provided by the factories. Typically, when the factories shut down, those workers go home; they now have no job and nowhere to live, so they can either apply for another job, or go back where they came from.

control laws are now working against its factory output. How? If you are a parent with only one child, you don’t want him or her working in a factory. You want that child educated, so that he or she can get a job working in an office or a bank in Shanghai or Beijing.

For a number of years, many people were coming south from the center of the country. In the past two years, there has been a reversal –– many people are moving home. One reason is that many factories from the south have moved north, enabling the workers to stay in the north where their families are.

Consequently, families work hard to educate their child for white-collar jobs, and the workers remaining are fewer and often less skillful.

Thus, in the south, where there is still a tremendous amount of industry, there are some labor shortages, especially around and after major holidays.

In sum, there has been some disruption of the workforce in China.

Incidentally, one irony –– and a new problem for the Chinese

] government –– is that its restrictive, one-child-only birth

For all these reasons and more, companies in China are now moving offshore to Vietnam, Cambodia, Bangladesh. Even the Philippines and Indonesia are coming back as manufacturing centers. We have seen substantial increases in our exports from our many non-China production locations.

 

FACTORY COMPLIANCE COST UP

In China, factories are also shutting down or striving to further reduce overhead because of the new compliance risk and costs.

Social compliance, we predict, will become a greater issue in 2009. The remaining factories are busy. They’ll need to work overtime, and they will have a hard time documenting what goes on. Documentation is a new requirement; it is simply not in the culture of the Chinese factory to do it.

More, social compliance audits are expensive; most of the companies who perform this task are dealing