Adidas AG to Shut down Self-Owned Plant
SUZHOU, Jul 19, 2012 (Menafn - SinoCast Daily Business Beat via COMTEX) --Later this year, Adidas AG will shut down self-owned plant in Suzhou, an economically developed city in Eastern China's Jiangsu Province.
Adidas is understood to be out of the consideration for integrating global resources. As the wholly-owned subsidiary of Adidas AG, Adidas Sports (China) is registered in Suzhou, where it has a production base. With trade headquarters located in Shanghai, the company operates branches in Beijing and Guangzhou. Still, related persons did not give an exact timetable for the closedown of the self-owned plant in Suzhou.
In the first three months of this year, Adidas generated EUR 3.82 billion in sales revenue from global markets, up 14% year on year; and net revenue of shareholders leaped 38% to EUP 289 million. But the gross margin lowered by 0.7 percentage point to 47.7%. Sales revenue from the Greater China Region amounted to EUR 385 million, up 26% from the same period of 2011.
Despite this, however, the increasing sales revenue cannot offset the production costs of Adidas. Many experts hold the view that constantly increasing costs in China's manufacturing sector is the main reason for Adidas's decision on shutting down the Suzhou plant.
Professor Liu Gang from Fudan University told reporters that because of such factors as RMB appreciation, rising labor cost, raw material cost and land cost, many manufacturing enterprises especially those engaged in the hi-tech and textile industries are removing their production bases.
Herbert Hainer, the CEO of Adidas AG, ever expressed that the Chinese Government has been constantly raising the wage standard, so the group wants to partly quit the Chinese market and transfer the production to locations with cheaper labor costs.
China Briefing's survey shows that China's minimum wage standard is two to three times that of India. Therefore, India has become the main production market for enterprises engaged in labor-intensive industries. In addition, compulsory social security is required in China, based upon which, the wage cost will be 40%-50% higher than the minimum standard. In India, however, such an expense only accounts for 10% of a worker's wage or even been totally neglected.
As required by the 12th Five-Year Plan, the minimum wage of China will be doubled by 2015, the last year of the 12th Five-Year Plan period. This means the minimum wage of China will be more than USD 3,000 by then and will be USD 4,500 at least if the welfares are counted.
Source: www.yicai.com (July 19, 2012)
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