LPC-European lingerie in China http://www.lover-beauty.com/ LBO activity stays strong
LONDON, Wholesale Bikini http://www.lover-beauty.com/Bikini/ Sept 4 Leveraged loan bankers are
working on financings lingerie in China totalling up to 12 billion euros to back a number of new buyouts that are in the auction
phase as Europe’s leveraged loan market becomes increasingly
attractive amid wider macro volatility.
Global market instability stemming from China’s stock market
rout and tumbling commodity and oil prices have led many sellers
to broaden their exit route opportunities in order to extract
the best value.
A number of sellers are running dual-track processes to
engage with as many buyers as possible. Such deals include those
of British payments processing firm Worldpay IPO-WORLD.L,
French smartcard maker Oberthur Technologies, Swedish chemicals
firm Perstorp and Ardagh’s metal can packaging business Oressa.
"A lot of the companies up for sale were firmly IPO
candidates until about a month ago," a loan banker said. "The
only reason they are coming back as potential buyouts is because
of the volatility. It is attractive for a seller to get rid of
100 percent of a business rather than listing, but it depends on
expectations and how much buyers are willing to pay."
Europe’s leveraged loan market has been crying out for
large-scale M&A, which is down significantly from last year with
only a handful of deals taking place so far in 2015, including
purchases of Saint-Gobain’s glass bottle unit Verallia
and German perfume and cosmetics retailer Douglas.
"No one knows when the IPO market will open," a second loan
banker said. "There are a lot of IPO financings being held at
bay until there is a bit more clarity on the situation and the
market."
Bankers are working on leveraged debt financings to back the
potential sales with about 4.5 billion euros required for a
buyout of Worldpay. Ardagh’s Oressa unit would require some 1.6
billion euros of debt, while bankers are working on deals of
around 1 billion euros each for Oberthur and Perstorp.
Bankers are also working on financings to back the potential
sales of other companies, including 650 million euros of debt
for French call centre business Webhelp, after UK private equity
firm Charterhouse mandated Deutsche Bank for a sale of its 60
percent stake.
UK petrol station operator Euro Garages and Airbus’s
defence unit could need up to 700 million pounds and 700 million euros of debt, respectively. Bankers
also lined up about 450 million euros of debt to back a buyout
of Dutch lingerie firm Hunkemoller, and although the process is
proving slow a sale or refinancing could still go ahead.
Other smaller potential financings out there include around
370 million pounds for a potential sale of British retailer
Tesco’s customer data business dunnhumby; 300 million
euros for German automotive parts maker Al-Ko; and 180 million
euros for Irish payments business Fintrax.
COMPETITIVE BID
Private equity buyers have become quite competitive compared
with corporate buyers, many of whom have suffered from the wider
volatility. With buyout firms cash-rich and needing to spend,
they could offer quite attractive propositions to win some of
the auction processes.
"With continued volatility there is a greater likelihood
that you end up hitting a bid on a sales process," a third
banker said. "Trade or publicly listed buyers have been hit as
the currency of their own equity has been affected by market
volatility.
"As their equity is less valuable they will be prepared to
pay less as comparable market valuations can’t justify as high a
price. That makes private equity bidders that have a lot of cash
to put to work all of a sudden far more valuable."
In September, 10 leveraged loans totalling 4.5 billion euros
are expected to be launched. Although pricing could widen
slightly to take into account the volatility, investor appetite
remains strong. [ID: nL5N1172NJ]
If private equity is successful during auction processes,
buyout loans could hit the market around November, which could
lead to a very busy and profitable fourth quarter. Depending on
how many deals hit the market, lenders hope renewed deal flow
will prompt more CLO issuance in order to keep the market
liquid.
"The loan market has proved it has more than enough capacity
to deal with a large number of deals coming at the same time,
even if some are large. Investors will be looking for healthier
deal flow, which will give confidence to the market and
confidence to raise more money," the third banker said.
LONDON, Wholesale Bikini http://www.lover-beauty.com/Bikini/ Sept 4 Leveraged loan bankers are
working on financings lingerie in China totalling up to 12 billion euros to back a number of new buyouts that are in the auction
phase as Europe’s leveraged loan market becomes increasingly
attractive amid wider macro volatility.
Global market instability stemming from China’s stock market
rout and tumbling commodity and oil prices have led many sellers
to broaden their exit route opportunities in order to extract
the best value.
A number of sellers are running dual-track processes to
engage with as many buyers as possible. Such deals include those
of British payments processing firm Worldpay IPO-WORLD.L,
French smartcard maker Oberthur Technologies, Swedish chemicals
firm Perstorp and Ardagh’s metal can packaging business Oressa.
"A lot of the companies up for sale were firmly IPO
candidates until about a month ago," a loan banker said. "The
only reason they are coming back as potential buyouts is because
of the volatility. It is attractive for a seller to get rid of
100 percent of a business rather than listing, but it depends on
expectations and how much buyers are willing to pay."
Europe’s leveraged loan market has been crying out for
large-scale M&A, which is down significantly from last year with
only a handful of deals taking place so far in 2015, including
purchases of Saint-Gobain’s glass bottle unit Verallia
and German perfume and cosmetics retailer Douglas.
"No one knows when the IPO market will open," a second loan
banker said. "There are a lot of IPO financings being held at
bay until there is a bit more clarity on the situation and the
market."
Bankers are working on leveraged debt financings to back the
potential sales with about 4.5 billion euros required for a
buyout of Worldpay. Ardagh’s Oressa unit would require some 1.6
billion euros of debt, while bankers are working on deals of
around 1 billion euros each for Oberthur and Perstorp.
Bankers are also working on financings to back the potential
sales of other companies, including 650 million euros of debt
for French call centre business Webhelp, after UK private equity
firm Charterhouse mandated Deutsche Bank for a sale of its 60
percent stake.
