County boasts plentiful labour

PUBLISHED : Wednesday, 15 September, 2010, 12:00am
UPDATED : Wednesday, 15 September, 2010, 12:00am

Linying, a traditionally agricultural county in Luohe, Henan, that is home to 700,000 people, has been caught up in the province-wide rush to lure coastal manufacturers inland. As part of that rush, Chen Mengxia , a pretty nurse at a county hospital, has spent every weekend for the past two years working as a volunteer promoting her hometown to foreign and coastal enterprises.

'We have the bountiful, dirt-cheap labour to cut your production costs,' she says. 'As long as you come to invest or move your plant, our government will allot a senior official, or even a deputy head of the county, to solve all your problems, from land to tax, power and construction. We have various preferential policies.

'We plan to invest 7.7 billion yuan (HK$8.86 billion) to develop a 16.25 square kilometre industrial zone. More than 18 highways will pass through Linying, guaranteeing you'll be just two hours from any place in the province.'

More than 180 new industrial parks have been set up across Henan, each costing a billion yuan or more. According to official data, Henan attracted 12.3 billion yuan of investment from coastal provinces in January, 22.5 billion yuan in February and 26 billion yuan in June.

Henan party secretary Lu Zhangong says cadres at all levels should do their utmost to attract enterprises to Henan. 'Last month, more than 1,400 enterprises signed agreements to move plant to Henan ... it's never happened before,' he said. 'And 300 enterprises will move from Zhejiang soon.'

For years, the inland provinces seemed neglected as the wealth of resources unlocked by the country's opening up and reform was poured into the coastal provinces. But in the past couple of years, and especially since the global financial crisis encouraged more firms to cut costs by setting up offices and factories away from the coast, the inland regions have bounced back economically.

Xu Wenbo , the boss of the Liantai food-processing group, said his production base used to be in Xiamen , Fujian province, where it was easy to do export business. But he closed the plant in 2008 and moved his 100 million yuan a year business to Linying, which was centrally located to exploit domestic opportunities. 'I have 800 workers here. The labour costs in Henan are at least 30 or even 40 per cent less than Xiamen,' he said. 'Also, Henan is a major agricultural province with an abundance of raw materials.'

Jackie Ho, who set up an electronics factory in Luohe in 2007, said those who insisted on staying near the coast would regret their decision in the next five years. 'More hi-tech manufacturers will follow Foxconn to the interior,' he said. ''If Foxconn moves, most suppliers to the giant will also have to move or it will just buy from another factory. Besides, we should not only think of exports and subcontractors. The domestic market is our future.'

But some analysts remain cautious about the relocation fever.

'Moving the factories would no doubt spur economic output and boost officials' career achievements,' said Shi Pu , deputy head of the Commerce Economy Association of Henan. 'But what the central government is most concerned about with Henan is its grain.'

With its army of 70 million agricultural workers, Henan grows most of the grain on the mainland. 'The increasingly worsening global grain crisis will come closer and closer,' Shi said. 'Guaranteeing the grain harvest is a bigger priority than anything else for Henan. Now the local authorities are fervent admirers of the Foxconns but are ignoring the need to modernise, invest in and protect agriculture and improve farmers' livelihoods.

'That will prove dangerous when the grain crisis eventually arrives.'