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www.psi-network.de PSI Journal 5/2016 service) of the established players in China that can stand apart from the “cheapskates”. In our business, the recent developments have hardly had any impact. However, in our core business, school and office supplies, we are sourcing several articles from Europe again for different reasons – due to currency developments sometimes even with price advantages. Initiating re­sourcing projects in Europe and focussing on other procurement markets in Asia will be future tasks. IMPORT IS BECOMING MORE DEMANDING This is why the trade should leave ever more demanding import to the professionals and develop quality products together with importers. Things will become more difficult if the standards that apply in the school and office products industry also apply in the promotional product industry. »Higher prices cause gross profit to shrink.« SYLVIA DEPPE UND HARALD VÄTH, TEAM­D Nobody believed that China’s growth rate would remain in double digits forever. Increased labour costs are also substantiated by improved benefits and working conditions. This meets the requirement in Germany for evidence of “social compliance”, but also means higher prices. CHEAP PRODUCTS VERSUS QUALITY It will be interesting to see how far further development goes: Customers in the West, including Germany, are not willing to pay more now for a previously cheap Chinese product. Nonetheless, safety standards, quality and social compliance should of course be exemplary. Some of the Chinese manufacturers have answered the call for cheap and even cheaper products and have relocated their factories to economically weaker countries in Asia or Africa. Other Chinese producers rely on an increased awareness of quality in consumer behaviour and continue to work on improving their standards. DIFFICULT PURCHASING CONDITIONS Purchasing conditions have indeed become difficult for us; the rise in prices has caused gross profit to shrink. We are not prepared to save ad­ ditional costs, also not those for product safety. Otherwise, not much has changed. We are unaware of any insolvent factories. If a supplier wanted to change the terms of payment, we would sit up and take notice. Close collaboration and supplier loyalty remain unchanged. The fact that some of the minimum quantities have fallen again is a positive development. PRICE­CUTTING IS STILL NOT AN ISSUE We do not need to change our philosophy; it is timeless. Price­cutting – buying cheaply at all costs – was never our style and is not an issue now. As soon as we detect an unhealthy price war, we will get out. There are countless beautiful products on the world market and we can find those we can deal in without losing any sleep at night. »In our cooperation with China, problems which did not previously exist have arisen.« STÉPHANE HENNIG, K+M WERBEMITTEL First of all, the recent development: China’s economy has been heavily subsidized in the past decades, especially exports. Trade shows, for example, are financed up to 100 per cent by the state. Thus, companies with a weak equity base have been able to participate in the market as there is no shortage of labour. However, so many workers were deployed in the technological field by the major global players that wages increased in double digits (with the exception of 2015). Consequently, unit labour costs are simply too high. MODERNISATION BACKLOG AND CAPITAL SHORTFALLS Meanwhile, the focus lies on the development of new technologies, the expansion of the service sector and an increasing consideration of environmental and sustainability issues. In many areas, there is a shortage of capital to modernize the factories and to meet the rising standards for products and (environmentally sustainable) production processes. The debt burden of companies is also very high. Some entrepreneurs withdrew from their core business because they hoped to earn more money in real estate. We now have a bubble in the real estate market, and private and foreign capital have been burned. Extremely bad loans have been discovered in the banking sector. Recently, the foreign exchange reserves 15

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