{"id":8995,"date":"2017-11-16T00:10:24","date_gmt":"2017-11-15T23:10:24","guid":{"rendered":"http:\/\/www.steelavailable.com\/?p=8995"},"modified":"2020-07-20T02:31:03","modified_gmt":"2020-07-20T00:31:03","slug":"thousands-of-factories-are-shut-down-in-china","status":"publish","type":"post","link":"https:\/\/www.steelavailable.com\/fr\/thousands-of-factories-are-shut-down-in-china\/","title":{"rendered":"Thousands of Factories are shut down in China"},"content":{"rendered":"

D\u00e9sol\u00e9, cet article est seulement disponible en English<\/a>.<\/p>

As you may have heard recently China\u2019s EPA has shut down tens of thousands of factories with no end in sight. Not only are factories being fined for not following the new laws, in some severe cases people are going to jail for this! This a<\/strong><\/em>rticle was reposted with permission from 80\/20 Sourcing.<\/a><\/strong><\/em><\/p>\n

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This article ‘Thousands of Factories are shut down in China” was written in November 2017 and we published an updated story 1 month later. You can find it here:\u00a0China\u2019s Environmental Policies Get Stricter<\/a><\/p>\n

To get the full picture of what is happening in China, we recommend that you read both articles starting with this one. If you have any questions, feel free to contact us<\/a>.<\/p>\n

 <\/p>\n

A hard stance against \u201cheavy polluters\u201d<\/h3>\n

If your company is sourcing products from China then there is a major disruption that may be flying under your radar.\u00a0 Since June of 2017, China\u2019s new Ministry of Environment is taking a hard stance against Chinese factories that are \u201cheavy polluters\u2019.\u00a0 In fact, in the most recent round of factory audits, China\u2019s environmental crackdown has shut down tens of thousands of Chinese factories with no end in sight.<\/p>\n

The effects of decades of massive manufacturing growth have taken its toll on the environment. \u00a0Now China has some of the most polluted cities in the world. \u00a0Air purifying equipment and anti-pollution masks sell out often. Groundwater is polluted making safe drinking water a big concern. \u00a0Now the government is doing something about it.<\/p>\n

What\u2019s different this time is that a hard stance is being taken in making sure that factories are compliant with environmental laws. \u00a0Previously when policies were passed there was little to no compliance. \u00a0Many factories were unaware or unwilling to comply so they continued operating in their old polluting ways.<\/p>\n

Now some factories are being forced to cease their production immediately and indefinitely.\u00a0 And if they don\u2019t comply their power could be shut off leaving them in the dark.<\/p>\n

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\"woman<\/p>\n

A woman wearing a face mask walks on a street as Beijing is hit by polluted air and sandstorms on May 4<\/em><\/p>\n

Source: npr<\/a><\/p>\n

 <\/p>\n

Power trumps Guanxi<\/h3>\n

And in this case, power trumps \u201cguanxi\u201d. \u00a0Decisions are coming directly from the top levels of government so it overrides any relationships factory owners may have at the municipal levels. \u00a0If they are noncompliant they will definitely face the consequences if they are audited.<\/p>\n

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Lack of transparency with no end in sight<\/h3>\n

One of the issues the factories face is a lack of transparency. \u00a0Government policy details are quite opaque and many factories are not aware of the exact policies that they must abide by so they may unknowingly continue to operate in noncompliant ways and risk being shut down.<\/p>\n

So they face an unpredictable and ongoing risk of being suddenly told to shut down. \u00a0And there is no clear timeline which means the factories don\u2019t know when or if they can resume production.<\/p>\n

So all of this makes it a very challenging time if you are sourcing products from China.<\/p>\n

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Who\u2019s affected?<\/h3>\n

According to my research, affected industries include but may not be limited to the following industries.<\/p>\n

