Much has been written recently about China’s rising labor costs and the inflationary pressure on Chinese goods. That story has ended. Jade Molds builds injection molds for our customers in North America and we have a timely update on the situation in China.
The Chinese economy is worse than what is reported on the news. You can expect to see revised estimates of Chinese growth from 7% to less than 3%. Forget anything you’ve heard about rising wages and hard to find labor. Both large and small shops are closing all over leaving a surplus of workers. Near us, we know of 20 factories, from small to large, that have closed in the last six months. The largest and oldest manufacturer in our area is considering closing its doors.
In our 8 years of owning a factory, it’s never been easier to find workers. We used to recruit aggressively to fill a position. Now we have about 20 applicants for each opening. The rules of doing business in China have changed, not only rapidly, but significantly. It has gone from a sellers market, where high demand allows sellers to pick their clients, to a buyers market, where buyers can dictate prices, as sellers are eager for work.
In the new China normal, buyers can be proactive about negotiation and executives should expect improvements to the bottom line.
In our business, prices for molds are falling dramatically for buyers. The RMB drop alone means that buyers should be paying 7% less for tooling – but there’s more. Demand is way down. Mold bases, steel, ejector pins, services & components have all fallen 10% – 20%. All these facts combined mean a savings of 15% – 20% for U.S. Buyers.
So if you buy injection molds or any other products from China, now is the time to take another look at your business. The bottom line is tool makers and all factories are hungry, and there’s a “new normal” that you should take advantage of to improve your profitability.
Patrick Smith is President of Jade Group International, LLC, an American company with mold manufacturing in Zhongshan City, China and founder of Advocates for Plastics Careers in America, a non-profit company dedicated to helping address the skills gap for American plastics employers.
Patrick is fluent in Mandarin, with nine years of experience building molds in China. Patrick is always interested in establishing new relationships and is willing to help you with advice on negotiation and other topics in China
Or you can connect with Patrick directly at: Patrick@jademolds.com