China has long been known as a haven for low cost manufacturing. Recently, however rising wages are forcing companies to relocate to neighbouring Southeast Asian nations, a foreign trade official from the Ministry of Commerce said.
China Daily reported, the official, who declined to be named, revealed that “nearly one-third of Chinese manufacturers of textiles, garments, shoes and hats “are now working” under growing pressure” and have outsourced all, or part of their production, outside of China in what he labelled the great industrial transfer.
Steel manufacturers have also felt the pressure, with slumping demand and falling prices leading to steelmakers reporting a loss of $294m AUD in July alone, with analysts predicting things would get worse as the manufacturing sector shrinks.
Industry body CISA (the China Iron and Steel Association) revealed that at current prices each tonne of China’s five main steel products is currently being produced at a loss.
As manufacturing in China becomes increasingly more expensive, firms are favouring countries like Vietnam, Indonesia and Malaysia.
China Daily revealed labor costs have soared recently by 15 to 20 percent , squeezing margins and driving some companies to bankruptcy. According to the Ministry of Human Resources and Social Security, minimum wages have seen a raise, on average, by 20 percent in 16 provinces – minimum wage in Shenzhen now stands at 1,500 yuan ($232 AUD) per month, setting the highest standard for the whole Chinese mainland, the report revealed.