its hole from China.

The majority of Bangladesh’s metal calls for come from importing scrap iron from United States and its domestic ship-breaking market. However, the U.S. imposed a 25 percent tariff on all metal imports in March 2018, in initiatives to revitalize its declining metal field. This action led U.S. suppliers of scrap iron to retailer their reserves in anticipation of greater tariffs. As a result, Bangladesh has observed a significant increase in the price tag of rods, an crucial merchandise required for its a lot of infrastructure jobs.

In 2017, Bangladesh scrapped 25 per cent of the ships dismantled globally. In light-weight of escalating improvement assignments, the region could possibly craft an industrial coverage to build its shipbreaking yards, hoping to sourcing a greater total of more cost-effective steel domestically, which is presently giving more than half of the country’s metal source.

On the purview of a trade war, although Chinese policymakers are searching for to tighten funds flows in hopes of blocking a depreciation of the yuan, China’s increasing involvement in various tasks in Bangladesh may imply constraints will not be as helpful. Additionally, Bangladesh has witnessed an maximize in FDI from China higher than forecasted, by means of factory relocations, primarily in the escalating export processing zones (EPZs).

Furthermore, as a member of Belt and Highway Initiative (BRI), it is far more meaningful for China to boost financial commitment in Bangladesh in these sectors which are affected in China by the trade war. Beijing’s assist of Bangladesh was evident in the 27 agreements for investments and loans signed by the two nations around the world – in the sum of $24 billion – when President Xi Jinping frequented in 2016. Net FDI from China into Bangladesh exploded following Xi’s stop by. It enhanced to $506 million in the 2017-18 money year, which was only $68.5 million in 2016-17, in accordance to the Bangladeshi newspaper The Monetary Express.

Placing all this jointly, it seems that the trade war amongst the United States and China opened for Bangladesh a window of chance. Nonetheless, no matter if the nation can experience the benefits will count on a host of variables. Bangladesh is having difficulties with crumbling infrastructure, weak rule of regulation, and a poor business natural environment. Many observers have also been alarmed at the Bangladeshi government’s excessive and reckless borrowing from China and worry it may perhaps set the region in a for a longer period-expression credit card debt entice, like other nations around the world.

It is as a result crucial for Bangladesh to do the job on a favorable coverage routine to seize new chances as they come, and to deliver enabling conditions for a lot more international direct investment—while also keeping away from unintended challenges and repercussions.

Anu Anwar is an Affiliate Scholar at East-West Center, and a Fellow at THE Pacific Forum, Hawaii, United States.

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