UK petrol station operator Euro Garages and Airbus’s
defence unit could need up to 700 million pounds and 700 million euros of debt, respectively. Bankers
also lined up about 450 million euros of debt to back a buyout
of Dutch lingerie firm Hunkemoller, and although the process is
proving slow a sale or refinancing could still go ahead.
Other smaller potential financings out there include around
370 million pounds for a potential sale of British retailer
Tesco’s customer data business dunnhumby; 300 million
euros for German automotive parts maker Al-Ko; and 180 million
euros for Irish payments business Fintrax.
COMPETITIVE BID
Private equity buyers have become quite competitive compared
with corporate buyers, many of whom have suffered from the wider
volatility. With buyout firms cash-rich and needing to spend,
they could offer quite attractive propositions to win some of
the auction processes.
"With continued volatility there is a greater likelihood
that you end up hitting a bid on a sales process," a third
banker said. "Trade or publicly listed buyers have been hit as
the currency of their own equity has been affected by market
volatility.
"As their equity is less valuable they will be prepared to
pay less as comparable market valuations can’t justify as high a
price. That makes private equity bidders that have a lot of cash
to put to work all of a sudden far more valuable."
In September, 10 leveraged loans totalling 4.5 billion euros
are expected to be launched. Although pricing could widen
slightly to take into account the volatility, investor appetite
remains strong. [ID: nL5N1172NJ]
If private equity is successful during auction processes,
buyout loans could hit the market around November, which could
lead to a very busy and profitable fourth quarter. Depending on
how many deals hit the market, lenders hope renewed deal flow
will prompt more CLO issuance in order to keep the market
liquid.
"The loan market has proved it has more than enough capacity
to deal with a large number of deals coming at the same time,
even if some are large. Investors will be looking for healthier
deal flow, which will give confidence to the market and
confidence to raise more money," the third banker said.
The sexy lingerie supplier http://www.lover-beauty.com/sexy-lingerie/ underground pipeline shaping North Korea’s new capitalists
SEOUL As the wholesale underwear China
http://www.lover-beauty.com/Sexy-underwear/ United States and other nations grasp for new ways to sanction Pyongyang in response to its latest nuclear test, some North Korean defectors see investment in its rudimentary market economy as a way to foment gradual change from within.
One wholesale underwear China defector living in South Korea uses a clandestine funding channel to send hundreds of thousands of dollars to help dozens of North Koreans open small businesses, such as noodle shops and grocery stores.
Last year, he shipped more than 3,000 Chinese LED desk lamps, chargeable with 12-volt solar panels, to three North Korean entrepreneurs. The defector, who escaped through China in the early 2000s, has also sent acupuncture needles, handbags, hair dye, vitamins and lingerie procured cheaply or through donations.
Under Kim Jong Un, North Korea has allowed a growing number of semi-legal markets known as jangmadang, where individuals and wholesalers buy and sell goods they have produced themselves or imported from China.
The markets have improved the quality of life for many but also makes them less reliant on the Soviet-style planned economy, undermining the power of the state. Markets also facilitate trade of contraband foreign media through USB sticks and DVDs.
"The North Korean business owners I am helping can be an alternative group to build sound capitalism," said the defector, who is in his 40s and declined to be named fearing for his safety and that of his partners in the North.
The defector, who does not seek a profit, said he has financed several grocery stores with investments of 20,000 to 30,000 yuan in rural towns, and more in Pyongyang.
’JANGMADANG GENERATION’
A South Korean government-commissioned report last year proposed nurturing North Korean private businesses as a way to drive reform. The plan, which is not government policy, envisions microfinance for start-ups and partnerships with big South Korean firms.
Contact with anyone in the South, however, can be punishable by death in North Korea. That’s because the 1950-53 Korea War ended in a truce instead of a peace treaty, leaving the two Koreas in a technical state of war the past six decades.
South Korea also forbids its citizens from trading with the North but turns a blind eye to remittances estimated at $10 million a year sent to relatives by many of the nearly 30,000 defectors in the South.
Hong Soon-jick, a research fellow at state-run Korea Institute for National Unification, said defector financiers can use the same funding routes.
"This can accelerate marketization and circulation of information," he said. "But there are political risks, so these transactions should be done secretly, even if South-North Korea relations improve."
The approach is a departure from the distribution of leaflets and USB sticks and radio broadcasts that are more typically used by anti-regime activists in the South to win the hearts and minds of North Koreans.
In a similar vein, the U.S. State Department recently sought proposals to fund projects aimed at promoting democracy in North Korea and encourage young defectors living in the South and who grew up among the "jangmadang generation" to reach out to young North Koreans.
CHINA BANKS
One such young defector, Seoul-based activist Ji Seong-ho, has been sending funds of $300 to $500 at a time for North Koreans to open food stalls and crop-lending businesses in rural areas.
"The bigger markets grow, the weaker the regime gets, so we need to support North Korean entrepreneurs," said Ji, 34, who heads Now, Action and Unity for Human Rights , which tries to help North Korean refugees in China to defect.
Surveys of defectors by Seoul National University found that the biggest challenge for North Koreans doing business was funding, followed by bribes paid to authorities and occasional crackdowns on market activity.
The first defector, who uses a clandestine money channel, typically works with middlemen who wire money to banks in China, where it is collected by agents and carried across the border.
He vets prospects through his relatives and acquaintances.
A few years ago, he sent several North Koreans cupping therapy machines, used in Chinese medicine, which he bought in the South for around $20 dollars each. They sold at a mark-up of more than three times in North Korea.
His brokers on the ground send photographs to him of businesses the defector has funded, using cellphones connected to China’s mobile network.
The defector’s secret project started in 2006 when he bought a used 2.5 tonne truck in China for 5 million won and sent it to a North Korean who then used it to make a living carrying goods.
In 2014, a deep-pocketed sponsor the defector declined to identify began supporting his effort.
