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Is the bottom falling out of China ESL?
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kungfuman



Joined: 31 May 2012
Posts: 1748
Location: In My Own Private Idaho

PostPosted: Thu Apr 25, 2013 9:04 am    Post subject: Is the bottom falling out of China ESL? Reply with quote

I have read several articles about companies pulling out of China as the cost of doing business here is getting higher daily. With the belief that so many English teaching positions materialized because of China's economic growth, do you think there is a long term future for Laowiu teachers?

Quote:
Article:

By 2015, Producing in China Will Be as Costly as US
By Philip LeBeau | CNBC – Thu, Apr 18, 2013 10:14 AM EDT

Walk onto the shop floor at Prince Industries in Shanghai, China and it looks like most other manufacturing plants in this country. It's busy running two shifts, cranking out components that will be shipped to major manufacturers like Caterpillar (CAT), Siemens (XETRA:SIE-DE), and Honeywell (HON).

But change is in the air.

The cost of manufacturing in China is going up, and quickly.

"It's something that we anticipated when we went to China, we just didn't know how quick it would happen," said Mark Miller, CEO of Prince Industries.
(Read More: China January to March FDI at $29.9 Billion, Up 1.44% Year-on Year )China and US Costs Even by '15

China is no longer a slam dunk for manufacturers looking for the lowest cost for operations.

In fact, a new study by the consulting firm AlixPartners estimates by 2015 the cost of outsourcing manufacturing to China will be equal to the cost of manufacturing in the U.S.

"The Chinese manufacturing cost advantage has eroded dramatically in the last few years," said Steve Maurer, AlixPartners managing director. "If you go back to 2005, it was pretty common for landed cost from China to be 25 to 30 percent less than the cost of manufacturing in the United States. Based on our analysis, two-thirds of that gap has closed."

Maurer said higher labor wages, the rising value of China's currency, and the cost of shipping goods from China to points around the world have made manufacturing in China more expensive.
"If trends continue, the China cost is going to be on par with U.S. cost in the next four to five years," said Maurer.

Higher Wages, Rising Currency

Since Prince Industries opened its plant in Shanghai a decade ago, wages have increased an average of 12 percent annually, while China's currency, the RMB, has appreciated 25 percent vs. the U.S. dollar.


The rising value of the RMB was expected and has made it more costly to ship goods built in China around the world.

Meanwhile, hourly wages have been going up steadily due to China raising minimum wages, while competition for labor has forced manufacturers to pay more to attract skilled workers and keep them.
Pulling Out of China or Moving Further Inland?

As the cost of manufacturing in China has risen, so have reports of companies pulling their plants out of the country to find cheaper locations.
Some have re-shored facilities to the U.S., where cost differences are offset by higher productivity of American workers.


But few expect a mass exodus of manufacturers in China.

"I don't think companies are going to pull out of China," said Hal Sirkin with the Boston Consulting Group. "Because of Chinese domestic demand which is growing at 8 or 10 percent a year, even if they decide to pull out their export plants they will then convert those plants, basically re-tool them into Chinese consumption because there is a great market in China given all that growth."

Sirkin said manufacturers squeezed by higher costs in more expensive cities on the coast of China like Shanghai will increasingly look to move plants to inner or western China where labor costs are lower.
"Some companies have found success in inner China and others have decided it is not worth it for them because they cannot get the productivity that they need," said Sirkin.

Made in China and the US

Even with manufacturing costs rising in China, Prince Industries has benefited from expanding its operations outside Chicago to include a plant in China. Since making the move into China, the firm's annual revenue has doubled to $40 million.


Much of that growth is spurred by the Prince Industries plant in Shanghai supplying customers who are manufacturing in China.

Given the changing market, would CEO Miller still expand to China?

