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Many hangers in the world originated from a two-story warehouse on the road leading to Lipu. Lipu is a hot town in southern China. The river flows between towering karst landforms and vendors sell the sweetest taro.
The lights strung along the promenade formed the shape of the lifeblood of the town. Residents are proud of the smooth wood products shipped from “China’s Hanger Capital” to Target and IKEA. But the scribbled help sign at the factory door hinted at a new reality.
The reason why China has become a world manufacturer is that it provides cheap, sufficient labor and an existing supply chain. In Lipu, from Savannah, Georgia to Stockholm, workers produced billions of hangers and filled closets. With wages rising and the population graying out, these factories are now struggling to find employees. China’s efforts to deal with shortages are at the core of trade tensions with Washington.
President Xi Jinping has accepted a US$300 billion strategy, “Made in China 2025″, which aims to accelerate China’s transformation into advanced manufacturing in fields such as robotics and aerospace. The Trump administration sees it as a conspiracy to dominate the world’s most critical technology. Sandwiched between the two are traditional industries that China once relied on for growth.
“We are struggling the most this year,” said Liu Xiangmin, who runs a small hanger factory that smells of fresh wood. After the Lunar New Year holiday, he lost 30% of his labor force in February. “We can’t even consider profitability.”
A group of women sat on the stools upstairs, sorting the hangers as the factory saws buzzed. They wear masks to prevent the dust coughed up by the drilling machine from splashing. Thanks to their efforts, the workers can earn approximately US$7,600 per year.
The threat of US tariffs does not worry Liu as much as keeping his factory running. China faces the challenge of its own industrial success. The country’s booming economy has led to rising wages, which makes labor-intensive products such as toys and shoes more expensive on the international market.
According to the National Bureau of Statistics, between 2011 and 2016, China’s average annual salary rose by nearly 63%. According to data from market research firm Euromonitor, the hourly wage of factory workers reached US$3.60 in 2016, which is higher than Brazil or Mexico and similar to Portugal or South Africa.
“What China wants to do is also what business owners need to do, which is this kind of upgrade and transformation…so that they can catch up with rising labor costs,” said Ashley Wanwan, an economist at Bloomberg Economic Research in Beijing. Research the provincial market. “China 2025 is a solution.”
Not only do factories need to pay workers more wages, but they also have no one to hire. The country’s one-child policy, which has lasted for more than three decades, means that there are not enough young people to replace the aging population. Last year, China had a labor force of 900 million. The government expects to reduce by 200 million by 2030.
“The whole chain was broken because we don’t have a younger generation to continue it,” said Xie Hua, who runs Huateng Hanger Co., Ltd. in Lipu. A few workers pack black and white plastic hangers in a warehouse near the showroom. None of them looked younger than 35 years old.
County data show that about 100 hanger companies in Lipu accounted for 70% of the country’s total output last year. Almost all products are shipped to Europe, the United States and other places. Local officials declined to comment.
About ten years ago, labor shortages began to appear in coastal areas and then spread to underdeveloped areas. Lipu has tried to diversify. Its residents grow oranges on the mountains outside the city, and a food processing factory produces packaged snacks. Factory owners talk about joining the transition to automation and more advanced technology.
It is this shift that scares the Trump administration. Officials worry that US companies will not be able to compete with Chinese companies backed by huge government subsidies. The White House proposes to impose tariffs on US$50 billion worth of Chinese goods, targeting technical products such as medical devices and automobiles.
“If China dominates the world, it is not good for the United States,” US Trade Representative Robert Lighthizer told a Senate committee in March.
The White House does not seem to care much about low-tech products, even though officials are exploring the taxation of another $100 billion in goods. The hanger has also been targeted by traders before. In 2008, US officials accused China of dumping steel wire hangers into the market and excluded domestic companies from setting prices. But the tariffs ultimately affect American dry cleaning companies, and ultimately customers who want tight pants or clean shirts.
“Of course I have concerns,” Qin Yuangao said, as his father opened the first hanger factory in the town. “But who will pay the price? American consumers. I feel sorry for them.”
Decades ago, the generation that turned China into the world’s factory left the small village for the growing metropolis in southeastern Guangxi where Lipu is located. This experience has its own name: chuqu, or “go out”. Immigrants work 14 hours a day in a dark and dirty factory. But they are making money, which means upward mobility.
The generation that will lead China’s next economic transformation are more likely to complete high school education even if they did not go to college. According to Euromonitor Information Consulting, between 2011 and 2016 alone, the country’s technical graduates increased by 18%. In addition to money, they are more concerned about the quality of life.
Dai Hongshun runs a famous restaurant near the Li River, serving spicy Hunan dishes. The 25-year-old’s income is lower than that of workers in the Lipu factory, but he shrinks at the thought of joining them. “It’s boring, and you’re stuck in an industry,” he said. “Also, too much overtime.”
“Young people want to experience new things, they don’t want to work in a factory,” said 28-year-old Liu Yan, a sales assistant at a stationery store in the city center filled with snowman pens and Disney notebooks. Yan spent three years packing wooden hangers into boxes, despising monotony. She felt trapped.
Three years ago, it provided an opportunity. Qin Yuxiang runs a small shop for hand-woven wooden baskets. One day, an employee of a foreign retail company asked him if he would use this raw material to make clothes hangers. He opened Ushine in 1989. Today, the company operates four factories with 1,000 workers who ship to IKEA, Target and Mango.
Qin made the company successful; his son is trying to save it. Qin Yuangao improves working conditions to attract employees. He provides workers with earplugs for unionization, insurance, and dust-free factory workshops. He is introducing more automated machines and is considering adding outdoor furniture to the company’s product portfolio.
Just as the United States is watching companies turn to China’s abundant labor force, Qin Yuangao is worried about competition from Brazil and its cheap raw materials. He is also cautious about Eastern Europe, where Romania and Poland are comparable to his exports to Germany and Russia.
Xiao Qin remembers that he visited the Boston hanger factory twenty years ago. It closed with other American hanger companies that could not compete with China.
“The United States has a clothes rack industry, you can’t see it now,” he said. “I don’t know if the hanger industry will still exist in 20 years.”
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