The Unemployed Chinese Worker; What Does it Mean For the Toy Industry?

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"In a 2015 study, the Boston Consulting Group said the costs of manufacturing in China’s major export-producing zone were now almost the same as in the United States…"

Is China Stealing Jobs? It May Be Losing Them, Instead,"

Michael Schuman, New York Times

It seems like just yesterday that we were hearing about a lack of sufficient labor for China's toy and play factories. Now, according to a New York Times article by Michael Schuman, we learn that unemployment is becoming an issue for China's work force. 

Why are their fewer jobs? According to the article, "Is China Stealing Jobs? It May Be Losing Them, Instead,"  we learn that: "They are losing their jobs because of a slowing domestic economy, rising costs and stiffer foreign competition — including from the United States."

What is ironic, however, is that afore mention under supply of labor is a primary cause of the undersupply of jobs today. It seems that, in order to secure whatever labor supply was available, factories (toy manufacturing center Shenzhen is mentioned in particular) raised wages to attract talent. According to the article, wages for factory workers in China are now 29% higher than they were three years ago. 

Because of that: "Factory workers in Vietnam earn less than half the salary of a Chinese worker, while those in Bangladesh get paid under a quarter as much." Is it any wonder that India, Indonesia, Viet Nam and other Asian countries are now effectively vying for business that used to go to China by default. 

So what does this mean for the United States and toy manufacturers?

It seems that for the first time in decades American manufacturing is now parity priced with China. Here is how the article puts it: "In a 2015 study, the Boston Consulting Group said the costs of manufacturing in China’s major export-producing zone were now almost the same as in the United States, after taking into account wages, worker productivity, energy costs and other factors."

Other factors may include time costs as well as the unexpected delays that can come in shipping goods across the ocean; things like storms, lack of container vessels, strikes and customs investigations. Is it any wonder that some companies are considering moving production back to the US or to another low wage country.

Here is what I think: Hong Kong factory owners are highly pragmatic. They know how to make toys and they understand their customers in the US and Europe. They will fight to keep Hong Kong as the world manufacturing center and they will adjust if they have to. That will mean moving manufacturing to other countries and even the US if they have to. Why shouldn't a Hong Kong or Chinese toy OEM manufacturer open a factory in the US? What better way to hedge their bets.

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