From Overseas Press

Why factories are leaving China

(chinadaily.com.cn)
Updated: 2010-05-25 14:53

Over the past two years, millions of jobs have moved to China's interior or elsewhere in Asia as factory owners try to cut costs, according to an article published in businessweek.com on May 13.

Factory owners complain that higher wages are the main reason, said the article. "In Guangdong, the mainland's top exporting province, wages have almost doubled in the past three years." Meanwhile, customers, like Wal-Mart, continue to squeeze them for lower prices.

Also, factory owners are worried about a potential revaluation of China's currency. "The yuan is up 21 percent vs. the dollar since 2005, and many economists expect it to rise an additional 5 percent this year."

Labor shortages are another factor. "China's one-child policy means fewer people are joining the workforce. Tax breaks for farmers and subsidies for companies setting up in the interior have allowed more people to find work near home. And a growing service sector means greater opportunities lie beyond the factory gate."

But the article emphasized that manufacturing will not disappear from coastal China, as the networks of suppliers for industries can't be easily replicated elsewhere. "Many companies plan to keep more sophisticated work in eastern China while moving basic tasks elsewhere."