Foxconn'S Salary Adjustment Has Butterfly Effect. The Textile Industry Is Under Attack.

Investment bank Citigroup issued a report that the heavier pressure of raise wages has made most Chinese enterprises profit from the prospect of Mengyin.

The rising trend of China's direct wage costs is irreversible. Most industries retain talent and are facing a heavy pressure to raise wages.

This week Taiwan's Hon Hai Foxconn's surge in mainland wages is triggering a series of butterfly effects.

Citigroup's report pointed out that clothing and textile and other labor-intensive industries are most vulnerable to the impact of rising costs.

Therefore, it is expected that nine Xing holdings, Shenzhou International, Foxconn, Dechang electric machinery and Yuyuan will be greatly affected. If the direct labor costs increase by 10%, the annual profits will be reduced by 5.5-9.9%, while the impact of the building stacking board, Li Wen papermaking and Nine Dragons Paper will be relatively limited, and the profit decline is estimated to be only 1.1-1.6%.

However, the report also points out that the actual impact of rising wage costs may not be as serious as expected, because enterprises have various ways to cushion them.

The clothing industry is labor intensive, and Shenzhou and Asia Pacific textile enterprises can be pferred to inland China or other countries, such as Bangladesh.

Dechang motor also plans to pfer low end micro motor business to inland China, because these products have few pricing power.

In addition to moving factories, the report predicts that Brand Company, Rui Sheng and other high tech companies such as VTech and Chuang Ke industries, and the paper industry will be able to shift the higher cost to end users through the introduction of new products and cost plus models.

In addition, most enterprises are taking the initiative to improve operational efficiency and automation.

Therefore, under the condition of shock, Citigroup favors high dividend and low P / E stocks, such as VIP and the build-up laminates.

In addition, it is also optimistic about the Nine Dragons Paper Industry. However, it still maintains the "sell" rating of Foxconn and Dechang electric motors.