At present, the operation mode of SMEs developing overseas is basically the same as that in China. They still rely on cutthroat competition to develop. "It's just moving the battlefield from China to Vietnam and Africa." Chen Jie, who has a deep understanding of this issue, believes that he can no longer follow this path.
A Bold Decision
Chen Jie is the general manager of Shunchang Shoe Industry Co., Ltd. in Foshan, Guangdong, mainly doing private label production for others. "Our customers are not very big, but they are widespread, covering Asia, Africa, Latin America, and Europe. They place orders with me, and then I ship the goods to them. It's that simple." On April 25, at the Wealth Leader Forum of the Third Outstanding Chinese Business Conference, Chen Jie told reporters that after more than ten years of such small-scale operations, he had accumulated a certain amount of wealth.
But the situation is different now. Factors such as the appreciation of the RMB, the implementation of the new Labor Contract Law, the reduction of export tax rebates, the implementation of the export deposit ledger system, and the increase in land costs all make it impossible for processing and trading enterprises in the Pearl River Delta, including the shoe industry, to continue operating without significant burdens.
"If the Chinese shoe industry, especially the Guangdong shoe industry, does not achieve industrial upgrading and does not change the backward competitive method of price wars, that would be a real crisis," Wang Ying, secretary-general of the Footwear Branch of the China National Light Industry Council for Arts and Crafts Import and Export, once said in an interview with the media.
In fact, Chen Jie, who is on the front line of the market, also understands this principle very well. But, "How to change? Tens of millions of assets, from a personal perspective, is relatively large; but from a capital perspective, it is very small, and cannot withstand much折腾 (trouble/ups and downs)." Chen Jie said that for labor-intensive shoe manufacturing enterprises, doing private label processing may yield lower profits, but the turnover is relatively stable.
Chen Jie also thought about creating his own brand, but after some research, he abandoned this idea.
Mr. Zhang, Chen Jie's good friend and the head of a medium-sized textile enterprise in Dongguan, also became wealthy by producing private labels for foreign companies. In 2000, he began shifting strategies and launched his own brand. However, this brand is still a "little brother" in the Chinese market, with the possibility of disappearing at any time. Mr. Zhang's life is far less comfortable now, "His hair turned gray before he turned 50."
On New Year's Day in 2008, when Chen Jie could not find a way out domestically while the RMB continued to appreciate, export trade was suppressed, and the new Labor Contract Law policy was implemented, Chen Jie made a bold decision: to temporarily close the factory. Thus, after the Spring Festival in 2008, Shunchang became one of the thousands of shoe factories in the Pearl River Delta region that went bankrupt.
Continuing Private Label Production Overseas
With no hope of creating a brand domestically, Chen Jie turned his attention overseas. "Actually, many of my relatives and friends moved their factories to Southeast Asian countries like Vietnam and Cambodia several years ago, and some went to African countries. Their survival status varies." Chen Jie said that the better aspects include lower labor costs and fewer trade frictions. "Especially in some African countries, the EU has no quota restrictions on them and often offers tariff preferential policies, etc."
However, there are also many unfavorable aspects, such as possible extortion and contract traps, etc. "A friend of mine invested in Vietnam and co-founded a factory with someone else, but the other party played dirty tricks and swallowed up the entire factory, turning millions of investment into nothing. My friend is still in court in Vietnam, which is disheartening." Chen Jie said, "After all, it's not in our home country, and we are not familiar with many local policies and regulations. A slight mistake could lead us into a trap, wiping out years of capital accumulation."
Of course, any investment carries risks, but many risks can be avoided if proper investigation and preparation work is done beforehand. Chen Jie said that through several overseas inspections, he discovered another issue that must be taken seriously.
Chen Jie found that when overseas, these SMEs' operation modes are basically the same as those in China, still relying on malicious competition to develop, "just moving the battlefield from China to Vietnam and Africa." With a deep understanding of this issue, Chen Jie believed that he could no longer follow this path, "Today in China, tomorrow in Vietnam, the day after tomorrow in Laos, this kind of migratory bird-style enterprise relocation might end up like my friend who invested in Vietnam, ultimately working hard for nothing."
"Because I have no other specialties and lack substantial funds, when I first go overseas, I plan to continue doing private labels, but this cannot be a long-term plan." Chen Jie said that he needs to inspect more different countries and find a suitable long-term development market to enter.
Sharpening the axe doesn't delay chopping wood. Therefore, since last year, especially after temporarily closing the factory, Chen Jie took the initiative to conduct inspections in multiple countries overseas.
"I personally prefer investing in North African countries. These countries were mostly European colonies, maintaining close ties with European countries, and their market mechanisms are inherited from European market mechanisms, relatively mature. If we can establish ourselves there, we can maintain long-term development, face the vast European consumer market, and make some transitions easily." Chen Jie said that one of the main purposes of his trip to Beijing to attend the Huashang Wealth Forum was to establish contact with former Chinese diplomats who had worked in some North African countries to further understand the political and investment environment of some North African countries, "If possible, I would also like to invite one or several former diplomats to serve as my long-term advisors."
Outstanding Huashang Conference
Jointly founded by the World Outstanding Huashang Association, China General Chamber of Commerce, etc., aiming to promote strong alliances among global outstanding Huashang elites, achieve harmonious and shared prosperity, and contribute to the great rejuvenation of the Chinese nation. So far, three sessions have been held.
The Wealth Leader Forum of the Third Outstanding Huashang Conference is a follow-up event of the Third Outstanding Huashang Conference, with more than 1,100 SMEs participating.
Diplomat Spring Activity