There is an old joke about a United Nations family planning conference. A speaker, trying to scare people about overpopulation, exclaims how there is a woman giving birth somewhere in the world every 3 seconds. A jokester at the back of the room stands up and says, “find me that woman!”
I thought of that joke today.
All Roads Lead To China just did a post, A Question of Chinese Toy Factory Closures, [link no longer exists] in which he asks all sorts of questions as to why so many Chinese toy factories have closed down when China’s overall economic statistics are still not all that bad. The post asks the following of those factories that have closed:
1) How many of these factories existed 6 months ago vs. which ones were brought online to cope with the Christmas rush?
2) How many of these factories closed due to the fact that many brands have been reducing the number of suppliers they use?
3) How many of these factories were really viable entities that competed in the market vs. those that simply were producing low end commodities that were uncompetitive?
4) How many of these factories were simply “shacks out back” vs. well capitalized?
All Roads goes to great lengths to emphasize that he is not minimizing the economic troubles of China’s factories, and I emphatically make that same statement. But — and I know this is going to sound strange — I have lately been asking my firm’s China clients just about every weekday for the last month how they have been impacted by the Global and China downturn and not one of them has mentioned factory closings. Indeed, I have asked many of them if they have experienced any problems from factory closings of their own or of their suppliers and the only response I have gotten is “no.”
So yes, like All Roads, I absolutely believe factories are closing in China and with that, massive worker and community dislocation.
But also like All Roads, I have very real questions as to what sort of factories those were. See yesterday’s post, Why Your Chances of not Getting Your First China Factory Order are so High for a plausible explanation of this disconnect. Companies that are smart about their China factories are not having problems whereas those who are not so smart are.
What are you hearing/seeing out there?