What to Do When Manufacturing Enterprises Are Closing Down en Masse?

2014-01-16 601 0人评论
       Recently I read a sensational post published on Tianya Finance by a hermit in the deep mountains titled 'Dongguan's Manufacturing Prospects Are Worrying! More Enterprises Will Still Close Down en Masse in the Future!' Two or three years ago, when I visited the Pearl River Delta and saw the empty specialty stores, I had similar concerns. Wenzhou is similar to Dongguan. In 2012, Wenzhou's GDP growth rate of 6.7% ranked last in Zhejiang Province, the only one of the province's 11 prefecture-level cities with a growth rate below 7%. At the same time, its per capita GDP ranked 11th among the province's 11 prefecture-level cities, overtaken by Lishui and placed at the bottom. As a city undergoing difficult transformation, a decline in GDP does not prove incompetence, but the fact that it has yet to find a development direction or a response strategy cannot help but make one sweat for the future of these cities.

  The decline of low-end manufacturing in the eastern region is an irresistible trend. It is hard to imagine that an area with an average commercial housing price of more than 20,000 yuan can still maintain a huge scale of low-end manufacturing. Manufacturing is moving to the central and western regions, and migrant workers can find employment in their hometowns without enduring the lonely life of leaving their children behind. This is a normal return, and the eastern region must accept reality. The decline of low-end manufacturing in the eastern region has freed up space for mid-range manufacturing and the service industry. What China needs to develop in large quantities is the service industry, to ease pressure on employment, the environment, and other aspects. Whether willing or not, the prospects for low-end manufacturing will become increasingly narrow. The manufacturing crisis objectively exists, but that does not mean there is no way out. It cannot be denied that the market will generate infinite momentum from within, and what the government should do in the face of that momentum is to observe quietly, like cooking a small fish.

  On December 8, Chen Yixin, secretary of the Wenzhou Municipal Party Committee, said that innovation is needed in the work of bringing Wenzhou merchants back. Next, the top 100 Wenzhou merchants by comprehensive strength will be invited back to Wenzhou in batches, "tentatively called the 'Leading Industry Project,' as a kind of responsibility and obligation of Wenzhou merchants." Chen Yixin stressed, "The essential feature of the Wenzhou economy is a people-based economy, and the 'Wenzhou Model' is not outdated."

  A people-based economy will never be outdated, but a people-based economy does not mean there is no need for rules of the game; the two are not mutually exclusive. In terms of manufacturing, strict protection of originality is the source of manufacturing innovation, and the shanzhai stage has passed. Places such as Dongguan have complete industrial chains and need protection for honest entrepreneurs and originators. As for which industries to focus on developing, that is a matter for entrepreneurs, not the government.

  Not only enterprises need to cultivate themselves; the government needs to do so even more. The reason Wenzhou's financial reform failed to grasp the "bull's nose" is that it was unclear about the bottom-line rules of the financial game and did not know where to loosen and where to supervise strictly. If regulators are not sufficiently aware, even temporarily attracting capital back will not have much effect.

  Capital is like water, flowing toward the good; industries are like tai chi, balancing in rotation. The closure of low-end manufacturing is an opportunity for the rise of mid-range manufacturing and for the development of the service industry. There is no need to complain; the market has its own logic of rise and fall.

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