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Counselor Senior Editor Michele Bell's slanted view of the world.

The China Syndrome

Filed under: Asia

Welcome to February!

Did you see the news last week? In China, hundreds of thousands of people were stranded at the Guangzhou train station on the way to visit their families for Chinese New Year due to a snow storm. Now, I’ve been to the Guangzhou train station quite a few times and I can tell you that under the best conditions, it’s no day at the beach.

Having seen the footage of throngs of Chinese citizens stuck there for days without ample food and water, it just about redefines what hell must be. Thankfully, the trains have resumed service and the Chinese people are slowly getting where they need to be for their holiday celebration. (The Guangzhou train station, incidentally, looks like Dresden after the bombings in the wake of all those people crammed in there for days…)

The sad part is that Chinese factory workers save their money to visit family during Chinese New Year. It is the high point of their year, and for people who make on average less than $200 per month, it was just soul-crushing to watch them wait helplessly while the Chinese government, clearly not used to this kind of weather-related catastrophe, grappled with how to alleviate the bottleneck of rail travel.

My friend Tom Ngo (pronounced “No,” and if that isn’t amusing enough, his middle name is “Phuc”… seriously), director of marketing at the Ontario, CA-based supplier Key-Bak, sent me an e-mail telling me of conversations with his factories in Asia in which his contacts are hearing rumblings that due to the tendency in recent years of workers not returning to their jobs after Chinese New Year — instead preferring to move along to more lucrative areas in other parts of China with higher paying jobs — that some factories may close and relocate to to areas in inland China with cheaper labor. (Am I the only one who can hear those machines coming to a grinding halt while orders attract dust bunnies?)  

As if that isn’t unnerving enough, my friend Jonathan Isaacson, the owner of Gemline and the person who gave one of the best presentations I’ve ever heard about all issues China at the Premier Group meeting at the PPAI Show in Vegas last month, sent me an article in the New York Timesin which this quote from author David Barboza stopped me dead in my tracks: “Americans could see prices increase by as much as 10% this year on specific products [from China] — including toys, clothing, footwear and other consumer goods — just as the U.S. faces a possible recession.” Needless to say, being the shoe junkie I am, he had me at “footwear.” Barboza goes on to say, as Tom Ngo noted, that factory wages in China have risen “80% or more” in many coastal areas… Nate Herman, director of international trade at the Arlington, VA-based American Apparel and Footwear Association, said in Barboza’s article that while many companies are now ordering for the Spring ’09 selling season, “factories [in China] are coming back and asking for 20, 30, 40, 50 percent price increases.”

How will this affect the North American ad specialties marketplace? If you’re a supplier, get ready to see new parts of the world. As Bruce Rockowitz, president of Li & Fung — one of the biggest companies for supplying products worldwide — told Barboza, there’s a shift in sourcing driven by higher prices in China. “We’ve already seen a big move in furniture to Indonesia.”

Lastly, the maker of Thomas & Friends Wooden Railway toys has agreed to a $30 million class-action settlement stemming from last year’s recalls, the first of what’s expected to be a wave of settlements related to millions of toys recalled because of lead paint.

In spite of all this, I’m a glass-half-full (especially if it’s half-filled with Grey Goose) kind of girl and believe that things can only get better from here. Just like with the new Super Bowl champs, the NY Giants… I always bet on the underdogs and root for the lost causes. And not just when the quarterback happens to be a hottie.  

Heading for Dallas tomorrow, where I’ll be blogging from the ASI Show and then off to a fun weekend in Austin (I just love a city whose official motto is “Keep Austin Weird”…) to stay with my favorite industry family, the Lindermans (Michael, Jane, Matt and Ernie) for a fun long weekend.

More from Dallas!

— Michele

1 Comment

  1. Jessica Ibsen Says:

    Great article. I have been concerned about quotes from China getting more and more competitive with their US counterparts and wondered if it wsa expense or shear greed. If China isn’t careful on this, our recession could come back on them by less exports from their country because of less buying on our side.

    Wednesday February 6, 2008

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