Guangdong Salaries to Increase by 14% per Year

July 18, 2008
Salaries in Guangdong will increase by more than fourteen percent a year starting in 2008. By 2012, salaries will be quadruple those in 2000, according to Guangzhou Daily. Local political advisor Lv Ping offered suggestions for increasing the salaries on the grounds that income growth and the economic development rate have been incommensurate for years. This proposal is expected to draw the attention of the policy-making department.

Officials in Guangdong labor and social security bureau said in reply to the proposal that three big projects will be launched in Guangdong this year, including an unspecified "double-salary project." By improving the minimum salary system and collective salary consultation system, Guangdong Province aims to increase the salaries of the workforce by more than 14 percent every year. A five-year plan to adjust the minimum wage is also in the works.

New trends demonstrate imbalanced income growth and economic development in Guangdong in recent years. The per capita disposable income of urban residents and the per capita net income of rural residents in Guangzhou are both increasing much slower than the provincial GDP.

From 2000 to 2006, income levels decreased from 45 percent to 39 percent compared to provincial GDP. This decrease amounts to 21.9 percentage points since 1979, and the trend has shown no signs of stopping. Guangdong has occupied the top position in total economic output in China since 1989. However, the average income of urban residents is lower than that of Zhejiang Province, and the increase rate of income in the province is lower than that of Jiangsu, Liaoning, Shandong, Zhejiang, and Fujian provinces.

China Textile Industry Slumps

July 10 Xinhua News Agency
China's textile and garment exports have significantly plunged. China Customs attributes the 3.7 percentage decline from September to May to the rapidly appreciating RMB, increasing production prices, in addition to an export rebate rate cut and the slowing global economy.

Textile and garment exports worth US$66.2 billion at the beginning of 2007 dropped by 0.2 percent last year. Under strain, Chinese exporters have moved large portions of their mainland production to the central and western regions where labor costs are relatively lower.

During the first five months of 2008, central provinces like Henan, Hunan, and Sichuan, saw a 30 percent increase in their textile and garment output as they began to appeal to domestic textile enterprises more.

Vietnam Dong Drops To Low End of New Band

Reuters, June 27, 2008
The Vietnamese dong dropped on June 27, 2008 to the low end of a new widened trading band, set up to address economic risks, after the central bank set the official exchange rate at a record low.

The dong fell as low as 18,846 per dollar and was quoted around 16,840/16,846 by 0347 GMT. The central bank cut its daily rate, which sets the central point for the day's trading, by 0.39 percent to VND16,516 per dollar. The central bank doubled the trading band to +/-2 percent on Friday, the second time it had widened the limits this year, in the face of mounting selling pressure on the currency stoked by a ballooning trade deficit and double-digit inflation.

China's Material Prices Up 0.5% In One Week

Source: Xinhua News, June 26, 2008
The prices of production materials in China rose 0.5 percent last week from a week earlier, the Ministry of Commerce (MOC) said Tuesday. This could drive up producer inflation and then fan consumer prices that had eased significantly in May as businesses passed the higher costs on to customers, analysts said.

The MOC said prices of energy, minerals, rubber, non-ferrous metals, construction and farm production materials rose; prices of chemicals were unchanged; ferrous metal prices dropped. The producer price index (PPI) rose 8.2 percent in May, up from 8.1 percent in April. The consumer price index (CPI) jumped 7.7 percent in May, down from 8.5 percent in April.

Factories in China Moving Inland to Escape Pollution Scrutiny

Institute of Public and Environmental Affairs (IPE), via Mallen Bakker June, 2008
Many Chinese companies are moving their most polluting processes away from coastal regions into areas where environmental scrutiny is lighter, according to the Chinese campaign group the Institute of Public and Environmental Affairs (IPE). Companies are coming under growing pressure in China due to government interests in reducing pollution and the growing public pressure around the worst excesses.

According to the IPE, companies are being drawn to parts of the country where rules are hardly enforced by the local authorities, allowing companies to largely escape scrutiny. China is seeing tensions arise for the first time in its rapidly growing economy, with environmental measures and other rising costs leading to thousands of factories to relocate.

