CHINA'S FACTORY BLUES: The days of ultra-cheap labor and little regulation are gone. As manufacturers' costs climb, export prices will follow

Many of China's manufacturers are undergoing the kind of restructuring that tore through America's heartland a generation ago. The U.S. housing market, which generated demand for everything from Chinese-made bedroom sets to bathroom fixtures, has plummeted. A new Chinese labor law that took effect on Jan. 1 has significantly raised costs in an already tight labor market. Soaring commodity and energy prices, as well as Beijing's cancellation of preferential policies for exporters, have hammered manufacturers. The appreciation of the Chinese currency has shrunk already razor-thin margins, pushed thousands of manufacturers to the edge of bankruptcy, and threatened China's role as the preeminent exporter of low-priced goods. Chinese policymakers so far profess little concern. The closures are mainly hitting lower-value, labor-intensive exporters that pollute heavily and use energy inefficiently. Still, the shift in the manufacturing base is likely to hit harder and be felt more widely than officials expect.