He tells the North Koreans he helps "not to be greedy, help other poor North Koreans and gain respect," he said. "This is maybe more effective than thumb drives, because it directly supports livelihoods."
SEOUL As the wholesale underwear China
http://www.lover-beauty.com/Sexy-underwear/ United States and other nations grasp for new ways to sanction Pyongyang in response to its latest nuclear test, some North Korean defectors see investment in its rudimentary market economy as a way to foment gradual change from within.
One wholesale underwear China defector living in South Korea uses a clandestine funding channel to send hundreds of thousands of dollars to help dozens of North Koreans open small businesses, such as noodle shops and grocery stores.
Last year, he shipped more than 3,000 Chinese LED desk lamps, chargeable with 12-volt solar panels, to three North Korean entrepreneurs. The defector, who escaped through China in the early 2000s, has also sent acupuncture needles, handbags, hair dye, vitamins and lingerie procured cheaply or through donations.
Under Kim Jong Un, North Korea has allowed a growing number of semi-legal markets known as jangmadang, where individuals and wholesalers buy and sell goods they have produced themselves or imported from China.
The markets have improved the quality of life for many but also makes them less reliant on the Soviet-style planned economy, undermining the power of the state. Markets also facilitate trade of contraband foreign media through USB sticks and DVDs.
"The North Korean business owners I am helping can be an alternative group to build sound capitalism," said the defector, who is in his 40s and declined to be named fearing for his safety and that of his partners in the North.
The defector, who does not seek a profit, said he has financed several grocery stores with investments of 20,000 to 30,000 yuan in rural towns, and more in Pyongyang.
’JANGMADANG GENERATION’
A South Korean government-commissioned report last year proposed nurturing North Korean private businesses as a way to drive reform. The plan, which is not government policy, envisions microfinance for start-ups and partnerships with big South Korean firms.
Contact with anyone in the South, however, can be punishable by death in North Korea. That’s because the 1950-53 Korea War ended in a truce instead of a peace treaty, leaving the two Koreas in a technical state of war the past six decades.
South Korea also forbids its citizens from trading with the North but turns a blind eye to remittances estimated at $10 million a year sent to relatives by many of the nearly 30,000 defectors in the South.
Hong Soon-jick, a research fellow at state-run Korea Institute for National Unification, said defector financiers can use the same funding routes.
"This can accelerate marketization and circulation of information," he said. "But there are political risks, so these transactions should be done secretly, even if South-North Korea relations improve."
The approach is a departure from the distribution of leaflets and USB sticks and radio broadcasts that are more typically used by anti-regime activists in the South to win the hearts and minds of North Koreans.
In a similar vein, the U.S. State Department recently sought proposals to fund projects aimed at promoting democracy in North Korea and encourage young defectors living in the South and who grew up among the "jangmadang generation" to reach out to young North Koreans.
CHINA BANKS
One such young defector, Seoul-based activist Ji Seong-ho, has been sending funds of $300 to $500 at a time for North Koreans to open food stalls and crop-lending businesses in rural areas.
"The bigger markets grow, the weaker the regime gets, so we need to support North Korean entrepreneurs," said Ji, 34, who heads Now, Action and Unity for Human Rights , which tries to help North Korean refugees in China to defect.
Surveys of defectors by Seoul National University found that the biggest challenge for North Koreans doing business was funding, followed by bribes paid to authorities and occasional crackdowns on market activity.
The first defector, who uses a clandestine money channel, typically works with middlemen who wire money to banks in China, where it is collected by agents and carried across the border.
He vets prospects through his relatives and acquaintances.
A few years ago, he sent several North Koreans cupping therapy machines, used in Chinese medicine, which he bought in the South for around $20 dollars each. They sold at a mark-up of more than three times in North Korea.
His brokers on the ground send photographs to him of businesses the defector has funded, using cellphones connected to China’s mobile network.
The defector’s secret project started in 2006 when he bought a used 2.5 tonne truck in China for 5 million won and sent it to a North Korean who then used it to make a living carrying goods.
In 2014, a deep-pocketed sponsor the defector declined to identify began supporting his effort.
He tells the North Koreans he helps "not to be greedy, help other poor North Koreans and gain respect," he said. "This is maybe more effective than thumb drives, because it directly supports livelihoods."
Special Cheap Plus Size Corset report
2017年4月24日Special Cheap Plus Size Corset http://www.lover-beauty.com/Plus-Size-Corsets/ report: World’s workshop heads to inland China
ZHENGZHOU, Suit Underwear http://www.suitunderwear.com/ China In a vast muddy cornfield scarred with the tracks of heavy vehicles, two young engineers pore over a construction blueprint showing a grid of 100 rectangular factory blocks.
Here on the outskirts of Zhengzhou, the provincial swimwear http://www.twetw.com/ capital of Henan in China’s interior, Foxconn, the largest company and exporter in "the workshop of the world" has staked its future on a mammoth new industrial complex.
New powerlines are being erected and roads wholesale Christmas costumes http://www.wholesalechristmascostumes.com/ built to the site under the watchful eye of local farmers who daydream about the entrepreneurial opportunities that up to 200,000 new workers in the area might present.
Taiwan-based Foxconn Technology Group, which includes its flagship Hon Hai Precision Industry , makes gadgets for a constellation of global brands including Apple APPL.O, Dell DELL.O, Nokia and Hewlett Packard .
Most of that production comes from its plants in Shenzhen, in the Pearl River Delta area, one of the three major Chinese coastal manufacturing hubs, along with the Yangtze River area around Shanghai and Bohai Bay north of Beijing.
With this leap into Henan province, 1,600 km from Shenzhen, Foxconn is expanding aggressively inland, where wages are lower and workers more plentiful, keeping mostly higher-value, engineering, and R&D work in China’s coastal areas. It will have as many as 1.3 million workers in China by the end of 2011, up from 920,000 now, company officials say.