 <\/p>\n

Affected Industries<\/h4>\n

\u00a0 \u2022 <\/b>Textiles<\/p>\n

\u00a0 \u2022 <\/b>Rubber<\/p>\n

\u00a0 \u2022 <\/b>Leather<\/p>\n

\u00a0 \u2022 <\/b>Chemicals<\/p>\n

\u00a0 \u2022 <\/b>Carbon<\/p>\n

\u00a0 \u2022 <\/b>Metal<\/p>\n

\u00a0 \u2022 <\/b>Coating<\/p>\n

\u00a0 \u2022 <\/b>Plastic<\/p>\n

\u00a0 \u2022 <\/b>Dying, Painting, and Printing processes<\/p>\n

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\"\"<\/a><\/p>\n

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The environmental audits have been implemented in rollouts that have begun in certain regions mostly centralized in and around Northern China. \u00a0The later phases will reach other regions. \u00a0Again it\u2019s difficult to pinpoint exact areas due to lack of transparency.<\/p>\n

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So far we understand that factories in these regions have been affected<\/h4>\n

\u00a0 \u2022 <\/b>Shandong<\/p>\n

\u00a0 \u2022 <\/b>Henan<\/p>\n

\u00a0 \u2022 <\/b>Hebei<\/p>\n

\u00a0 \u2022 <\/b>Tianjin<\/p>\n

\u00a0 \u2022 <\/b>Beijing<\/p>\n

\u00a0 \u2022 <\/b>Zhejiang<\/p>\n

\u00a0 \u2022 <\/b>Jilin<\/p>\n

\u00a0 \u2022 <\/b>Jiangsu<\/p>\n

\u00a0 \u2022 <\/b>Sichuan<\/p>\n

\u00a0 \u2022 <\/b>Guandong (Find out more about the reasons behind the Guangdong factories sudden shutdown<\/a>)<\/p>\n

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\"\"<\/a><\/p>\n

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Why is the clampdown happening now?<\/h3>\n

In 2013, China passed the \u201c10 Measures for Environmental Protection\u201d which outlined measures to improve China\u2019s environment. \u00a0This was monumental as China began addressing admitting the environmental problems head-on while in the past China was more focused on developing its economy with manufacturing while paying a huge expense in the air, water, and ground waste pollution. \u00a0My sources tell me that the newly appointed Minister of Environment is demanding stricter compliance from the factories thus the extensive auditing and review of these tens of thousands of factories.<\/p>\n

Moreover, if we look at the macro level, China has an important government meeting in the 19th Plenum, the most important government meeting which takes place every five years. \u00a0Taking place on Oct 18th, 2017, the main objectives are to select the top leaders and policies to put in place as a roadmap for the country going forward.<\/p>\n

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\"\"<\/a><\/p>\n

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Environmental Protection is one of the key issues to be examined. \u00a0It would make sense to do a bit of cleaning before the meeting to drum up the numbers and also produces some blue skies for them to take credit for.<\/p>\n

Similar supply chain disruptions in China related to major economic, political and social events have happened in\u00a02016 in the months preceding the G-20 meetings in Hangzhou<\/a>\u00a0as well as in 2008 before the Beijing Olympics.<\/p>\n

Other speculators say that another reason is because of a major sporting event and competition at the national level happening in north China in the fall. \u00a0In my opinion, this is a less probable cause than the 19th Plenum which is the most important event that will set the stage for the future of China in the next five years.<\/p>\n

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What do you do if you are sourcing from China and risk being affected?<\/h3>\n

If your factory has not been affected (yet) then now is the time to check with them to ask if they will be affected.<\/p>\n

It\u2019d be smart to ask if their component suppliers are being or will be affected as well.<\/p>\n

Note that even if your factories themselves have been audited and approved for production, their component subcontractors may not be so lucky. \u00a0If their component suppliers get shutdown then your factory will not be able to follow the normal production process and your product may get delayed as they are left scrambling to find a replacement. \u00a0This makes it more difficult to predict delivery lead times as these external factors may be out of their direct control.<\/p>\n

For example, if you are manufacturing a mason jar and your glass factory passed inspection but their metal lid subcontractor gets shut down then your factory will have a hard time delivering your product on time as they will need to search for a replacement. \u00a0Remember you\u2019re only as strong as your weakest link!<\/p>\n

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Best practice: Be proactive in communicating with your suppliers!<\/h3>\n

