The Pearl River Delta, once regarded as the factory to the world, will lose 10 per cent of its Hong Kong-owned factories over the next two years.
The warning came from Stanley Lau Chin-ho, a deputy chairman of the Federation of Hong Kong Industries, who added that in the past few months, several factories making watch components had closed down.
"They have been in the business for over 10 years. Unfortunately, due to the difficulties they have been facing, they are not confident they can survive. In the next one to two years, we expect more factories from watch and other industries to have the same problems," Lau said.
Hong Kong manufacturers have most of their factories in Guangdong's Pearl River Delta, where Hong Kong investment has been a driving force to make the delta the most important manufacturing base in the world.
In 2011, Lau said the delta would lose 30 per cent of its factories in three to five years.
"It is quite realistic [to assume] this will happen," he said yesterday. "We see more Hong Kong manufacturers in labour-intensive sectors considering relocating to interior regions in the mainland or Southeast Asian countries, where labour supply is abundant."
The minimum wage in Guangdong would rise 12 to 15 per cent this year, Lau said. "Fifteen per cent is quite high. It will have a great impact. Hiring in the delta will be difficult in 2013."
Guangdong also suffers from electricity shortage. Factories going without electricity for one or two days a week was common last summer, Lau said.
Hong Kong's exports this year would grow in single digits, federation chairman Roy Chung Chi-ping said.
The recession facing debt-ridden European countries might continue this year, Chung said.
"The uncertain economic outlook for Europe will remain a major threat to the recovery of the global economy. If there are signs of deterioration in the global market, the government needs to provide extra support for our exporters," he said.
The US economy would see modest growth this year, but demand might be dampened.
However, Hong Kong should enjoy steady increase in exports to Russia, Southeast Asia and the Middle East, Chung said.
The federation expects Hong Kong's economy to grow 3 to 4 per cent this year.