Foxconn is by no means alone. Intel , the world’s biggest chip maker, opened a $600 million plant this year in Chengdu and Hewlett-Packard built a laptop factory in Chongqing, both cities in the western province of Sichuan.
Cheaper labor is not the only attraction. The worker has become the consumer in China, with the government determined to raise household incomes and reduce wealth disparities. Locating factories nearer to markets makes dollars and sense.
"Most of the villagers here think it’s a good thing," said Meng, Xiangting, 46, a farmer prying stones from a wall with a crowbar for use on his own crumbling home. "They’ve guaranteed jobs for anyone in the area between 18 to 50 years of age. I’m not interested. I’d like to open a small shop for the workers instead."
With factories closer to home, children of farmers like Meng won’t have to make the annual trek to distant coastal regions and live desultory lives as migrant workers in factory towns.
A rash of suicides at Foxconn’s Shenzhen plant which the company said weren’t work-related but which victims’ families blamed on tough conditions, helped fuel a wave of labor unrest -- and has become yet another motivation to move operations into the less volatile interior.
Foxconn’s move will touch off a mini-boom in an ancient Chinese capital perhaps best known for the 5th-century Shaolin temple that is home to its famous brand of Kung Fu.
Foxconn’s suppliers will have to relocate as well. The workers will need housing and places to shop. Some may even be able to afford cars to commute to work on the new highways being built to Foxconn’s mega-factory and its satellites.
A foreman supervising a team of men in straw hats working on a road linking to Zhengzhou’s highways and the international airport said they had paved 4 km in three weeks. "Foxconn is amazing," he said. "They work extremely fast."
A lot of people are working fast in China’s rapidly developing interior.
Manufacturers are building huge factories in the provinces to escape rising costs in the coastal zones that helped China become the world’s largest exporter. Big customers such as Wal-Mart are buying more goods from the new inland factories in a relentless quest to find low-cost suppliers.
New high-speed rail links are shrinking distances for shuttling goods in and out of China’s heartland.
The move inland by manufacturers coincides with a parallel trend in urbanization. Local governments are competing ferociously to build and expand cities on farmland to lure back millions of migrants from the coast in a project that could absorb more residents than the entire population of the United States in the coming decades.
The drive is part of a strategic economic shift to rebalance China’s economy -- and by extension the rest of the world’s -- to rely less on exports for future growth and more on domestic consumption. The Obama administration has been pressing China to do just that.
"Our lives will completely change," said Meng, the farmer. "Next August, they’ll be able to bring in over 100,000 workers. With more people, there’ll be more businesses."
While a smaller percentage of Chinese coastal manufacturers are moving operations offshore -- garments to Bangladesh, shoes to Vietnam, some experts see a more pronounced move inland.
A recent survey by Hong Kong’s Trade Development Council of 2,400 manufacturers found a quarter would choose to set up new factories in inland China, twice that of those who would opt for cheaper alternatives in Asia. Around half said they would stay in China’s coastal hubs.
China’s industrial model has relied on efficient and nearby supply chains along with good transportation infrastructure that make it more efficient to keep operations onshore.
Factory production in China will continue to move to the interior, said Bruce Rockowitz, president of Li & Fung, one of the world’s leading sourcing firms that caters to clients such as Wal-Mart. "That’s the future, and maybe we’ll get another 20 years out of that."
MASSIVE REDEPLOYMENT
Workers in Foxconn T-shirts, clocking in for the night shift along unlit paths at Foxconn’s temporary plant near Zhengzhou, say they are part of the advance guard of what is expected to be a massive redeployment of the company’s workforce.
The official Xinhua news agency reported recently that the Foxconn plant under construction would produce mainly Apple iPhones, generate more than $13 billion in annual exports and have a production capacity of 200,000 handsets a day.
Wei Wei, deputy director at Personnel Exchange Center, a major job recruitment center in Zhengzhou, said Foxconn had asked his firm to help recruit 100,000 workers within three months time in preparation for the first phase of the giant factory’s expected opening next year.
Factories in coastal China, such as Foxconn’s sprawling operations in Shenzen, have been powered by an army of 130 million or so migrant workers streaming in annually from inland Chinese provinces. They are not given permanent resident rights, however, and they often move on.
Labor shortages have begun to be a problem for these traditional export centers as the growth of the working-age population slows. Moreover, a younger generation of migrant workers, better educated, more tech-savvy, and less accepting than their parents were of life in the factories -- low pay, grueling hours and sometimes martial workplace rules -- have launched wildcat strikes and protests. Keywords: CHINA MANUFACTURING/
"To be very frank and open, I think we were caught by surprise by the structural changes in the worker composition," Louis Woo, special assistant to Terry Gou -- Foxconn’s reclusive and enigmatic Taiwanese chief executive -- told reporters at a company-sponsored rally last week at its Shenzen plant.
"We haven’t changed fast enough to meet the changing needs and new aspirations of this new generation of workers," said the silver-haired and rake-thin Woo, wearing blue suspenders and Prada glasses.
"China is changing and that’s why Foxconn is also changing."
Recent strikes at Japanese car assembly plants in China, which resulted in a doubling of wages in some cases, have prompted other multinationals with intensive labor needs to seek a more stable and plentiful workforce inland.
"China has had a very unusual situation for a number of years with just this incredible supply of workers. That is now coming to an end," said Arthur Kroeber of Beijing-based consultancy Dragonomics, who says the number of young Chinese workers aged 15-24 years of age will likely fall by a third in the next 12 years, giving more bargaining power to this younger blue-collar generation.
Labor is plentiful in provinces such as Henan, China’s most populous with over 100 million people -- more than the population of Germany.
At a recent Foxconn recruitment fair in Zhengzhou, thousands of hopefuls clamored for places, excited at the prospect of working for the Fortune 500 firm.
