By Usman Ahmed
The manufacturers relocation a phenomenon which was once experienced by the Europe, is now being witnessed in China, the second largest economy of the world, due to soaring labor costs. The manufacturers are relocating completely or partially their businesses outside China particularly
in Southeast Asian countries where wage rates are considerably lower.
Rising wages and shrinking export demands are forcing manufacturers to relocate to neighboring Southeast Asian nations and many, that remain, are seriously considering to move, a foreign trade official from the Chinese Ministry of Commerce, told China Daily last month.
The official, who declined to be named to the newspaper, said that nearly one-third of Chinese manufacturers of textiles, garments, shoes and hats were working under growing pressure and had moved all, or part of their production, outside China. He termed the phenomena as the great industrial transfer.
A survey conducted by the Capital Business Credit, a US-based financial consultancy firm, has also revealed that 40 percent of major companies interviewed said, they have plans to move factories from China to other locations, including Vietnam, Pakistan, Bangladesh and the Philippines.
Liang Shiyu, director of the administrative office at the China Chamber of Commerce for the Import and Export of Textiles, confirmed that a large number of manufacturers have moved part or all of their business abroad.
Xiao Yujing, general manager of Zhongshan Liancheng Co, an electronics manufacturer, complained that it was increasingly difficult for his company to find international buyers at the China Import and Export Fair, known as the Canton Fair.
Buyers have turned their eyes to manufacturers from Southeast Asian countries, he noted, which has forced him to plan to relocate part of his business.
We will try Cambodia, where labor costs are about just one-fourth of what we have in the Pearl River Delta he said.
The relocation of businesses is not only considered by the domestic Chinese companies but multinational corporations either relocating or mulling over to shift their businesses.
Adidas, a German multinational corporation that designs and manufactures sports clothing and accessories, has already closed its factory in Suzhou, Jiangsu province un-employing 160 people. The company first came to China in 1980s and benefited from the economic boom of the Peoples Republic but now it seems that the labor cost has compelled the company to close down its operations.
Nike, another international footwear brand closed its only plant in Chinas Suzhou province in 2009.
Huo Jianguo, director of the Chinese Academy of International Trade and Economic Cooperation, affiliated to the Ministry of Commerce, said the shift by some firms toSoutheast Asiais both clear and understandable.
Chinas labour costs have surged recently by 15 to 20 per cent annually, squeezing margins and driving some companies to bankruptcy.
According to the Ministry of Human Resources and Social Security, from January to June the minimum wage was raised, on average, by 20 per cent in 16 provinces.
The minimum wage in Shenzhen, a major city in the south of Southern Chinas Guangdong Province, now stands at 1,500 Yuan (US$ 238) per month, setting the highest standard for the whole Chinese mainland. Whereas many developing countries in Southeast Asia have lower labour costs that make them attractive choice for Chinese and other Multinational firms.
The Europe experienced the phenomena a decade ago when a large number of multinational giants relocated their businesses in China due to high labour costs. Now the flight of companies from China to South and Southeast Asian states particularly Pakistan, Bangladesh and Malaysia will help boost their economies.
The states like Pakistan and Bangladesh need to overcome energy crisis besides providing one-window treatment to the relocating firms for capitalizing the real benefits.
The manufacturers relocation a phenomenon which was once experienced by the Europe, is now being witnessed in China, the second largest economy of the world, due to soaring labor costs. The manufacturers are relocating completely or partially their businesses outside China particularly
in Southeast Asian countries where wage rates are considerably lower.
Rising wages and shrinking export demands are forcing manufacturers to relocate to neighboring Southeast Asian nations and many, that remain, are seriously considering to move, a foreign trade official from the Chinese Ministry of Commerce, told China Daily last month.
The official, who declined to be named to the newspaper, said that nearly one-third of Chinese manufacturers of textiles, garments, shoes and hats were working under growing pressure and had moved all, or part of their production, outside China. He termed the phenomena as the great industrial transfer.
A survey conducted by the Capital Business Credit, a US-based financial consultancy firm, has also revealed that 40 percent of major companies interviewed said, they have plans to move factories from China to other locations, including Vietnam, Pakistan, Bangladesh and the Philippines.
Liang Shiyu, director of the administrative office at the China Chamber of Commerce for the Import and Export of Textiles, confirmed that a large number of manufacturers have moved part or all of their business abroad.
Xiao Yujing, general manager of Zhongshan Liancheng Co, an electronics manufacturer, complained that it was increasingly difficult for his company to find international buyers at the China Import and Export Fair, known as the Canton Fair.
Buyers have turned their eyes to manufacturers from Southeast Asian countries, he noted, which has forced him to plan to relocate part of his business.
We will try Cambodia, where labor costs are about just one-fourth of what we have in the Pearl River Delta he said.
The relocation of businesses is not only considered by the domestic Chinese companies but multinational corporations either relocating or mulling over to shift their businesses.
Adidas, a German multinational corporation that designs and manufactures sports clothing and accessories, has already closed its factory in Suzhou, Jiangsu province un-employing 160 people. The company first came to China in 1980s and benefited from the economic boom of the Peoples Republic but now it seems that the labor cost has compelled the company to close down its operations.
Nike, another international footwear brand closed its only plant in Chinas Suzhou province in 2009.
Huo Jianguo, director of the Chinese Academy of International Trade and Economic Cooperation, affiliated to the Ministry of Commerce, said the shift by some firms toSoutheast Asiais both clear and understandable.
Chinas labour costs have surged recently by 15 to 20 per cent annually, squeezing margins and driving some companies to bankruptcy.
According to the Ministry of Human Resources and Social Security, from January to June the minimum wage was raised, on average, by 20 per cent in 16 provinces.
The minimum wage in Shenzhen, a major city in the south of Southern Chinas Guangdong Province, now stands at 1,500 Yuan (US$ 238) per month, setting the highest standard for the whole Chinese mainland. Whereas many developing countries in Southeast Asia have lower labour costs that make them attractive choice for Chinese and other Multinational firms.
The Europe experienced the phenomena a decade ago when a large number of multinational giants relocated their businesses in China due to high labour costs. Now the flight of companies from China to South and Southeast Asian states particularly Pakistan, Bangladesh and Malaysia will help boost their economies.
The states like Pakistan and Bangladesh need to overcome energy crisis besides providing one-window treatment to the relocating firms for capitalizing the real benefits.
