HK firms struggle for survival on an uneven business field

The dim outlines of the low-rise buildings emerge gradually from smog perennially hanging over the main road leading to Chin Wa-keung's electroplating factory in Huizhou, Guangdong.

But the dense yellow smoke is not coming from Chin's factory, which was purpose-built four years ago to satisfy the government's new environmental standards. The smog comes from the many illegal electroplating workshops that have mushroomed around Chin's plant, running on as little as one-eighth of his operating costs.

Gradually but surely, Chin's business has lost out to his more aggressive local competitors, who do not hesitate to flout the law when it is profitable to do so. Already struggling in face of the sharp economic slowdown, Hong Kong manufacturers like Chin are being driven out of the Pearl River Delta by cutthroat competition and an uneven playing field.

Fighting back tears, Chin, co-owner of Boluo Chak Wa Electroplating, says the company has been losing money "over the past one to two years". "We are considering winding it up if things don't change in the next six months," he said.

As China's economy slows, profit margins across the board are being squeezed. This is making Chin's customers much more price-sensitive than before, prompting many to switch their orders to the illegal workshops offering lower prices.

Chin and his partners - all Hong Kong investors with decades of experience of doing business in Dongguan - ploughed more than HK$4 million in 2007 into building an environmentally friendly electroplating factory in the Longxi industrial zone in Boluo county, Huizhou.