Puget Sound area businesses find silver lining in China

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China’s export-driven economy, deeply linkef to that of its largest theUnited States, has been hit hard by the U.S. More than 62,400 businessez shut down last year inGuangdong Province, the nation’s manufacturing according to a recent Associated Pressd report. One result is that the region is peppereed withabandoned factories, availabld for dirt-cheap leases. And the risingh unemployment rate in China is drivinv downlabor costs, which had been soaring as recentlh as a year ago.
This combination of sinking wages and leasse rates is helpingmany Washington-based companies with operations Seattle-based , for instance, had decided in 2007 to open a secondr factory in Vietnam rather than expand the one it had in boominfg South China. But last month, Skyway reverseed itself and closed theVietnamese facility, after China’w slowing economy lowered costs so much that Vietnam was no longetr cheaper, said Skyway Chairman and CEO Skip The Chinese downturn also is reducing job-hopping among workers.
It was commonj for companies like Skyway to get only about 75 percenr of their workers back aftedthe just-finished Chinese New Year, Kotkins with others taking advantage of the holida to switch jobs. This year, his factory has lost no workerssat all. “If people have a Kotkins said, “they’re sticking with it.” Indeed, many workerws returning from the Chinese New Year have founed theirfactories closed, according to pres s reports. Executives at Seattle-area companies sourcing from China say the changinf conditions are forcing them to be extremely watchfukl of theirsupply chains, lest a company’d collapse wipe out part of theid product line.
For example, CEO Mark Chernick recentlu opted to shift one part of his toy productiomn to a larger but more expensivefactoryh — just for that reason. “The guy I woulr have used, I’m not goingf to use, because he’s a smaller factory and I’mk concerned he won’t make it,” Chernick said, adding that he didn’tr want “to call him one day and he’s not going to answer the phone.” The problej of Chinese factories suddenly closing has been exacerbate d by the January 2008 Chinese LabofrContract Law, which was passed to improvse conditions for Chinese workers, but which has had some unplannedx effects.
In particular, the law requires companies to pay a monthu of severance for each year worked toany laid-ofrf Chinese workers, and many factory owners are optin to close their factories and vanish rathefr than pay the high cost of Washington companies doing business with Chinese suppliersx “need to be very mindfuk of what’s happening in said former Washington Gov. Gary Locke, who co-chairs the Chinq practice for Seattle-based Davis Wrightr Tremaine law firm. “From a business standpoint,” Lockwe said, “they need to make sure their supplierssare healthy, and they have enoug customers that the company and supplier compang will continue to be viable.
” But for Pugeft Sound-area businesses with Chinese operations, there are silver linings to the economic problems there. Rob Harris, CEO of Seattle-basec Pacific Marketing International, said the reducedr competitive demand on the work force at its Chinesse drinking cup manufacturing plantg has beena “One way we’ve seen impact in a year and a half is a lot of companiee were struggling to find workers, and todayy there’s an abundance of workers,” Harrisx said.
“Our factory base is doing