"I think for us it made sense, it doesn't make sense obviously for every U.S. manufacturer," he said. "Once we announced that we were going to China, we had to convince our U.S. workforce that we weren't going to move all of our manufacturing to China and just become a shell over here. Fortunately for us it worked out."

http://finance.yahoo.com/news/2015-producing-china-costly-us-141454768.html

http://finance.yahoo.com/news/forget-china-meet-21st-centurys-193000437.html


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roadwalker



Joined: 24 Aug 2005
Posts: 1750
Location: Ch

PostPosted: Thu Apr 25, 2013 2:30 pm    Post subject: Reply with quote

China is still set up wonderfully as a manufacturing country, with the ability to transport by air, sea, road and rail, and with a good labor force. There will still be jobs for English speaking Chinese young people, whether or not foreign manufacturers pull out. Too much research is written and published in English and the world and its customers speak English. So Chinese manufacturers need English. Plus tourism is a major Chinese industry. Non-Chinese-speakers want to come and see 5000 years of history and all that. And those people eat and stay at hotels and take transportation and go to hospitals. English, English, English.
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wangdaning



Joined: 22 Jan 2008
Posts: 3154

PostPosted: Thu Apr 25, 2013 10:32 pm    Post subject: Reply with quote

I don't really think the raising cost of doing business here is a reflection of China's economy going south. Seems more of an indicator of development.
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Asiateacher



Joined: 03 Apr 2013
Posts: 22
Location: Shenzhen, China

PostPosted: Sat May 04, 2013 10:18 am    Post subject: Reply with quote

We have at least 500 years left... hehehe
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GreatApe



Joined: 11 Apr 2012
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Location: South of Heaven and East of Nowhere

PostPosted: Tue May 07, 2013 12:38 am    Post subject: Reply with quote

@ Asiateacher Laughing

--GA
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JustinC



Joined: 15 Mar 2013
Posts: 138
Location: The Land That Time Forgot

PostPosted: Tue May 07, 2013 1:15 am    Post subject: Reply with quote

"If trends continue, the China cost is going to be on par with U.S. cost in the next four to five years," said Maurer.

Yeah, extrapolating is the best. Yesterday I walked back from the shops, which took 30 minutes. Normally I'll get a taxi bike back which takes 5, so I was out 25 minutes longer than normal. If trends continue in 4-5 years I will be a platypus! Rolling Eyes
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wonderingjoesmith



Joined: 19 Aug 2012
Posts: 910
Location: Guangzhou

PostPosted: Wed May 08, 2013 1:18 am    Post subject: Reply with quote

I don't think costs will be the factor, the product quality may however. In State the "Made in China" is not as bad as here on mainland, yet, in my opinion, it doesn't match the overall reliability of American or Japanese products. Chinese manufacturers cut corners, bring in cheep labor, machinery and expect to become "rich and famous" overnight. The ESL in this country may just go down for similar reasons.
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isitts



Joined: 04 Jun 2010
Posts: 159
Location: Korea

PostPosted: Wed May 08, 2013 4:20 am    Post subject: Re: Is the bottom falling out of China ESL? Reply with quote

kungfuman wrote:
I have read several articles about companies pulling out of China as the cost of doing business here is getting higher daily. With the belief that so many English teaching positions materialized because of China's economic growth, do you think there is a long term future for Laowiu teachers?


Unless you're teaching English to low wage laborers, I'm not sure this will matter.
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doogsville



Joined: 17 Nov 2011
Posts: 916
Location: China

PostPosted: Wed May 08, 2013 5:40 am    Post subject: Reply with quote

The thinking seems to be that most Chinese learn English in order to sell stuff to developed countries who either speak English natively or do business in English. That certainly seems to be the most common reason most of the adults I have taught give. The fact that the economies of many of those nations are cooling down and they are buying less from China leads some people to speculate that the demand for English will lessen. It might, but also, if China becomes a major importer of goods from those countries then the demand could remain just as high. While some of the exporters from those countries may start to learn Chinese in order to gain a competitive advantage, it still makes a lot of sense for the Chinese to learn English in order to be able to make deals in the internationally excepted language of business.

There's also the cultural reason, which is that many Chinese, especially the younger generation, want to know more about and take part in the wider world. English is, for now, the language of the Internet, so having some mastery of it allows them to find out what's going on out there.