Already, a fifth of Foxconn’s workers hail from Henan. By moving workers closer to their families it might help ease a problem that plagued the company during the first half of the year -- the dozen suicides mostly involving young workers leaping off buildings at its Shenzhen complex.
Zeng Jundan, one of the workers at Foxconn’s temporary plant who previously worked for the company in Shenzhen, said he was happier. "It’s not bad here -- my mom and dad can come see me every day if they want to," he said.
LURING A DRAGON HEAD
Like all manufacturers, Foxconn depends on a network of suppliers. Unlike others, Foxconn is big enough to force a new ecosystem to develop around it.
Jackie Ho, a Taiwanese industrialist making TV screens and mobile phone accessories in Luohe town, an hour’s drive from Zhengzhou, said the new Foxconn facility would help foster fresh industrial clusters in Henan.
He is hoping to capitalize on what he terms the "Foxconn effect", along with other downstream suppliers that will likely migrate up from the Pearl River Delta.
"Most suppliers to Foxconn have no choice," Ho said. If Foxconn moves they have to follow or it will just buy from another factory. I believe that after two years Foxconn may not have to purchase and transport from the south anymore. Many firms will be here."
Foxconn is what some supply chain experts describe as a "dragon head" industry. It can nurture and sustain small- and medium-sized firms that otherwise wouldn’t have the economies of scale or management mindset to move inland themselves.
"The key manufacturer is the dragon head, and there’s always a supply ecosystem that goes along with it," said Edward Tse, the Greater China chairman of consultancy Booz & Co. and author of a book "The China Strategy" detailing the country’s business landscape and how multinationals might capitalize.
"Without a dragonhead like Foxconn it’s hard to get that kickstart," Tse said.
In several villages ringing Foxconn’s Zhengzhou sites, red banners with pithy slogans were hung over roads and painted onto brick walls by local propaganda authorities, hailing the manufacturing giant as an economic savior.
"Welcome Foxconn. Swiftly move toward a well-off society" read one.
The government is clearly hoping that as companies and their "ecosystems" move to the countryside, more of China’s 1.3 billion residents will progress from a life of subsistence to one of greater domestic and consumerist comforts in landlocked provinces, perhaps better described as mid-sized nations rather than regions.
"Manufacturing is something that a lot of local cities and regions can relate to because it’s hard; people can see that in terms of the plants, the laborers, the products and so on," said Tse, who has advised multinationals on their China production and sourcing strategies.
"So a lot of inland areas see this as a natural area of growth. You need to find jobs for these people who’ve been urbanized, instead of them continuing to be peasants working on paddy fields. This is usually the first starting point like Shenzhen had done 20 years ago."
Government statistics show industrialization in inland provinces has outpaced established manufacturing hubs such as Guangdong in recent years.
The number of enterprises with annual revenues of over five million yuan in Guangdong province near Hong Kong grew by an average of some 24 percent in 2008 to 52,574 firms. The same figures for Henan were 38 percent and 18, 700 firms. The year before it had only been 13.6 percent.
INLAND CONSUMER CLASS
On the green northern rim of Guangdong, beyond the mountains and into the land-locked region of Ganzhou in Jiangxi province, LED factory owner Kong Xiangzhong is one of the new breed of industrialists who have staked a future away from the cluttered expensive coastal manufacturing regions of China.
A minnow compared with Foxconn with around 100 workers, Kong has nevertheless positioned his inland factory as a potential gateway to the mainland China market, spurning the usual export track. Almost all his energy-efficient LED lighting products will be trucked and sold entirely within China from Ganzhou.
"For us factories doing domestic demand, we hope that we can expand everywhere in China, to the west, the center and the east," said Kong, a self-made businessman who started out as a production line worker in a Guangdong factory nearly 20 years ago.
Around 400 km north of the Pearl River Delta, Ganzhou sits at the crossroads of three of southern China’s most economically vibrant provinces; Guangdong, Fujian and Hunan. Besides its relative coastal proximity, Ganzhou’s surrounding counties are home to nearly 8 million residents with minimum wage levels around 40 percent cheaper than in Guangdong, making it a natural manufacturing spillover region for factories from the Pearl River Delta.
"The geographic location is good here," said Kong, who recently set up his LED lights factory in Ganzhou. "We can get to the Yantian port for shipping in about four hours. It’s also quite close to Shanghai," added Kong, speaking slightly accented Mandarin Chinese in a sign of his provincial roots.
Like many ambitious inland areas, Ganzhou has invested millions in new infrastructure, including a new airport, highways and railways to bolster the transport and logistics infrastructure so crucial to businesses. Keywords: CHINA MANUFACTURING/
This region, too, has attracted a dragon head company -- Nasdaq-listed contract manufacturer Flextronics . It will soon open a factory employing 11,000 in one of Ganzhou’s new industrial estates to make transformers and power adaptors.
Rob Roohparvar, president of the Flextronics unit running the plant, estimates costs will be at least 10 to 15 percent cheaper in Ganzhou than the southern coast where the conglomerate and key rival of Foxconn runs its flagship China facility.
In the next five years, Zeng Weilin, vice director of the Ganzhou Development Zone, expects the region’s GDP to quadruple and the number of factories to rise from 300 to over a thousand. Focusing on domestic buyers can help producers mitigate another risk: the appreciating yuan.
"The exchange rate has no effect on us, because our main market is 100 percent focused in mainland China," said Simon Lu Xingping, the head of Maniform, a fast-growing Chinese lingerie manufacturer headquartered in Shenzhen, which is building a 6,000-worker factory in Ganzhou.
Maniform is one of a batch of emerging Chinese manufacturers that started off as exporters or producers for overseas brands, picking up skills and know-how until they reached a point where they felt they could develop a brand themselves.
