Many of the labels on our Christmas decorations say “Made in China” but few of us realize that more than 60% of the world’s Christmas goods come from China. The very low profit Chinese Christmas industry has suffered recent difficulties which could predict problems for Chinese and worldwide manufacturing.
Some of these problems are common to low wage developing countries and include the rising cost of city living as workers move from rural villages with family support and low living costs. Manufacturers in the Chinese Christmas industry have been forced to increase wages as much as 150% and still have faced labor shortages. Factor in the increasing average age of Chinese workers and their reluctance to work long hours for low wages and live in factory dormitories thousand of mile from their home villages and you can predict more labor shortages for this and other low wage industries. The government has encouraged many factories to relocate inland where cheap labor is more available, but these new locations do not provide the raw material supply, skilled trades and lower transport costs now enjoyed by the ” coastal pods” of Christmas product manufacturers.
Rising material costs are also pressuring the industry. Commodity prices, led by oil and copper, are increasing worldwide. Rising oil prices impact on the transport cost of everything. In addition oil is the feedstock for many plastic resins used in the manufacture of many Christmas articles. Raw materials are estimated to make up 40% of the cost of Christmas products.
Since profit margins are so low in the very competitive Chinese Christmas business, these problems could become the “canary in the coal mine” for many industries worldwide as China, with its huge demand is driving up commodity prices and exporting inflation and low wage jobs.
The Christmas business will likely continue to be centered in China as no other low age country has the labor supply, concentration of efficient factories and industrial infrastructure to support mass production. Nevertheless, countries such as Vietnam, Bangladesh and even the the Philippines and Indonesia will experience a rapid growth of low wage jobs.
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