Guangzhou will top the wage increases on the mainland with an 18.2 per cent increase to 1,300 yuan a month, the country's highest. Dongguan, the epicentre of Hong Kong-owned factories, will require workers to be paid at least 1,100 yuan a month - up 180 yuan or a 19.6 per cent increase.

As part of the province's 12th five-year plan to 2015, Guangdong Party Secretary Wang Yang has promised to create a 'happy livelihood' partly by raising labourers' salaries and benefits. But manufacturers are unhappy with the higher labour costs.

'It is inevitable wages will keep rising, at a rate of more than 15 per cent every year,' Hong Kong Young Industrialists Council honorary chairman Eddie Leung Wai-ho said yesterday. 'Costs are rising on all fronts.'

Leung, also a committee member of Chinese People's Political Consultative Conference, said Guangdong's 12th five-year plan was consistent with the central government's, which called for minimum pay to be raised by at least 15 per cent annually until 2015. The Guangdong plan was approved during the annual meeting of the provincial congress this week. The national plan is due for approval at the annual congress in Beijing next month.

Even without the higher minimum wage, labour shortages are forcing factory owners to pay their workers more. Some manufacturers said Guangdong workers were commonly paid at least 1,600 yuan a month, well above the base rate.

Leung said his company, Dailywin Watch Products in Dongguan, reimbursed the travel expenses of some 560 workers to retain workers, particularly during the high turnover period before and after the Lunar New Year.

Danny Lau Tat-pong, chairman of the Hong Kong Small and Medium Enterprises Association and the boss of curtain-wall maker Kam Pin Industrial, said the company would pay about 300 workers at its Dongguan factory bonuses in instalments before and after the Lunar New Year holiday. 'We just fear that they won't return to work after the holidays,' Lau said. 'There are many job opportunities in their home towns in the north and it is not necessary to travel a long way to the south to make ends meet.'

Federation of Hong Kong Industries deputy chairman Stanley Lau Chin-ho said the mainland's low-cost advantage was history and overseas buyers would have to brace for higher factory-gate prices.

'The minimum wages are likely to be doubled in five years,' he said. 'Overseas importers should wake up to the fact that costs are rising rapidly in China.'

Michael Tien Puk-sun, a Hong Kong fashion retailer and a Guangdong People's Political Consultative Conference representative, said manufacturers would be hit hard but he expected they were already well prepared. 'Lifting the minimum wage can help drive enterprises to upgrade and increase productivity to meet new challenges,' Tien said. 'It's also good for the workers.'

In Guangzhou's Huadu district, Li Jiandei pays workers at his women's handbag company, Gatli.cn, 1,900 yuan a month but expects to lift the wage to 2,200 yuan as a result of the minimum wage rise. The company has annual sales of more than three million yuan and employs 50 workers. 'We can't leave our workers starving and yet, this is going to drive up our operating costs,' Li said.

'I still think this is going to be good for us as it drives us to be more competitive by cultivating more sales channels.'

Liu Linping, director of Sun Yat-sen University's labour research and service centre, welcomed the new wage standard and said it was in time to address issues such as inflation and labour shortages.