In the short to medium term then, I don't think too many of us need to fear for our jobs.
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avigoldberg



Joined: 17 Mar 2013
Posts: 31
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PostPosted: Wed May 08, 2013 8:51 am    Post subject: Reply with quote

An article about the low margins on EFL in China.

http://www.economist.com/node/6803197

Quote:
The language business in China
English beginning to be spoken here
The market for English-language education in China is huge. The profits are not
Apr 12th 2006 | shenzhen |From the print edition

“MY MOTHER used to be an engineer, but now she's a housewife. I don't like her job. I want to be a designer. I like to think up new ideas.” Not the words of a young British or American child, but a nine-year-old Chinese girl in Shenzhen city, southern China. And Shun Yushun is no prodigy. She is typical of her English First school, one of 68 on the mainland started by a Swedish-owned language-teaching chain.

Yushun belongs to a new generation in a country where older folks, deprived of education during the Cultural Revolution, speak almost no English at all. Even young adults struggle, having passed through an archaic school system that still insists on the brute memorisation of words and grammar. Zhang Jin, a 24-year-old from remote Guizhou province, studied English from the age of 12 and then for four years at Huanan University. But she has trouble putting a sentence together.

Today the Chinese are obsessed with English. Anything up to a fifth of the population is learning the language. As Gordon Brown, the British finance minister, observed on a trip to China last year, in two decades China's English speakers will already outnumber native English speakers in the rest of the world. This is fuelling a market that comprises everything from books, teaching materials and tests to teacher training and language schools themselves. At $60 billion a year, China is already the world's largest market for English-language services, estimates Mari Pearlman at ETS, an American group that developed TOEFL, a well-known test of English-language proficiency.

The bulk of this, she says, is spent on teaching materials: dictionaries, language textbooks and classroom aids. Most of these are supplied by the education arms of foreign companies in partnership with local firms. Macmillan has sold more than 100m school textbooks in China with its partner FLTRP, which has a fifth of the market and is the leading Chinese publisher of English-language books. Longman (which belongs to Pearson, part-owner of The Economist), Oxford University Press and HarperCollins have popular bilingual dictionaries, while Thomson Learning has licensed its teaching materials to People's Education Press.


Never too young to learn

Demand for textbooks has been boosted by the government's recent lowering (from 12 to nine) of the age at which primary-school pupils start to learn English, and many eastern cities have begun teaching it at six. On some estimates, English texts now account for up to one-fifth of the country's entire book sales. Though foreign publishers must license books to Chinese publishers, almost half the English-teaching market involves the purchase of foreign copyright.

There is also an increasing call for high-tech teaching. At its kindergartens, Beijing's municipal government has just started testing interactive whiteboards made by a British firm, Promethean. At 33,000 yuan ($4,125) a go, they enable teachers to integrate traditional materials with movie clips, radio broadcasts and other internet content. Nicole de Lalouvière, the director of learning at the British Council in Beijing, claims its website, managed with a Chinese partner and offering free tests, vocabulary and business English, has become “the biggest online university in the world”, with 2m students.

Testing is also growing fast, as students with overseas ambitions practise for international college-entrance exams, and Chinese employers seek proof of English ability. Once again, foreigners are in pole position, though the two main suppliers, ETS and a venture between the British Council and Cambridge Assessment, are run as not-for-profit organisations. Teacher training promises to become another big market, given the shortage of half a million English teachers in state schools and Beijing's push to improve English ahead of the 2008 Olympics.

Finally, there are the private language schools themselves—some 50,000 of them, reckons Ms Pearlman, from family-run outfits to chains such as English First, Wall Street English and New Oriental, a Chinese operator that claims to be the biggest, with 2.5m enrolled students. While such schools were established for adults, the demand today is from parents willing to spend up to half their household income to boost their offspring's chances. The 550 students at English First's Shenzhen school used mostly to be adults; now more than 70% are children. And they are getting younger. The rage at kindergarten these days is English-speaking classes for four-year-olds.

Adults and college students, meanwhile, can choose from the many business-English classes at foreign colleges, such as the universities of Illinois, Maryland and Nottingham, which are establishing MBA courses and even entire campuses in China to tap into the huge numbers of potential students.

