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High Real Estate Prices Effecting Factories

High Real Estate Prices Effecting Factories

The rapid rise of property prices in China can be a good thing for investors and a bad thing for manufacturers. But it is not bad for manufacturers just because of the additional cost of doing business due to higher rental fees. There is a less obvious reason for why it is affecting them. And this reason is what I would call ‘loss of attention’.

For example, last year new home prices in Shenzhen increased about 60%. There is definitely a property boom here brought on by speculators. And people are not just buying 1 property. They will buy 2 or 3 of them.

And who are these speculators? They are not the regular workers here. They are the business owners - many of them factory owners.

To own and run a factory is extremely difficult. You always have to worry about having no business or too much business. At times you don’t have enough employees. At other times you have too many. You have to deal with customers who can give you a hard time over some small detail and refuse to pay for an order or want a larger discount. And we are not talking about 1 or 2 pieces. It can be 1,000 or 10,000 or even 20,000 pieces of the same item. You also have to come up with many new designs throughout the year so your customers always have something new to buy.  If you do trade shows that takes up a lot of your time and energy. And with the cost of these shows today it is very easy to lose money doing them. I could go on about this but I’m sure you get the idea.

So if there was an easier way to make money wouldn’t you look into it? This is what has been happening.

My wife deals with a number of other factories here for various parts and to help her complete some of her orders. She complains to me that now when she gets together with the other owners they don’t talk about their businesses. Instead they talk about real estate – the price of properties, what they have bought recently and what they want to buy in the future.

I can see that these owners are not paying attention to their business like before. The quality of their work is starting to suffer and they are taking a much longer time to complete an order. As long as property prices continue to rise I see this as a problem. They think that they are making so much money in real estate that it doesn’t matter if their factory is doing well anymore. Some are even thinking of not having a factory in the near future. Instead they have a dream to just buy and sell real estate. This, in turn, will put many people out of work and cause hardship for the lower and middle class people here.

I hope that in the near future there will be a correction in property prices and these factory owners will wake up, get to work and again start focusing on creating quality products for the world to use.

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