Pearl River Delta losing favour as factory centre for Hong Kong firms
One-third of manufacturers plan to decrease investment in the delta as labour costs rise
Nearly 30 per cent of Hong Kong-based manufacturers with factories in the Pearl River Delta plan to scale back their investment in the area.
The Chinese Manufacturers' Association of Hong Kong says nearly 29.6 per cent of the manufacturers it interviewed as part of a survey said they would reduce investment in the Pearl River Delta in the next three years, up from 26.9 per cent last year.
With rising labour costs on the mainland continuing to spook manufacturers, the survey found that 32 per cent of the manufacturers were planning to move their factories to areas with lower costs within three years. That percentage is the highest in four years.
An increasing number of Hong Kong manufacturers with factories in the delta have been moving to Southeast Asia and remoter parts of Guangdong, as well as other provinces of the mainland.
The association interviewed 274 companies between March and May. Respondents identified labour costs as the biggest challenge, with more than 93 per cent saying these costs had increased. Although the companies said they have been reducing staff by way of modernisation, they are still facing a labour shortage.
"The labour cost has been increasing by 10 to 15 per cent every year. Many manufacturers are also puzzled by the ever-changing labour policies in Guangdong, which is an even bigger problem than the appreciation of the yuan," said Irons Sze, the association's chairman.