Is China's furniture manufacturing industry promising?
China's export manufacturing industry has been developing rapidly for 30 years. Our factory Justhow Zhihua Manufacturing Co., Ltd has been in the export manufacturing business for 16 years. Many people think that China's manufacturing industry has encountered bottlenecks, and its export competitiveness has deteriorated compared with the past. Is China's furniture manufacturing industry promising?
I hereby share with you the answers on behalf of Justhow Zhihua's management team. How sustainable is the Chinese economy?
This issue is so important because it seems very macro, but it is related to the choice of each of us.
There has always been a voice saying that China's development model is not unique, so sustainability of China’s economy is not good.
The most typical of these voices is the "Geese Model" proposed by Japanese scholars. If put in simple words: "As the cost increases, the industry will transfer between different countries."
Japan undertook the industrial transfer of the United States, Asia's four dragons took over Japan, and China undertook four Asian dragons. Therefore, at the beginning of the 21st century, China became the "world factory." So any country is just an interim transfer station for industrial transfer of another country.
There are two meanings here.
First, China will never be a leader in a flock of geese. Although it is a large-scale player, it is merely focusing on low-end industries, which were transferred to China.
Second, with the increase in costs, China’s status of the "world factory" will sooner or later be handed over to others. This is the sustainability issue.
Do not you think so? Over the past few decades, the Chinese have always been living in such anxiety --- Although our economy is growing, our costs are rising. Will industry transfer happen soon? Will our golden age of economic development come to an end?
It is already in 2018. When we look back, over the past decade, China’s labor costs have increased by five-fold, to a level close to the developed countries. However, the trend of concentration of manufacturing industries into China has not slowed down yet. Why hasn’t industrial transfer come yet? Why hasn't China fallen into the pit of that prophecy?
The key point is whether the industry shifts to China because the Western countries are not willing to do those industries, or because they cannot do the industries and transfer them to China. This is the core of this issue.
A new perspective is introduced to see this issue. Over the past few decades, the pace of world industry evolution has changed.
Let's look at several typical products of the industrial revolution ---
The typical product of the first industrial revolution was train.
The product of the second industrial revolution was car.
The typical product of this generation of industrial revolution is the intelligent furniture industry.
An American manufacturer can own complete production lines. This means that it has control over all aspects of production and it is the strongest in terms of comprehensive cost control. But what are the basic needs of intelligent furniture products? It is innovation. The huge production lines of the American manufacturer would inhibit its innovation ability. Because the production lines are designed according to the needs of the last generations of products, to introduce innovation, the entire production lines must be adjusted, and the cost is extremely high.
So, whether it is a large factory in the United States or in Europe, it will be dragged to slow growth by its huge scale.
When the western countries enter the innovation economy, there is an urgent need for outsourcing the production process, transferring the cost of production process to others, while merely focusing on constant conceptual innovation.
In the previous eras, innovation was based on technology, and technology itself constituted a competitive barrier; but nowadays the basis of innovation is a concept. The concept itself is easy to be plagiarized, so its competitive barrier is its own innovation speed. As long as my innovation speed is faster than yours, you can only follow but you can't surpass me.
Let’s take the Organizing furniture in the United States as an example. Originally wardrobe is the most professional business, and customers are happy, and you can only need to specialize in one area. For example, the technology for producing Jewelry cabinets has become more and more sophisticated and you can even produce a jewelry cabinet within one minute. This is called professionalism. However, one day the consumers have suddenly changed their tastes. For example, they want to add a Make Up function to the jewelry cabinet or want to bring in lighting . And you are dumbfounded because of low flexibility as a result of your high professionalism. You see, high efficiency and high flexibility are contradictory.
In the manufacturing industry, who can resolve this contradiction? In today’s world, so far only China can do it.
What is the degree of division of labor among Chinese companies? In Lishui village of Foshan city in Guangdong, a Jewelry Cabinet, consisting of 38 parts, is produced individually in 38 professional manufacturers, and then these parts are assembled. A Jewelry armoire that is sold at $110 on the market and its cost can be as low as $35. When we Justhow Zhihua visited Guangdong, we saw some manufacturers that produce Jewelry cabinet Hinge, and one factory only produces one part. Thus, these manufacturers are highly specialized and highly efficient.
At the same time, numerous extremely specialized SMEs have also intensively connected to form a large and efficient supply chain network. They mutually support each other. When the upstream demand changes, this matching relationship can be quickly restructured to ensure flexibility.
Why can only China do it?
One is because of China's unique endowment --- China’s super large scale. Other countries want to learn and cannot learn it.
The other is because that China has just stepped on the right rhythm at a right point of time.
Justhow Zhihua Manufacturing Co,.LTD has always had a judgment on the global division of labor in the future - global technology, China manufacturing, and global market.
When China is in the age of industrial transfer, the nature of international trade has changed, from "inter-industry trade" to more "intra-industry trade".
What is an inter-industry trade? Just like what the Chinese did in the 1980s when they use finished products to exchange for another finished product, such as exchanging more than one billion pairs of trousers for one plane.
What is intra-industry trade? Take smart jewelry armoire production as an example. Just like an American designing company that wants to produce Smart Jewelry armoire, and its supply chain spreads all over the world, while China is in one part of the supply chain.
It is very easy for China to open this gap. China will make good use of its advantages like super-large-scale, efficiency, and flexibility to open up new territories in this opportunity window and grab shares in the global market.
In this way, a scale is no longer just scale. The scale itself is ability.
What is China's unique strength? China has become a supply chain network with both efficiency and flexibility. Therefore, China’s becoming "world factory" is not one of the stations in the global manufacturing shift, but the last station. JUSTHOW will continue to develop and grow itself and will become a designer, manufacturer, and distributor of Jewelry cabinet and armoire and even smart furniture.