These Chinese competitors, often nimbler, highly entrepreneurial and more flexible than multinationals, have almost all targeted their lucrative home markets and have begun to set up vast retail networks and factories across the country.
Notable examples include those in the sportswear industry including Li Ning , Anta and Hongxing Sports . Global brands like Spanish clothing giant Zara -- famed for the success of its rapid product development cycles -- and sportswear firm Puma PUMD.L are reportedly planning huge expansion plans to target China’s future middle class consumers.
"The internal business of consumption is competing now with the export business for space, for people, and it’s driving the costs up in China. So that party that we’ve had in the last 15 years is going away," said Rockowitz of Li & Fung.
POOR INFRASTRUCTURE
But challenges loom for those moving to inland China.
Yifan Hu, chief global economist at Citic Securities, said the inland business environment is hampered by poor infrastructure, high transportation costs and a lack of developed free markets.
Ho, the Henan factory owner is critical of inconsistent and discretionary government policies that make it difficult for businessmen to map out longer term strategies and commit investment to the region, particularly smaller firms without the clout of a Foxconn.
"The legal environment isn’t so good and everything is decided face to face with officials. You don’t really know what you’re getting. Their policies need more clarity," Ho said.
Ho’s transportation costs are almost double those in the Pearl River Delta, with the nearest port being the Lianyun port in Jiangsu province, almost 600 km away. Still, he says, transportation costs now only make up around 3.5 percent of his overall production costs so it’s still manageable.
"There will be some shifting of products away from southern China to both the interior of China and outside of China," said Henry Tan, the CEO of Luen Thai Holdings, one of Hong Kong’s largest listed textiles groups.
"However there will still be a portion of products that stay in the Pearl River Delta and the Yangtze River Delta, purely because of the convenience of supply chains, because all the fabrics, all the trims, all the development are there."
The waning of government stimulus efforts, which have done much to spur growth in China’s rural areas over the past year or so, could also hamper the move inland. Local governments with shrinking budgets have less scope to scatter sweeteners to attract industry, Hu said.
Zhengzhou like other cities borrowed heavily to bankroll a blitz of marquee infrastructure projects, such as a new convention center, renovation of the business district and high-end property developments.
China’s switch to a domestic consumption model will take time, even as exports contribute less and less to China’s GDP -- now around 10 percent, Hu estimates.
ZHENGZHOU, Suit Underwear http://www.suitunderwear.com/ China In a vast muddy cornfield scarred with the tracks of heavy vehicles, two young engineers pore over a construction blueprint showing a grid of 100 rectangular factory blocks.
Here on the outskirts of Zhengzhou, the provincial swimwear http://www.twetw.com/ capital of Henan in China’s interior, Foxconn, the largest company and exporter in "the workshop of the world" has staked its future on a mammoth new industrial complex.
New powerlines are being erected and roads wholesale Christmas costumes http://www.wholesalechristmascostumes.com/ built to the site under the watchful eye of local farmers who daydream about the entrepreneurial opportunities that up to 200,000 new workers in the area might present.
Taiwan-based Foxconn Technology Group, which includes its flagship Hon Hai Precision Industry , makes gadgets for a constellation of global brands including Apple APPL.O, Dell DELL.O, Nokia and Hewlett Packard .
Most of that production comes from its plants in Shenzhen, in the Pearl River Delta area, one of the three major Chinese coastal manufacturing hubs, along with the Yangtze River area around Shanghai and Bohai Bay north of Beijing.
With this leap into Henan province, 1,600 km from Shenzhen, Foxconn is expanding aggressively inland, where wages are lower and workers more plentiful, keeping mostly higher-value, engineering, and R&D work in China’s coastal areas. It will have as many as 1.3 million workers in China by the end of 2011, up from 920,000 now, company officials say.
Foxconn is by no means alone. Intel , the world’s biggest chip maker, opened a $600 million plant this year in Chengdu and Hewlett-Packard built a laptop factory in Chongqing, both cities in the western province of Sichuan.
Cheaper labor is not the only attraction. The worker has become the consumer in China, with the government determined to raise household incomes and reduce wealth disparities. Locating factories nearer to markets makes dollars and sense.
"Most of the villagers here think it’s a good thing," said Meng, Xiangting, 46, a farmer prying stones from a wall with a crowbar for use on his own crumbling home. "They’ve guaranteed jobs for anyone in the area between 18 to 50 years of age. I’m not interested. I’d like to open a small shop for the workers instead."
With factories closer to home, children of farmers like Meng won’t have to make the annual trek to distant coastal regions and live desultory lives as migrant workers in factory towns.
A rash of suicides at Foxconn’s Shenzhen plant which the company said weren’t work-related but which victims’ families blamed on tough conditions, helped fuel a wave of labor unrest -- and has become yet another motivation to move operations into the less volatile interior.
Foxconn’s move will touch off a mini-boom in an ancient Chinese capital perhaps best known for the 5th-century Shaolin temple that is home to its famous brand of Kung Fu.
Foxconn’s suppliers will have to relocate as well. The workers will need housing and places to shop. Some may even be able to afford cars to commute to work on the new highways being built to Foxconn’s mega-factory and its satellites.
A foreman supervising a team of men in straw hats working on a road linking to Zhengzhou’s highways and the international airport said they had paved 4 km in three weeks. "Foxconn is amazing," he said. "They work extremely fast."
A lot of people are working fast in China’s rapidly developing interior.
Manufacturers are building huge factories in the provinces to escape rising costs in the coastal zones that helped China become the world’s largest exporter. Big customers such as Wal-Mart are buying more goods from the new inland factories in a relentless quest to find low-cost suppliers.
New high-speed rail links are shrinking distances for shuttling goods in and out of China’s heartland.
The move inland by manufacturers coincides with a parallel trend in urbanization. Local governments are competing ferociously to build and expand cities on farmland to lure back millions of migrants from the coast in a project that could absorb more residents than the entire population of the United States in the coming decades.
