Wandering China

An East/West pulse of China's fourth rise from down under.

Tree orders up, profits down in China [Straits Times]


A sign of things to come – China as the world factory may not be able to keep its prices down for much longer. With the cost of labour in Shenzhen increasing by up to 30 per cent this year in response to the widespread protests for higher pay this year, ‘The Chinese clearly did not foresee the leap in wages and raw material prices that would eat into their profits, even when they had raised prices by 10 per cent this year. Mr Liao said that although he received 30 per cent more orders this year, his margin was wiped out by the 15 per cent rise in his 200 workers’ wages. ‘

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Tree orders up, profits down in China
By Lee Choo Kiong
Source – Straits Times, published December 19, 2010

Orders for artificial Christmas trees have picked up after the financial crisis, but their Chinese makers are not cheering.

To them, Christmas is blue this year as a stronger yuan and rising costs ravage their profits and threaten to shut them down.

The impact has been felt by over 200 factories in Shenzhen city, a key production base for the pine in southern Guangdong province, even though orders from Europe and the United States have spiked.

Mr Liao Jiahua, general manager at the Shenzhen Hongyu Artcraft Factory, which churns out wire Christmas trees and wreaths, told Hong Kong newspaper Ta Kung Pao that the industry is up to its neck with orders from the West.

But as more orders stream in, their losses snowball.

Unlike in other trades, prices of the man-made conifers are set one year ahead of the annual Yuletide.

The Chinese clearly did not foresee the leap in wages and raw material prices that would eat into their profits, even when they had raised prices by 10 per cent this year.

Mr Liao said that although he received 30 per cent more orders this year, his margin was wiped out by the 15 per cent rise in his 200 workers’ wages.

The cost of labour in Shenzhen has gone up by about 30 per cent this year, following widespread protests for higher pay.

Even King Tree Corp, one of Shenzhen’s top tree makers, is struggling.

‘We are alive, but dying,’ its owner, Mr Hao Xiaopeng, was quoted as saying in China Daily.

He added that his profit margin has shrunk to less than 5 per cent this year, down from 15 per cent during the sluggish times of last year.

Shenzhen has exported around US$880 million (S$1.1 billion) worth of artificial Christmas trees this year, up 15 per cent from last year.

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Filed under: Domestic Growth, Economics, Foxconn Suicides 2010, Honda Strike in Foshan 2010, Human Rights, Lifestyle, Population, Social, Straits Times

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