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What vuvuzelas can teach about cheap labor
By Zhang Ran and Li Baojie |
June 30, 2010, Wednesday
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Print Edition
Print Edition
AT the South Africa World Cup, the ubiquitous buzzing of vuvuzelas has triggered complaints from both players and television audiences.
While the vuvuzela is widely seen as a South African tradition, few people know that 90 percent of the instruments were made in China. But few Chinese manufacturers are feeling secure in their conquest of the vuvuzela market.
The stresses of cut-throat competition have been exacerbated by rising labor costs, renewed flexibility of the yuan and the rolling back of export rebates.
Chinese plastics manufacturer Wu Yijun first glimpsed a possibility for the vuvuzela in 2001 when he saw a cartoon on the Internet featuring Africans blowing bamboo vuvuzelas to drive away baboons. In 2004, Wu, general manager of Jiying Plastic Product Corp,in Ninghai County, an industrial town in Zhejiang Province, saw his opportunity when South Africa was awarded the 2010 World Cup.
In August last year he sold 1,000 plastic vuvuzelas at three yuan (44 US cents) each to an African merchant through Alibaba.com, China's largest e-commerce platform. Wu has seen explosive increases in orders since January and by the end of April, he had sold 1 million vuvuzelas.
The seeming success has brought Wu publicity, but failed to fill his bank account. Huge sales of the plastic horns, like many other China-made low-end products, do not bring in handsome profits. The export price of the horns, which are up to 60 centimeters long, has dropped to just 30 US cents each, he says. "For each vuvuzela, the profit is just 0.1 yuan."
The vuvuzelas are sold for as much as 60 South African Rand (US$7.80) each, 26 times the export price. Traders and retailers rather than Chinese exporters make huge profits, he says.
Wu now has around 40 workers and is recruiting more to cope with growing overseas orders.
At a time when Chinese workers are increasingly agitating for higher pay, he finds it difficult to hire staff for what many see as low-paid hard work.
Employees work 12-hour shifts in a sweltering workshop. Two electric fans struggle to disperse the heat from the plastic injection molding machines, which can exceed 100 degrees Celsius.
He Zongjun, a migrant worker from the southwestern province of Yunnan, produces around 1,000 vuvuzelas each nightshift, but he has no idea what they are used for. "I don't watch the World Cup. I need to sleep after working a whole night," he says.
Chen Shida, head of the Zhejiang Academy of Work Security, says, "Labor-intensive industry is becoming less attractive to workers born in the 1980s and 1990s. They find that their returns do not match their work."
Labor shortages and rising labor costs are new challenges for China's manufacturers. The appreciation of China's currency, the renminbi or yuan, and the scrapping of export tax rebates are nibbling away their meager profits. The yuan appreciated about 0.56 percent against the US dollar last week after China's central bank made the exchange rate more flexible.
"I can only tolerate a 2-percent appreciation against the US dollar," Wu says. "If it goes to 5 percent, we won't make any profits."
Luo Weidong, economist and vice president of Zhejiang University, says, "While the world enjoys cheap China-made products, China pays a huge price."
(The authors are writers at Xinhua news agency.)
While the vuvuzela is widely seen as a South African tradition, few people know that 90 percent of the instruments were made in China. But few Chinese manufacturers are feeling secure in their conquest of the vuvuzela market.
The stresses of cut-throat competition have been exacerbated by rising labor costs, renewed flexibility of the yuan and the rolling back of export rebates.
Chinese plastics manufacturer Wu Yijun first glimpsed a possibility for the vuvuzela in 2001 when he saw a cartoon on the Internet featuring Africans blowing bamboo vuvuzelas to drive away baboons. In 2004, Wu, general manager of Jiying Plastic Product Corp,in Ninghai County, an industrial town in Zhejiang Province, saw his opportunity when South Africa was awarded the 2010 World Cup.
In August last year he sold 1,000 plastic vuvuzelas at three yuan (44 US cents) each to an African merchant through Alibaba.com, China's largest e-commerce platform. Wu has seen explosive increases in orders since January and by the end of April, he had sold 1 million vuvuzelas.
The seeming success has brought Wu publicity, but failed to fill his bank account. Huge sales of the plastic horns, like many other China-made low-end products, do not bring in handsome profits. The export price of the horns, which are up to 60 centimeters long, has dropped to just 30 US cents each, he says. "For each vuvuzela, the profit is just 0.1 yuan."
The vuvuzelas are sold for as much as 60 South African Rand (US$7.80) each, 26 times the export price. Traders and retailers rather than Chinese exporters make huge profits, he says.
Wu now has around 40 workers and is recruiting more to cope with growing overseas orders.
At a time when Chinese workers are increasingly agitating for higher pay, he finds it difficult to hire staff for what many see as low-paid hard work.
Employees work 12-hour shifts in a sweltering workshop. Two electric fans struggle to disperse the heat from the plastic injection molding machines, which can exceed 100 degrees Celsius.
He Zongjun, a migrant worker from the southwestern province of Yunnan, produces around 1,000 vuvuzelas each nightshift, but he has no idea what they are used for. "I don't watch the World Cup. I need to sleep after working a whole night," he says.
Chen Shida, head of the Zhejiang Academy of Work Security, says, "Labor-intensive industry is becoming less attractive to workers born in the 1980s and 1990s. They find that their returns do not match their work."
Labor shortages and rising labor costs are new challenges for China's manufacturers. The appreciation of China's currency, the renminbi or yuan, and the scrapping of export tax rebates are nibbling away their meager profits. The yuan appreciated about 0.56 percent against the US dollar last week after China's central bank made the exchange rate more flexible.
"I can only tolerate a 2-percent appreciation against the US dollar," Wu says. "If it goes to 5 percent, we won't make any profits."
Luo Weidong, economist and vice president of Zhejiang University, says, "While the world enjoys cheap China-made products, China pays a huge price."
(The authors are writers at Xinhua news agency.)
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