Efforts to revive Dongguan factories may be too little, too late
Dongguan factories are facing a bleak future with rising wages and lack of product innovation
When Yu Yongsan bit the bullet and plunged 1 million yuan (HK$1.27 million) into automating production in his small electronics manufacturing business, he hoped the move would keep his prices competitive and move the firm up the value chain.
Five years later, Hengjia Electronics has a workforce a third of its original size processing orders barely a tenth of the size they used to be. And his wage bill keeps rising. Yu is struggling to survive in the fast changing world of mainland export manufacturing.
Yu made the automation move when his factory, which makes connectors for phones and computers, was churning out 500,000 such products a month. "Now in good times we [deliver] 30,000 to 50,000 in a month," Yu told the South China Morning Post during a visit to his factory in the southern Chinese city of Dongguan.
Once the undisputed capital of mainland export manufacturing, Dongguan and its companies are struggling to come to terms with a rapidly changing business environment - both in terms of technology and exports versus domestic orders. And all while annual wage costs rise at a double digit pace.
"I've hired the least people possible to keep the factory functioning, but as labour costs keep rising, the profits we make are not enough to pay workers' salaries," Yu said.
The global boom in electronics and mobile commerce has clearly taken its toll on Yu's business. Rarely do landline telephones and computers physically connect these days.