The drive is part of a strategic economic shift to rebalance China’s economy -- and by extension the rest of the world’s -- to rely less on exports for future growth and more on domestic consumption. The Obama administration has been pressing China to do just that.
"Our lives will completely change," said Meng, the farmer. "Next August, they’ll be able to bring in over 100,000 workers. With more people, there’ll be more businesses."
While a smaller percentage of Chinese coastal manufacturers are moving operations offshore -- garments to Bangladesh, shoes to Vietnam, some experts see a more pronounced move inland.
A recent survey by Hong Kong’s Trade Development Council of 2,400 manufacturers found a quarter would choose to set up new factories in inland China, twice that of those who would opt for cheaper alternatives in Asia. Around half said they would stay in China’s coastal hubs.
China’s industrial model has relied on efficient and nearby supply chains along with good transportation infrastructure that make it more efficient to keep operations onshore.
Factory production in China will continue to move to the interior, said Bruce Rockowitz, president of Li & Fung, one of the world’s leading sourcing firms that caters to clients such as Wal-Mart. "That’s the future, and maybe we’ll get another 20 years out of that."
MASSIVE REDEPLOYMENT
Workers in Foxconn T-shirts, clocking in for the night shift along unlit paths at Foxconn’s temporary plant near Zhengzhou, say they are part of the advance guard of what is expected to be a massive redeployment of the company’s workforce.
The official Xinhua news agency reported recently that the Foxconn plant under construction would produce mainly Apple iPhones, generate more than $13 billion in annual exports and have a production capacity of 200,000 handsets a day.
Wei Wei, deputy director at Personnel Exchange Center, a major job recruitment center in Zhengzhou, said Foxconn had asked his firm to help recruit 100,000 workers within three months time in preparation for the first phase of the giant factory’s expected opening next year.
Factories in coastal China, such as Foxconn’s sprawling operations in Shenzen, have been powered by an army of 130 million or so migrant workers streaming in annually from inland Chinese provinces. They are not given permanent resident rights, however, and they often move on.
Labor shortages have begun to be a problem for these traditional export centers as the growth of the working-age population slows. Moreover, a younger generation of migrant workers, better educated, more tech-savvy, and less accepting than their parents were of life in the factories -- low pay, grueling hours and sometimes martial workplace rules -- have launched wildcat strikes and protests. Keywords: CHINA MANUFACTURING/
"To be very frank and open, I think we were caught by surprise by the structural changes in the worker composition," Louis Woo, special assistant to Terry Gou -- Foxconn’s reclusive and enigmatic Taiwanese chief executive -- told reporters at a company-sponsored rally last week at its Shenzen plant.
"We haven’t changed fast enough to meet the changing needs and new aspirations of this new generation of workers," said the silver-haired and rake-thin Woo, wearing blue suspenders and Prada glasses.
"China is changing and that’s why Foxconn is also changing."
Recent strikes at Japanese car assembly plants in China, which resulted in a doubling of wages in some cases, have prompted other multinationals with intensive labor needs to seek a more stable and plentiful workforce inland.
"China has had a very unusual situation for a number of years with just this incredible supply of workers. That is now coming to an end," said Arthur Kroeber of Beijing-based consultancy Dragonomics, who says the number of young Chinese workers aged 15-24 years of age will likely fall by a third in the next 12 years, giving more bargaining power to this younger blue-collar generation.
Labor is plentiful in provinces such as Henan, China’s most populous with over 100 million people -- more than the population of Germany.
At a recent Foxconn recruitment fair in Zhengzhou, thousands of hopefuls clamored for places, excited at the prospect of working for the Fortune 500 firm.
Already, a fifth of Foxconn’s workers hail from Henan. By moving workers closer to their families it might help ease a problem that plagued the company during the first half of the year -- the dozen suicides mostly involving young workers leaping off buildings at its Shenzhen complex.
Zeng Jundan, one of the workers at Foxconn’s temporary plant who previously worked for the company in Shenzhen, said he was happier. "It’s not bad here -- my mom and dad can come see me every day if they want to," he said.
LURING A DRAGON HEAD
Like all manufacturers, Foxconn depends on a network of suppliers. Unlike others, Foxconn is big enough to force a new ecosystem to develop around it.
Jackie Ho, a Taiwanese industrialist making TV screens and mobile phone accessories in Luohe town, an hour’s drive from Zhengzhou, said the new Foxconn facility would help foster fresh industrial clusters in Henan.
He is hoping to capitalize on what he terms the "Foxconn effect", along with other downstream suppliers that will likely migrate up from the Pearl River Delta.
"Most suppliers to Foxconn have no choice," Ho said. If Foxconn moves they have to follow or it will just buy from another factory. I believe that after two years Foxconn may not have to purchase and transport from the south anymore. Many firms will be here."
Foxconn is what some supply chain experts describe as a "dragon head" industry. It can nurture and sustain small- and medium-sized firms that otherwise wouldn’t have the economies of scale or management mindset to move inland themselves.
"The key manufacturer is the dragon head, and there’s always a supply ecosystem that goes along with it," said Edward Tse, the Greater China chairman of consultancy Booz & Co. and author of a book "The China Strategy" detailing the country’s business landscape and how multinationals might capitalize.
"Without a dragonhead like Foxconn it’s hard to get that kickstart," Tse said.
In several villages ringing Foxconn’s Zhengzhou sites, red banners with pithy slogans were hung over roads and painted onto brick walls by local propaganda authorities, hailing the manufacturing giant as an economic savior.
"Welcome Foxconn. Swiftly move toward a well-off society" read one.
The government is clearly hoping that as companies and their "ecosystems" move to the countryside, more of China’s 1.3 billion residents will progress from a life of subsistence to one of greater domestic and consumerist comforts in landlocked provinces, perhaps better described as mid-sized nations rather than regions.
