GUANGZHOU  -- Antony Chuang, an investor from Taiwan who has been operating a toy business in Shenzhen City, has not spent much of his time on his business these days.

Chuang, who is also deputy head of a 2,000-member association of Taiwan investors in Shenzhen, Guangdong Province, has devoted most of his time to organizing tours for members to inland provinces or even overseas as they seek new business locations.

He believes that the shift of small and medium-sized overseas-backed enterprises out of the Pearl River Delta, where Shenzhen is located, is only natural.

"Going back two decades, when Taiwan-invested businesses first appeared in the Pearl River Delta, the pattern of management was sloppy," said Chuang. "Plenty of investors, with compasses in hand, decided on factory locations according to wherever they had their hearts set on," said Chuang.

"Some conventional enterprises built then can hardly meet the present requirements for fire safety and environmental protection, and for them, the suggestion is either to upgrade or leave."

Many small and medium-sized overseas-backed companies have left sites in the Delta, mainly Shenzhen, Dongguan, Guangzhou, Foshan and Shunde. Since 2005, more than 500 have left Shenzhen alone. Most of those firms were making electronic, plastic and metal products or toys and furniture.

Ding Li, a fellow at the Guangdong Provincial Academy of Social Sciences, cited rising costs as a prime factor for the flight by investors from Hong Kong, Macao and Taiwan.

"Rising labor and environmental costs have exacerbated the pressure on conventional manufacturers," said Ding, "Labor-intensive businesses have been forced to make a transition or go where labor is cheaper."