Executive Briefings

Cost of Commodities Has Factories Fleeing South China

Has China, and particularly the factory-rich region of the Pearl River Delta in southern China, lost its edge as a low-cost manufacturing base? Local industry associations report that more than 10,000 factories have closed down. Equal numbers of Taiwanese and Hong Kong factory-owners have fled the area, leaving behind shuttered plants, unpaid workers, and plenty of debt.
There are many reasons for this. For one, rising labor costs: local CFOs report a 15 to 20 percent annual jump in pay for low-skill workers over the past three years, and skilled labor is ever harder to find. Some companies have resorted to professional labor hunters and now accept women in their 30s and 40s, many of whom were once rejected because of their lack of education and more-limited physical capabilities. New labor laws also play a part, in that they give laborers a stronger sense of their rights and inspire heated salary negotiations.
But it is the rising cost of commodities that is really hurting the region.
Source: CFO, http://cfo.com

Has China, and particularly the factory-rich region of the Pearl River Delta in southern China, lost its edge as a low-cost manufacturing base? Local industry associations report that more than 10,000 factories have closed down. Equal numbers of Taiwanese and Hong Kong factory-owners have fled the area, leaving behind shuttered plants, unpaid workers, and plenty of debt.
There are many reasons for this. For one, rising labor costs: local CFOs report a 15 to 20 percent annual jump in pay for low-skill workers over the past three years, and skilled labor is ever harder to find. Some companies have resorted to professional labor hunters and now accept women in their 30s and 40s, many of whom were once rejected because of their lack of education and more-limited physical capabilities. New labor laws also play a part, in that they give laborers a stronger sense of their rights and inspire heated salary negotiations.
But it is the rising cost of commodities that is really hurting the region.
Source: CFO, http://cfo.com