CHINA’S WEST

FOREIGN FIRMS IN CHINA GO WEST TO BEAT WAGE HIKES

Allison Jackson

AFP, July 14, 2010

BEIJING — A growing number of foreign companies in China, faced with spiralling wages and a shortage of skilled workers, are moving their factories inland to contain rising costs, analysts say.

After a spate of strikes and minimum wage hikes resulted in hefty pay rises for millions of workers, firms are looking to capitalise on government incentives to shift their operations to impoverished western China.

Foreign-invested firms are also looking to tap into a young, talented labour force which no longer wants to sacrifice family ties by leaving home to work long days in the coastal industrial belt.

"It makes economic sense," Bhavtosh Vajpayee, an analyst at CLSA Asia-Pacific in Hong Kong, told AFP.

"Profitability is low in the assembly manufacturing business -- many of these companies have operating margins of two to four percent, so that is not a lot of headroom if your costs start going up."

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