Teaching Comparative Government and Politics

Tuesday, April 26, 2016

Basic example of China's economic dilemmas

So, why is that the booming Chinese economy is slowing down? What's happening to production? Here's a most basic explanation.

Bleak times in bra town

A PYRAMID of bras stands beside each worker at the Honji Underwear factory in Gurao, a town in the southern province of Guangdong… Gurao produces 350m bras and 430m vests and pairs of knickers a year for sale at home and abroad. Undies account for 80% of its industrial output…

[M]any people in Gurao and other underwear-factory clusters around Shantou, a coastal city, worry about the future. Costs are rising, but customers are unwilling to pay more, says June Liu of Pengsheng Underwear, which makes lingerie and swimwear. Last year several factory-owners fled from Gurao, leaving debts and unpaid wages…

During the past three decades of rapid economic growth, one-industry towns like Gurao… sprang up along China’s eastern seaboard… they fuelled the country’s export boom. There are now more than 500 such towns, making products such as buttons, ties, plastic shoes, car tyres, toys, Christmas decorations and toilets…

Niche towns in China produce 63% of the world’s shoes, 70% of its spectacles and 90% of its energy-saving lamps…

China’s consumer goods grabbed a huge share of global markets thanks to their low prices. That advantage is fading. Since 2001 wages have risen by 12% a year. Thailand and Vietnam, where labour is cheaper and taxes lower, now make lingerie for global brands such as Victoria’s Secret and La Senza. China’s biggest underwear firm, Regina Miracle, will open two factories in Vietnam…

Gurao still has advantages, such as excellent supply chains. Several factories there make components for undergarments: dyed textiles, lace and the tough foam used to upholster push-up bras. Every form of elastic waistband used for boxer shorts is produced locally…

Officials in Gurao insist that the town can overcome its difficulties by upgrading its technology and using machines instead of people. But attracting the capital and skill to transform Gurao may be more difficult than [it once was]…

In 2013 migrant workers made up nearly half of Gurao’s 161,000 people. Many are low-skilled, moving from one job to another… Most did not complete high school and are ill-equipped to retrain for jobs in service industries, which the Chinese government hopes will replace manufacturing ones…

Some of the one-product boomtowns could fade away, leaving little behind but the concrete shells of empty factories and polluted soil…

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