Manufacturers in battle to grow exports
The average lifespan of a manufacturer in China is about 11 years, while only 7.9 percent of firms get past 20 years, according to a survey.
In its latest annual examination of small and medium-sized manufacturing companies, Global Market Group - an organization which awards standards in quality to Chinese manufacturers - interviewed 1,000 firms in the Pearl River and Yangtze River delta regions.
More than 30 percent of respondents said they had been in existence for 11 to 15 years, the largest portion, and 17.9 percent said they started their businesses less than five years ago.
"The majority of privately owned manufacturing companies in China were launched after the country's reform and opening-up in 1978, which is relatively short compared to other countries," said Wei Tao, Global Market's marketing director.
Over the past year, 36.8 percent of companies reported the major pressure they faced was rapidly decreasing overseas demand.
Ye Mingchun, the manager of Zhejiang Tianyiqi Shoes, based in Taizhou, Zhejiang province, for instance, said: "The fall in export volumes meant my company only made about 60 percent of the revenues it did in 2011."
Rising labor costs were also a major difficulty for most companies, with 70 percent saying salaries now accounted for more than 20 percent of costs.
Zhang Wenhua, the owner of a mechanical company in Nanjing that exports products to Europe, said the gradual increase in material and labor costs had minimized profits made by SME manufacturers.
Wei said the report showed some firms will have to increase spending on technology, replacing staff with equipment to reduce costs in the long term.
"Many SMEs realize it is essential to upgrade and transform their products with the use of more advanced, automated technology to minimize labor costs," Wei added.
However, as a whole, most enterprises surveyed said they were feeling optimistic about their export prospects in 2013.
More than 61 percent of companies interviewed said they expected volumes to rise gradually as the global economy recovers.
"The gloomy economy in the US and European countries is rebounding slowly, which will definitely increase export activities by Chinese trading companies," said Wei.
The report also found that more enterprises realize the quality of products will become more important than price in attracting more business, long-term.
Only 12.8 percent of enterprises said they still relied on making low-price products in 2012, while more than 40 percent started shifting their focus to higher-quality goods.
Chen Tanxiang, general manager of Xiamen Nasda Non Woven Co Ltd, a manufacturer of non-woven fabric products, said: "Designing our own products with improved quality to attract higher-end clients was the only way to stand out from the competition.
Wei added that apart from moving away from the cheaper end of the market, more companies suggested they were willing to expand their operations to cover all aspects of manufacturing, including design, logistics, sales and marketing, through to selling, and rely less on others during the process.