August 15, 2012
Translated by Zhang Dian

After shutting down it's last factory in China, in recent days there have been rumors that the well-known German sports clothing manufacturer Adidas also plans to terminate its contracts with 300 contract manufacturing factories in China.

This is simply the latest in a run of bad news for factories operating in China's southern Pearl River Delta region.

If you take a bus from the railway station of the southern manufacturing hub of Dongguan (东莞), it will take you about 30 minutes to get to the township of Dalang (大朗镇), one of the biggest distribution centers for textile products in the world.

At present, a lot of shops are shuttered up and there are few customers in the few stores that are open.   

Xingye Knitwear Corporation (兴业针织有限公司), one of the better known enterprises in Dalang County, once employed between 1,200 and 1,300 people but now only keeps about 500 staff on. The company relies on exports, but orders have shrunk by 50 percent compared to last year and the company's general manager says that the situation is even worse than it was in 2008 when the financial crisis hit.

A senior executive at the company told a journalist from the China Securities Journal that the rising cost of manufacturing in China and the economic downturn in the West were to blame.

"Lots of orders go to low-cost countries like Vietnam, Cambodia, and Bangladesh. Their costs are at about the same level as ours were 15 years ago, we can't possibly compete with them on price."

Lots of contract manufacturers in Dalang complain that there is no longer any room to make profits. "Yes we have orders, but the prices being paid are so low. It's definitely not the way out," the head of another company in Dalang said.  

Aside from textiles, toy factories and shoe manufacturers have also been hard hit.

Chen Naixing (陈乃醒), the head of the center for SME Studies at China's Academy of Social Sciences, said that factories that relied too heavily on labor are more likely to run into difficulties. This year, China's bankruptcy rate has increased to 8 percent, while normally the figure is only 3 percent.

Links and Sources
China Securities Journal: 阿迪撤离恐生蝴蝶效应 珠三角代工厂频倒闭