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China's exports keep rising despite higher costs

Even as wages rise, its currency strengthens and growth in demand slows, China's exports grab more market share and manufacturers invest in making higher-value items such as heavy machinery.

April 13, 2012|By David Pierson, Los Angeles Times

Liam Casey, founder and chief executive of PCH International, a global supply chain management company, said China's export sector is evolving into a leaner industry, capable of meeting increasingly sophisticated industrial demands.

"You can't play in that low-end space. You have to add value," Casey said, lifting one of his three iPhones to show a video of a robot at a local factory he's partnered with stacking the outer shells of cellphones. Casey said the machinery replaced the jobs of about 100 workers.

PCH, named after California's famous coastal highway and identified recently by Apple as one of its suppliers, links U.S. brands with a database of 1,000 factories in the southern Pearl River Delta region. The company primarily supplies cellphone and tablet accessories.

In addition to helping manufacturers build their products, Casey's company packages the goods and fulfills online orders by sending them on air freight — tasks that would have been performed elsewhere a few years ago.

"It's not about the China price anymore," Casey said, referring to the term used to describe squeezing out the lowest possible margins. "It's about the ecosystem. The supply base is built here. You think you can just transfer it? It's not that easy."

Tony Zhang, the shoemaker, said he's reluctant to move inland where costs are cheaper. One of the reasons: It would be harder to locate raw materials.

He acknowledges that cheap manufacturing is phasing out. Zhang has friends who have abandoned manufacturing to open what they considered less risky ventures, such as restaurants and a campground. A pair of hiking boots he makes for Sears that three years ago cost $13 to produce now costs $19.

"One day, the salaries here could be the same as the West," said Zhang. "But I'll keep trying until people don't need shoes."

Nicole Liu in The Times' Beijing bureau contributed to this report.

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