Is it Time to Leave China

China has experienced rapid economic and social development over the last four decades. The GDP growth has averaged 10 percent per year. This economic boom in manufacturing has lifted a significant number of China’s 1.4 billion inhabitants out of poverty, but it has seriously impacted the environment. Air pollution is the leading environmental cause of death worldwide according to the State of Global Air 2017, a first annual report on the planet’s environmental air pollution.

We are seeing increasing air pollution problems worldwide, and this new report and website details why that air pollution is a major contributor to early death. The trends we report show that we have seen progress in some parts of the world – but serious challenges remain.

Dan Greenbaum, President of the Health Effects Institute

Made in China

The State of Global Air analysis found that China and India were collectively responsible for more than half of the total global deaths related to air pollution.

While China factories are keeping up with the demand of items such as the Apple iPhone (Designed in California and Assembled in China), electronics are not the only exported goods “Made in China.”

Traces of smog from mainland China have been observed to reach as far as California. In recent months, Chinese safety officials have been inspecting factories to see if they are meeting emissions requirements. 40 percent of all China’s factories have been closed to be inspected by environmental bureau officials. Over 80,000 factories have been fined for not meeting requirements, resulting in decreased productivity which could lead to higher prices on U.S. shelves. The worst offenders have been thrown in jail. Large parts of eastern China have been affected by these crack-downs and some companies have moved their supply chains to nearby Bangladesh and India.

Implementing Change Immediately While Staying Warm in Winter

Reducing air pollution has now been prioritized by President Xi Jinping. Xi’s statement of “green mountains and clear waters are equal to mountains of gold and silver” has become the official motto related to air pollution control campaigns. As the economy has grown and incomes have increased, China must now become more focused on “quality of life” issues.

Authorities in northern China recently imposed emergency restrictions until mid-March to control air pollution, which increases during the colder months. They imposed a ban on coal. They ordered a 30 percent reduction in aluminum production and a 50 percent cut in steel. Furthermore, they’ve  halted construction.

The 26 cities that had promised to replace coal-based heating systems failed to complete work on time. Gas prices began to soar and school children were subjected to running around to stay warm. The government was forced to allow a certain amount of coal to be burned. Air quality did begin to improve. Particulate concentrations in Beijing falling to about two-thirds of the 2013 “Airpocalypse” average. This was a devastating outcome for the tough enforcement efforts. China aims to reduce the concentration of hazardous fine particulate matter from 47 micrograms per cubic meter to 35 micrograms by the year 2035. Now China’s ambition to diminish pollution could reduce economic growth by 0.25 percentage points in the next six months.

Is it too late?

In 2013, ten million cans of fresh air were sold in ten days. It was a tongue-in-cheek campaign to bring awareness to the devastation caused by smog, but the smog is only the tip of the iceberg.

At least 25 percent of China’s farmland is contaminated with cadmium and arsenic.

In 2015, 85 percent of Shanghai’s water was undrinkable, according to official standards. 56.4 percent was unfit for any purpose. This creates a major divide in living standards between the rich and the poor. Those who can afford indoor air quality and water filtration may be just fine. The upper class who have afforded travel around the world has learned about the dangers of pollution and how to avoid it. But for most, pollution in China continues to shorten life spans and contribute to health problems. One study found air pollution in northern China cut life expectancy by three years, compared with southern China. If China can somehow balance the line between environmental policy and continued economic development, the efforts to fight climate change may not be in vain.

Cost of Manufacturing in China

With the closing of outdated and illegal steel mills, coal mines and aluminum smelters, competition has increased for skilled labor. Companies, regardless of size, have had to adapt to the strict regulations. The pressure has come down a pipeline as manufactures receive pressure from the government to make the necessary adjustments to their systems. This includes a decrease in labor and increase in cost. That cost spike moves down the line to manufactures, importers, and consumers. Wholesalers buyers are no exception.

A salesman for a suitcase company stated that customers couldn’t accept the higher prices at first. They’ve had to bear the changes as every supplier lifts their prices.  From the wholesale buyer perspective, one from Argentina explained how stunned they were by the 20-30% price increase. This is just the beginning as the higher costs will eventually extend to consumers around the world through global supply chains.

How will manufactures survive the pressure from both China and the retailer?

Sharon Shichor is the CEO of Eighteen Knowledge Group LLC, your solution and knowledge base for brand building and getting your products and services in the hands of consumers.

Want to learn more about Marketing solutions and trends? Visit our company page and blog for more on the subjects that affect your company’s daily operations the most!

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