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English>>Foreign Affairs

‘Made in SE Asia’ doesn’t doom China

By Ding Gang (Global Times)

08:55, August 23, 2012

Recently I did a micro-survey at a shopping mall in Bangkok. I randomly picked up clothes, shoes and hats from 10 different brands. It turned out that save for a pair of golf shoes made in Slovakia and a jacket made in El Salvador, all the rest were produced in Asia.

Nevertheless, among the other eight items, only one T-shirt was made in China, and the others were made in Southeast Asian countries like Thailand, Vietnam and Malaysia.

So is "made in China" being replaced by "made in Southeast Asia?" This certainly seems to be the case for clothes, shoes and hats. The main reason is the rising costs of Chinese labor.

According to Zheng Shengzhong, boss of the Chinese-funded Cambodian Zhenzhou Clothes Company, Cambodian workers at his factory make more than $100 every month, and manager-level employees $200 to $300, far surpassing the local minimum wage. But almost no Chinese worker would accept such a low rate.

The exchange rate and labor costs, once China's advantages, are gradually turning into disadvantages. This is also why companies like Nike are now shutting down their production lines in China and moving to Southeast Asia.

But the situation isn't as bad as it might seem at first glance. In Zheng's clothes company, the facilities used to produce ready-to-wear garments were made in China. This phenomenon is even more prevalent in Vietnam. Most raw materials and machinery in garment factories there are bought from China.

This could explain two things. The first is why Southeast Asian countries haven't cut, but greatly enhanced, their imports from China. And the second is that Chinese investments toward Southeast Asia have sharply increased in recent years.

Some low- and medium-end labor-intensive industries have transferred to Southeast Asia, but they haven't totally separated from China yet. While relying on Chinese capital, they are also dependent on Chinese facilities and technologies.

Southeast Asian countries are generally smaller nations, which can neither provide a comprehensive industrial chain in a single country, nor independently manufacture certain products.

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