China’s central regions lure manufacturing from the affluent coast, with low labour and land costs

Foreign investment is rising rapidly in central China, as many manufacturing firms move production away from the coastal regions in search of lower costs inland

China’s six central provinces – Anhui, Henan, Hubei, Jiangxi, Hunan and Shanxi – are all are tapping into the growing demand for low-cost production

Reading Time:3 minutes

A worker drives a forklift past aluminium rolls at a factory in Huaibei, Anhui province, China. Photo: Reuters

Published: 7:30am, 4 May 2019Updated: 10:09am, 6 May 2019

Foreign investment is rising rapidly in central China, as many manufacturing firms move production away from the coastal regions in search of lower costs inland.

Rapidly rising costs – everything from wages to land prices to taxes – have made manufacturing increasingly unprofitable in the coastal regions, especially in the export hubs of the Pearl River and Yangtze River Deltas.

Tariffs on US$250 billion of Chinese exports due to the US-China trade war have not helped, only serving to drive up costs in the traditional manufacturing hubs.

Some firms moved out of China altogether to avoid the tariffs, setting up factories in Vietnam and other Southeast Asian countries. Others have decided that China’s superior transport and logistics network, as well as the larger supply of skilled labour made it worth staying.

Workers transport boxes of baijiu at a Henan Yangshao Liquor plant in Sanmenxia, Henan province. Photo: Reuters

For many of those, moving production inland was a way of offsetting the rising costs.