Yet not all this readily translates into profit. Education remains highly regulated. It is no accident that the state propaganda department controls the ministry of education, which only recently allowed (heavily edited) English textbooks from foreign publishers into the state system. Foreigners still cannot publish in China, receiving only royalties on their content. Their partners (such as FLTRP) use their materials to do a roaring business training teachers and running conferences. Though selling books to private language-schools can be more lucrative, these schools are also shackled. Foreign chains need a Chinese partner and must have their teaching materials approved. The difficulties and costs prompted English First to franchise all but four of its 68 schools: after a decade in China it has yet to recoup its investment.

The Chinese government is not entirely comfortable with western teaching methods. China has no government drive to welcome native English speakers, unlike Japan, where the ministry of education runs the 19-year-old JET programme, which puts thousands of foreign teachers to work in state schools. Indeed, until a few years ago, private language schools in China could be fined for hiring foreign English teachers.

Although China's passion for English is palpable, it will become a lucrative and open market only if China's Communist Party allows it to. It is reluctant because, along with English textbooks and teachers come western ways of learning and thinking—ways that might one day threaten the party's authority.
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doogsville



Joined: 17 Nov 2011
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Location: China

PostPosted: Wed May 08, 2013 2:47 pm    Post subject: Reply with quote

avigoldberg wrote:
An article about the low margins on EFL in China.

http://www.economist.com/node/6803197


The owner of the language mill I used to work for has a Range Rover that cost close to 1 million RMB. He doesn't drive it himself, he has a driver. He also has several other high price cars. He has many apartments and a villa, and his commercial property portfolio is huge. All paid for by people learning English. If the profit margins in language schools are really that low, then somebody forgot to tell him and his family, who are equally wealthy. If the English language business was really that difficult to make money in the why are so many Chinese people doing it and seeming to make so much money?

I'm sorry Economist, but I'm just not buying it, if you'll excuse the pun.
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creeper1



Joined: 24 Aug 2010
Posts: 478
Location: New Taipei City, Taiwan

PostPosted: Wed May 08, 2013 5:01 pm    Post subject: EF Reply with quote

The article you quoted from the economist is 7 years old. Unfortunately I'm sure the mills are making bank off the backs of the students and teachers big style. Crying or Very sad
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wangdaning



Joined: 22 Jan 2008
Posts: 3154

PostPosted: Thu May 09, 2013 12:12 am    Post subject: Reply with quote

doogsville wrote:
avigoldberg wrote:
An article about the low margins on EFL in China.

http://www.economist.com/node/6803197


The owner of the language mill I used to work for has a Range Rover that cost close to 1 million RMB. He doesn't drive it himself, he has a driver. He also has several other high price cars. He has many apartments and a villa, and his commercial property portfolio is huge. All paid for by people learning English. If the profit margins in language schools are really that low, then somebody forgot to tell him and his family, who are equally wealthy. If the English language business was really that difficult to make money in the why are so many Chinese people doing it and seeming to make so much money?

I'm sorry Economist, but I'm just not buying it, if you'll excuse the pun.


Are you sure that his money is coming from the school?

I have often wondered if many of these "schools" are just a front to funnel other money to make it legit.

Just a thought.
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NoBillyNO



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PostPosted: Thu May 09, 2013 12:55 am    Post subject: Reply with quote

i agree with the above post
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Javelin of Radiance



Joined: 01 Jul 2009
Posts: 1187
Location: The West

PostPosted: Thu May 09, 2013 1:23 am    Post subject: Reply with quote

Yeah, I'm suspicious too. I'd say there's more to the uber wealthy language mill owner than language mills. The profit margin in this business might not be low but it isn't that high. What China needs is good investigative reporting to expose where some of this extreme wealth comes from.

Well the bottom isn't going to fall out of the market here anytime soon. Even if manufacturing here bottoms out a bit China is set to become the most popular tourist destination for foreign visitors, most of whom need goods and services in a language they can understand. ESL is here to stay is my educated guess.
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