Worst over as delta plants see orders rebound
Despite companies reporting 10 per cent rise in demand, industry chief says Pearl River Delta firms should continue seeking cheaper sites
Hong Kong manufacturers in the Pearl River Delta said the worst times might be behind them as orders rose more than 10 per cent last month and more invoices were in the pipeline.
The Federation of Hong Kong Industries, however, said manufacturers should continue to relocate to cheaper countries as escalating costs in the Pearl River Delta could eventually drive out even the strong ones.
But moving to less prosperous nations was not without risk as the federation's vice-chairman Stanley Lau Chin-ho warned of hidden costs from loss of productivity ranging from union protests to teeth inspections by human rights inspectors to determine the age of workers.
"In Bangladesh, for example, human rights groups regularly check for child labour. Dozens [of workers] are selected for teeth inspection upon every visit and the doctor charges a couple of hundred US dollars for testing each tooth," Lau said.
While Guangdong has lowered its trade growth forecast this year to 5 per cent from an original 7.5 per cent, Lau expected Hong Kong manufacturers in the delta to see a mild double-digit growth in exports as orders had flooded in from the United States, Europe and Middle East over the past two months.
"Retailers were over-cautious last year but the markets weren't actually that bad. Now they have used up most of their inventories," he said.
Despite this, Lau said local manufacturers must plan to gain a foothold in other developing countries as costs in the delta might rise further.
"Enterprises which survived the wage rises and bad business over the past two years are not likely to be affected by any further wage rise because it's already within their expectation," he said. "However, if wages continue to rise by double digits annually after 2015, we would need a backup plan."
The number of overseas enterprises registered in Dongguan - 80 per cent of which are from Hong Kong - has shrunk to about 4,000 from 6,000 two years ago. While the recent 19 per cent surge in the minimum wage in Guangdong is expected to have limited impact on enterprises there, many of which are already paying more than the minimum salary, Lau said the increase would still push costs up by 3 to 5 per cent as workers now expected employers to pay even more.
A number of provinces lowered their forecast for trade growth this year to between 5 and 8 per cent from 8 to 10 per cent. Critics said the revision signalled the shifting of the provinces' focus from trade to internal consumption.
While some local manufacturers have already relocated part of their production to Bangladesh, India, Vietnam and Cambodia, they continued to look for other destinations as the political situation in these countries changed quickly and wages also rose by double-digits annually.
The Trade Development Council will organise a trip for industrialists to Myanmar next month.