"Manufacturing is something that a lot of local cities and regions can relate to because it’s hard; people can see that in terms of the plants, the laborers, the products and so on," said Tse, who has advised multinationals on their China production and sourcing strategies.
"So a lot of inland areas see this as a natural area of growth. You need to find jobs for these people who’ve been urbanized, instead of them continuing to be peasants working on paddy fields. This is usually the first starting point like Shenzhen had done 20 years ago."
Government statistics show industrialization in inland provinces has outpaced established manufacturing hubs such as Guangdong in recent years.
The number of enterprises with annual revenues of over five million yuan in Guangdong province near Hong Kong grew by an average of some 24 percent in 2008 to 52,574 firms. The same figures for Henan were 38 percent and 18, 700 firms. The year before it had only been 13.6 percent.
INLAND CONSUMER CLASS
On the green northern rim of Guangdong, beyond the mountains and into the land-locked region of Ganzhou in Jiangxi province, LED factory owner Kong Xiangzhong is one of the new breed of industrialists who have staked a future away from the cluttered expensive coastal manufacturing regions of China.
A minnow compared with Foxconn with around 100 workers, Kong has nevertheless positioned his inland factory as a potential gateway to the mainland China market, spurning the usual export track. Almost all his energy-efficient LED lighting products will be trucked and sold entirely within China from Ganzhou.
"For us factories doing domestic demand, we hope that we can expand everywhere in China, to the west, the center and the east," said Kong, a self-made businessman who started out as a production line worker in a Guangdong factory nearly 20 years ago.
Around 400 km north of the Pearl River Delta, Ganzhou sits at the crossroads of three of southern China’s most economically vibrant provinces; Guangdong, Fujian and Hunan. Besides its relative coastal proximity, Ganzhou’s surrounding counties are home to nearly 8 million residents with minimum wage levels around 40 percent cheaper than in Guangdong, making it a natural manufacturing spillover region for factories from the Pearl River Delta.
"The geographic location is good here," said Kong, who recently set up his LED lights factory in Ganzhou. "We can get to the Yantian port for shipping in about four hours. It’s also quite close to Shanghai," added Kong, speaking slightly accented Mandarin Chinese in a sign of his provincial roots.
Like many ambitious inland areas, Ganzhou has invested millions in new infrastructure, including a new airport, highways and railways to bolster the transport and logistics infrastructure so crucial to businesses. Keywords: CHINA MANUFACTURING/
This region, too, has attracted a dragon head company -- Nasdaq-listed contract manufacturer Flextronics . It will soon open a factory employing 11,000 in one of Ganzhou’s new industrial estates to make transformers and power adaptors.
Rob Roohparvar, president of the Flextronics unit running the plant, estimates costs will be at least 10 to 15 percent cheaper in Ganzhou than the southern coast where the conglomerate and key rival of Foxconn runs its flagship China facility.
In the next five years, Zeng Weilin, vice director of the Ganzhou Development Zone, expects the region’s GDP to quadruple and the number of factories to rise from 300 to over a thousand. Focusing on domestic buyers can help producers mitigate another risk: the appreciating yuan.
"The exchange rate has no effect on us, because our main market is 100 percent focused in mainland China," said Simon Lu Xingping, the head of Maniform, a fast-growing Chinese lingerie manufacturer headquartered in Shenzhen, which is building a 6,000-worker factory in Ganzhou.
Maniform is one of a batch of emerging Chinese manufacturers that started off as exporters or producers for overseas brands, picking up skills and know-how until they reached a point where they felt they could develop a brand themselves.
These Chinese competitors, often nimbler, highly entrepreneurial and more flexible than multinationals, have almost all targeted their lucrative home markets and have begun to set up vast retail networks and factories across the country.
Notable examples include those in the sportswear industry including Li Ning , Anta and Hongxing Sports . Global brands like Spanish clothing giant Zara -- famed for the success of its rapid product development cycles -- and sportswear firm Puma PUMD.L are reportedly planning huge expansion plans to target China’s future middle class consumers.
"The internal business of consumption is competing now with the export business for space, for people, and it’s driving the costs up in China. So that party that we’ve had in the last 15 years is going away," said Rockowitz of Li & Fung.
POOR INFRASTRUCTURE
But challenges loom for those moving to inland China.
Yifan Hu, chief global economist at Citic Securities, said the inland business environment is hampered by poor infrastructure, high transportation costs and a lack of developed free markets.
Ho, the Henan factory owner is critical of inconsistent and discretionary government policies that make it difficult for businessmen to map out longer term strategies and commit investment to the region, particularly smaller firms without the clout of a Foxconn.
"The legal environment isn’t so good and everything is decided face to face with officials. You don’t really know what you’re getting. Their policies need more clarity," Ho said.
Ho’s transportation costs are almost double those in the Pearl River Delta, with the nearest port being the Lianyun port in Jiangsu province, almost 600 km away. Still, he says, transportation costs now only make up around 3.5 percent of his overall production costs so it’s still manageable.
"There will be some shifting of products away from southern China to both the interior of China and outside of China," said Henry Tan, the CEO of Luen Thai Holdings, one of Hong Kong’s largest listed textiles groups.
"However there will still be a portion of products that stay in the Pearl River Delta and the Yangtze River Delta, purely because of the convenience of supply chains, because all the fabrics, all the trims, all the development are there."
The waning of government stimulus efforts, which have done much to spur growth in China’s rural areas over the past year or so, could also hamper the move inland. Local governments with shrinking budgets have less scope to scatter sweeteners to attract industry, Hu said.
Zhengzhou like other cities borrowed heavily to bankroll a blitz of marquee infrastructure projects, such as a new convention center, renovation of the business district and high-end property developments.
China’s switch to a domestic consumption model will take time, even as exports contribute less and less to China’s GDP -- now around 10 percent, Hu estimates.
