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Costs rising in China’s production hotbed

Factory employees want better wages, working conditions

Labor activists threw paper money in front of cutouts representing Chinese employees during a protest outside the Foxconn Technology Group office in Hong Kong. Chinese factory workers have started demanding better wages and working conditions. Labor activists threw paper money in front of cutouts representing Chinese employees during a protest outside the Foxconn Technology Group office in Hong Kong. Chinese factory workers have started demanding better wages and working conditions. (Kin Cheung/Associated Press)
By Elaine Kurtenbach
Associated Press / July 9, 2010

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SHANGHAI — Factory workers demanding better wages and working conditions are hastening the eventual end of an era of cheap costs that helped make southern coastal China the world’s factory floor.

A series of strikes over the past two months have been a rude wake-up call for the many foreign companies that depend on China’s low costs to compete overseas, from makers of Christmas trees to manufacturers of such gadgets as the iPad.

While low-tech factories and scant wages were once welcomed in a China eager to escape isolation and poverty, workers are now demanding a bigger share of the profits. The government, meanwhile, is pushing foreign companies to make investments in high technology and other areas it believes will create greater wealth for China.

Many companies are striving to stay profitable by shifting factories to cheaper areas farther inland or to other developing countries, and a few are resuming production in the West.

“China is going to go through a very dramatic period. The big companies are starting to exit. We all see the writing on the wall,’’ said Rick Goodwin, a China trade veteran of 22 years, whose company links foreign buyers with Chinese suppliers.

In an about-face mocked on “The Daily Show with Jon Stewart,’’ Wham-O, the company that created the Hula-Hoop and Slip ‘n Slide, decided to bring half of its Frisbee production and some production of its other products back to the United States.

At the other end of the scale, some in research-intensive sectors such as pharmaceutical, biotech, and other life-sciences companies are also reconsidering China for a range of reasons, including costs and incentives being offered in other countries.

“Life-sciences companies have shifted some production back to the US from China. In some cases, the US was becoming cheaper,’’ said Sean Correll, director of consulting services for Burlington, Mass.-based Emptoris.

That may soon become true for publishers, too. Printing a 9-by-9-inch, 334-page hardcover book in China costs 44 to 45 cents now, with another 3 cents for shipping, Goodwin said.

The same book costs 65 to 68 cents to make in the United States.

“If costs go up by half, it’s about the same price as in the US. And you don’t have 30 days on the water in shipping,’’ he said.