It\u2019s important to understand that Chinese culture doesn\u2019t encourage people to reveal bad news until it happens. \u00a0Often bad news is swept under the carpet until it absolutely has to be revealed. \u00a0So it pays for you to be proactive to communicate with your supplier and learn about and minimize the disruption to your supply chain.<\/p>\n

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What if your factories are being affected now?<\/h3>\n

\u201cOur production scheduling is in total disarray and our suppliers literarily have no idea when they can re-start production.\u201d<\/p>\n

Case in point \u2013 A friend of mine who has 20+ years experience in China sourcing from a deep base of suppliers is facing a huge headache. \u00a0He sources from Chinese suppliers whose products fall under one of the monitored industries and are based in the Shandong province. \u00a0Even though they are compliant, several of his suppliers have been shut down and they have not received any word about the next steps nor when production can resume. \u00a0This makes it next to impossible to plan purchase orders for the 4th quarter and pre-Chinese New Year period. \u00a0His company headquarters is giving him a lot of heat for this. \u00a0What can he do?<\/p>\n

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Going out of China<\/h3>\n

One solution is to go out of China. \u00a0Since my friend\u2019s industry is one of the targeted ones in the new environmental policy regulations,\u00a0he\u2019s shifting his production to India<\/b>\u00a0where their production has not been impacted by environmental policies.<\/p>\n

Depending on your industry, some products can be manufactured in other countries such as India, Thailand, Vietnam, etc. \u00a0This will circumvent the problem until the disruption passes. \u00a0Also a general rule of thumb, it\u2019s a good idea to diversify your risk by not putting all your eggs in one basket in China.<\/p>\n

In summary, China can be a non-transparent place for doing business. \u00a0Social-economic and political events can and will affect your business here. \u00a0So it\u2019s your responsibility to have a backup plan to reduce the impacts of these events on your supply chain. \u00a0Now would be a good time to talk to your suppliers to find out the extent of the problem and work out solutions. \u00a0And if you\u2019re facing the impact of these problems head-on, it may be time to consider other countries so you don\u2019t put all your eggs in one basket and have them all break with one sudden jolt.<\/p>\n

Have your suppliers been affected by the environmental audits in China? \u00a0If so, hit reply and let us know what happened and what you\u2019re doing about it.<\/p>\n

 <\/p>\n

Author \u2013\u00a0Gary<\/a>\u00a0at 80\/20 Sourcing<\/p>\n

Gary is based in Shanghai since 2008. He has managed multimillion dollar China sourcing campaigns for international clients. He created 80\/20 Sourcing to teach online sellers, especially Amazon’sellers, and small business importers how to source from China like a pro and avoid common mistakes.<\/p>\n

 <\/p>\n

I<\/a> want to read the updates on this<\/a> story<\/a><\/p>\n

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If you want to have more information about the article or you want to share your opinion with us, contact us at\u00a0info@steelavailable.com<\/a><\/span><\/span>.<\/p>\n

Please notice that you might be interested in the other articles we\u2019ve published:<\/p>\n

\u00a0 \u2022 <\/strong>China\u2019s Environmental Policies Get Stricter<\/a><\/p>\n

\u00a0 \u2022 <\/b>The Path to a Sustainable Supply Chain in the Steel Industry<\/a><\/p>\n

\u00a0 \u2022<\/strong> Is Outsourcing In China Still An Economically Viable Option?<\/a><\/p>\n

 <\/p>\n

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We are Steel Available<\/a>, an online supplier relationship management and sourcing platform\u00a0connecting suppliers and buyers\u00a0from the heavy industry. We are developing the first ecosystem in the heavy industry. It allows clients to efficiently manage and automate their supply chains using web-based tools and services. Our goal is to reduce the hidden risk in value chains. We do it by providing the information that matters, from compliance to quality assurance, creating value for all stakeholders.<\/p>\n

To get more information you can\u00a0download our brochure<\/a>.<\/p>\n

 <\/p>\n

Posted by:<\/strong><\/p>\n

 <\/p>\n

\"\"<\/p>\n

 <\/p>\n

Diane de Beaudrap<\/strong><\/p>\n

Sales & Marketing Director @Steel Available<\/a><\/p>\n

diane@steelavailable.com<\/a><\/p>","protected":false},"excerpt":{"rendered":"

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