Higher costs allowing Chinese companies to move to South-East Asia

Jobs going to other countries in China's ' big industry transfer '

China's rising wages and shrinking export demand manufacturers to relocate to neighboring Southeast Asian Nations force and many who remain are seriously considering to switch, said an official of the foreign trade of Chinese Ministry of Commerce.

The official, who refused to be named, said that "almost a third of Chinese manufacturers of textiles, clothing, shoes and hats" are now working "under growing pressure" and all have moved, or part of their production outside China in what he called the transfer of large industry.

Favoured destinations are usually members of the Association of Southeast Asian Nations, or Asean, Viet Nam, Indonesia and Malaysia in particular.

And in all probability "the trend will continue" with more traditional labour-intensive manufacturers transfer of production, he told China Daily.

Liang Shiyu, Director of the Administration on the China Chamber of Commerce for the Import and Export of textiles, confirmed that a whole series of manufacturers have moved part or all of their business abroad.

But the foreign trade official said that while some jobs loss during the transfer occurred, the phenomenon of ' in principle positive ", and" in accordance with "Government commitments is to upgrade China's industrial power and change its model of economic growth.

The 12th five-year plan (2011-2015) urges exporters to produce more high-end goods.

Exporters are also looking for new ways to do things such as momentum declines as a result of a combination of negative factors at home and abroad, of higher labour costs to weak demand from the European Union and the United States export.

China's labour costs have surged recently with 15 to 20 percent per year, squeezing margins and drive some companies into bankruptcy.

According to the Ministry of human resources and social security, the minimum wage from January to June grew, on average by 20 percent in 16 provinces.

The minimum wage in Shenzhen now stands at 1,500 yuan (US $ 238) per month, the highest standard for the whole Chinese mainland.

Many developing countries in Southeast Asia have lower wage costs.

The monthly wage for manufacturing jobs in Viet Nam was averaging 600 yuan in 2011, equivalent to the level of 10 years ago in Dongguan, an industrial city in South China Pearl River Delta.

Some Asean countries, including Viet Nam, have extended preferential policies in land use and tools for foreign investors, including those from China.

Clothing and textile companies have moved from the Pearl River Delta to South-East Asia.

Xiao Yujing, general manager of Zhongshan Liancheng co., complained that it is increasingly difficult for his company denim to international buyers at the China import and export Fair, better known as the Canton Fair.

Buyers have "turned their eyes to manufacturers of South-East Asian Nations", he noted, which has forced him to plans to move part of his company.

"We will try Cambodia, where labour costs are only about one quarter of what we have in the Pearl River Delta," he said.

This is not only about domestic companies. Multinational companies in China are also strategic move.

Adidas closed his factory in Suzhou, Jiangsu province, that 160 people.

Nike closed its only Chinese footwear factory, also located in Suzhou, in 2009.

Partly because of the rising cost of China, foreign direct investment in the past few months are suffering.

According to a survey by capital business credit, a US-based financial consulting firm, said 40 percent of major companies interviewed that they have plans to factories from China to other locations, including Viet Nam, Pakistan, Bangladesh and the Philippines.

Huo Jianguo, Director of the Chinese Academy of international trade and economic cooperation, affiliated to the Ministry of Commerce, said that the move by some companies to South-East Asia is both "clear" and "understandable."

Huo said that China is still an attractive destination for investors, thanks to its large domestic market production, are relatively mature investment climate and its skilled workforce.

"We note also some manufacturers and foreign companies are moving operations from coastal regions to Central and Western areas," he said. An example that he mentioned was Samsung, which this year announced that its largest foreign investment agreement will be located in Xi'an, a city in Northwestern China.

But lower costs in other countries may change quickly, some said.

"The benefit [of labor and production costs] in Southeast Asian countries will only last for a few years," said Jian Chen, a general manager of a garment company stationed in Foshan, on the Pearl River Delta.

"The trend is just like what happened about ten years ago when many manufacturing industries in Hong Kong and Taiwan to the Pearl River Delta is moved to hunt for cheap labour."But now you can see how much our labour costs increased. "

Yu Ran in Shanghai contributed to this story.