Dongguan offers to cut fees on factories
Dongguan officials have offered to reduce or eliminate some 'administrative' fees levied on Hong Kong manufacturers in the Pearl River Delta who have complained about an upcoming rise in minimum wages.
But some of the manufacturers say that lowering such fees would be just a drop in the bucket and did not address their more serious financial concerns.
Earlier this month, the Guangdong provincial government said it planned to raise the minimum wage by 15.4 to 20 per cent in January, the second increase in 10 months.
Huang Guanqiu, a director of the Dongguan Bureau of Foreign Trade and Economic Co-operation, and other government officials on Monday offered to trim or abolish certain fees in an effort to save factories about 300 million yuan (HK$367.3 million) a year.
Huang said that 70 per cent of factories in Dongguan were either breaking even or losing money.
'The cut and exemption in administrative charges is pathetically insufficient to offset the 20 per cent jump in minimum wages, and more increases are in the pipeline,' Federation of Hong Kong Industries deputy chairman Stanley Lau Chin-ho said yesterday. 'The jump is unbearable.'
Hong Kong manufacturers generally consider Dongguan a business friendly municipality. But they say they have been squeezed by rising wages, labour shortages, tight credit, a strong yuan, a nationwide industrial policy to upgrade or relocate production, and shrinking demand from its top two export markets - the United States and European Union.
Danny Lau Tat-pong, the chairman of the Hong Kong Small and Medium Enterprises Association, said factories commonly paid about 30 administrative charges to different government bureaus.
Danny Lau, whose factory in Dongguan produces curtain walls for skyscrapers, cited several examples: a 'management fee' of about 240,000 yuan a year payable to the local village administration; a monthly fee to help maintain 'the village wall'; and another monthly charge for failure to hire disabled people.
'Administrative fees are charged at the village, district, municipal and provincial levels and in various forms that sometimes leave me scratching my head,' he said. 'It's as if I need to pay for breathing.'
Stanley Lau said Huang could not promise whether it would agree with the federation's call to freeze the proposed increase in the minimum wage for one year. Huang said the decision would be made by the provincial government.
Guangdong is seeking industry reactions to two proposals to be implemented on January 1. One would raise minimum pay by an average 16 per cent and the other 17.9 per cent. Both proposals mean a rise ranging between 15.4 and 20 per cent, which would vary from region to region. For heavily industrialised Dongguan, for example, the plan is for a 15.5 per cent rise to 1,270 yuan a month or a 17.3 per cent increase to 1,290 yuan a month.
'A long winter is looming,' Stanley Lau said.
He added that overseas buyers had put orders on hold for next year, pending the results of sales during Thanksgiving and Christmas.
China International Capital Corp chief economist Peng Wensheng said yesterday that the European debt crisis posed greater risks to the global economy next year while consumer demand remained weak in the US because of high unemployment.
These factors would lower China's export growth to 10 per cent next year from an estimated 21.6 per cent this year and 31.3 per cent last year, Peng said.
The drop in Christmas sales expected by Hong Kong manufacturers