Now how they do it even with Europe in turmoil and rising wage and raw material, rising Yuan. Increase productivity of course. Invest in machinery an automation. To overwrite China growth is nothing but wishfull thinking. China still have a lot of tricj under their sleeve. Chovanec and Petis read this article from New York time
Selling Abroad, China Eases Slump at Home
By KEITH BRADSHER
Published: June 10, 2012
GUANGZHOU, China — With China’s domestic economy stumbling badly this spring as construction and retail sales slow, this country is unleashing a fresh surge of exports that is preserving millions of jobs in Chinese factories but could fan trade tensions with the West.
Forbes Conrad for The New York Times
Weakness in the domestic economy has led Chinese to look for jobs at export businesses.
China’s General Administration of Customs announced on Sunday that exports had surged 15.3 percent in May from a year earlier, twice as fast as economists had expected and vaulting May past last December as the biggest month ever for Chinese exports. China’s trade surplus has expanded in each of the last three months.
As indebted European economies slip into recession and unemployment inches back up in the United States, Chinese factories are outcompeting rivals in developing countries and the West to claim larger market shares even as global demand is barely rising.
“Our sales have picked up significantly and we’re now overbooked,” said Roger Lee, chief executive of the TAL Group in Hong Kong, one of the biggest suppliers of high-end dress shirts to department stores and luxury brands in the United States.
China’s renewed success relies heavily on the American market, with Chinese exports to the United States soaring 23 percent in May from a year earlier, the data on Sunday showed. Chinese exports to the European Union rose only 3.2 percent.
But resurgent Chinese exports also have the potential to become a political issue in the American elections in November. Mitt Romney, who has clinched the Republican nomination for president, has already promised in campaign ads to stand up to China more vigorously on currency issues. President Obama has set up an interagency group to investigate trade law violations, particularly by China.
Underpinning China’s export success is a combination of long-term investments in automation and short-term depreciation of the currency.
Manufacturers across China are investing in labor-saving equipment, reorganizing shop floor management and taking other measures to control labor costs, which have been rising steeply as the country grows in prosperity.
Here in southern China, a manufacturer of home saunas has installed a $25,000 computer-controlled drill that does the work of up to eight people. A garment company in Wenxi, in eastern China, is buying machinery to manufacture buttons more cheaply. And a printer in Wuhan, in central China, is fully automating paper cutting and plans further investments in printing and binding, so that workers will only be required to package the finished product.
“We are investing in additional machinery so as to improve productivity,” said Jessica Meng, the sales director at the printer, Maxleaf Stationery. “Labor costs are too high these days.”
The move to automation, consistent across many industries, is a central reason that Chinese imports in the United States are becoming cheaper. Data from the Bureau of Labor Statistics in the United States show that average prices for goods imported from China edged down in April for the first time in almost two years, despite double-digit increases in labor costs.
Rising Chinese labor costs have not yet meant relief for China’s rivals in other developing countries, Japan and the West, partly because automation is offsetting an erosion in Chinese competitiveness.
Beijing officials have strongly endorsed stepped-up equipment investments by exporters. Labor shortages in export zones have meant that workers have not tended to protest the introduction of more machinery.
As the domestic Chinese economy slows, the government is also counteracting some of the pain by taking currency actions to help exporters. The Chinese government allowed the country’s tightly managed currency, the renminbi, to fall nearly 1 percent against the dollar last month, its largest drop since Beijing officials unpegged the currency from the dollar in July 2005. A weaker renminbi makes Chinese goods less expensive in foreign markets, and makes imports less affordable in China.
The competitive advantage for Chinese exporters is amplified by a fundamental shift in inflation. For years, producer prices in China were rising faster than producer prices in the United States. As a result, the inflation-adjusted exchange rate of the renminbi to the dollar was rising even faster — it was up 40 percent since 2005, according to a Treasury report last month.
But producer prices in China have been falling this year. They were down 1.7 percent in May from a year earlier, as the popping of China’s real estate bubble over the past year depressed demand for steel, cement and other materials. Producer prices have kept rising in the United States, so the inflation-adjusted exchange rate has moved about 2 percent in favor of China’s exporters this year.
At the same time, weakness in China’s domestic economy
It is easier to find workers this year, much easier,” said James Jian, the general manager of Hongyuan Furniture here, a 200-employee manufacturer of home saunas that use infrared lights instead of hot rocks. Demand for the saunas, which cost $1,500 to $4,000, is particularly strong from affluent households in the United States, he added.
Chinese officials have also urged the country’s state-owned banks to lend more to small and medium-size manufacturers, many of which are exporters. The country’s 70 financial institutions, all state controlled, have been lending heavily to state-owned enterprises; some are exporters, but many are engaged more in domestic activities like real estate development and infrastructure.
In antisubsidy trade cases, however, the United States Commerce Department typically regards loans from state-owned banks as carrying subsidized interest rates. Loans are widely issued at fairly low interest rates through a system that allocates credit based partly on the Five-Year Plan and other national policies, as opposed to who can pay the highest risk-adjusted interest rate.
The strong Chinese exports in May came after a much weaker month in April, when shipments to Europe actually shrank. But American demand for Chinese goods has been consistently strong.
May had an extra workday this year and April had one fewer day because of the timing of Chinese holidays. But this has a limited effect on exports because manufacturers schedule enough shifts to meet demand.
The biggest question mark is the extent to which manufacturers can continue to offset rising labor costs with investments in automation and the reorganization of often-inefficient work practices.
China’s current Five-Year Plan calls for industrial wages to rise 13 percent a year through 2015, and some cities have been raising their minimum wages even faster. Mr. Lee of the TAL Group said that his company’s labor costs were already rising at least 15 percent a year. By contrast, productivity per worker is rising only half as fast as wages, he said, as the manufacture of woven shirts is hard to automate.
The TAL Group has found some efficiencies through reorganizing its employees into smaller work teams. If Foxconn, which makes iPhones and other electronic products for Apple and many other manufacturers, fully carries out all of the pay and overtime policy changes that it announced in February, then its labor costs per worker could rise as much as 40 percent, Mr. Lee said, adding that this would put heavy pressure on other manufacturers like TAL to raise wages even faster.