Investors Seek Asian Options to Costly China

The New York Times, June 18, 2008
HANOI - Canon is no longer building or expanding factories in China, but the company is doubling its work force at a printer factory outside Hanoi to 8,000.

Nearby, Nissan is expanding a vehicle engineering center. Hanesbrands, the underwear company based in Winston-Salem, N.C., is setting up two new factories here, as is the Texhong Textile Group from Shanghai.

China remains the most popular destination for foreign industrial investment in the world, attracting almost $83 billion last year. But a growing number of multinational corporations are pursuing a strategy that companies and analysts call "China plus one", establishing or expanding Asian bases outside China, particularly in Vietnam.

A long list of concerns about China is feeding the trend: inflation, shortages of workers and energy, a strengthening currency, changing government policies, even the possibility of widespread civil unrest someday. But most important, wages in China are rising close to 25 percent a year in many industries, in dollar terms, and China is no longer such a bargain.

Even as companies seek other places to make their goods, they are stalked by overheated economies: in Vietnam, for example, inflation was 25.2 percent last month.

More than corporate profit margins are at stake. When the cost of making goods in Asia rises, American consumers inevitably feel pain. The Labor Department said Thursday that import prices were 4.6 percent higher in May than a year earlier for goods from China and 6.4 percent higher for goods from southeast Asia.

Companies are using the China-plus-one strategy to mitigate the risks of overdependence on factories in one country.

Vietnam Embarks on Plan to Create Larger Area For Hanoi

The Straits Times, June 7, 2008
Although Vietnam is in the throes of its worst economic slump in decades with its stock market in free fall, a banking and currency crisis, inflation hitting 25% and growing strike action by workers across the country, Vietnam is embarking on an ambitious plan almost quadruple the size of its capital despite reservations, even among members of the ruling Communist Party.

Under the plan, the capital's borders will grow 3.6 times and its population will double to 6.2 million making it bigger than Singapore and Kuala Lumpur.

India, China Make Huge Infrastructure Investments

As reported in CPN June 4, 2008
A pair of new reports from London-based consulting firm Trusted Sources and Urandaline, an Australian consultancy that specializes in capital-intensive industries, says that India and China will between them put $1.5 trillion into infrastructure improvements and modernization over a five-year period.

"Both countries are investing on a massive scale," Larry Brainard, chief economist at Trusted Sources, said in a prepared statement, "and this is creating attractive long-term investment opportunities, both in specific projects as well as in companies that are positioning themselves to meet the new demands for resources, expertise and technology. To sustain economic growth, both countries urgently need more and better infrastructure."

The larger of the two reports, "China Infrastructure: Playing the Boom,'" runs 240 pages and covers development and investment opportunities in five key sectors of infrastructure: electric power, railroads, coastal ports and harbors, inland water transportation, and water supply. The report notes that China's current Five Year Plan (2005-2010) includes infrastructure expenditures totaling more than $1 trillion, much of which will be made by the central government and local authorities. The second report, "India Infrastructure: Playing Catch-Up," is 200 pages and covers a similar, but not identical, list of five major infrastructure sectors: electric power, roads, ports and harbors, airports and civil aviation. and railroads.

Kaizen Events; The Secret of Success at Toyota

As written in The New Yorker, May 12, 2008, authored by James Surowiecki
At the core of Toyota's success story is its adherence and development of the concept of Kaizen within its company and on its production floor. Describing the power that kaizen provides, he writes "They're also phenomenally difficult to duplicate. In part, this is because most companies are still organized in a very top-down manner, and have a hard time handing responsibility to front-line workers. But it's also because the fundamental ethos of kaizen-slow and steady improvement-runs counter to the way that most companies think about change. Corporations hope that the right concept will turn things around overnight. This is what you might call the crash-diet approach: starve yourself for a few days and you'll be thin for life. The Toyota approach is more like a regular, sustained diet-less immediately dramatic but, as everyone knows, much harder to sustain."

8,000 firms close, employment contract law blamed

As reported in the CSR-Asia Weekly May 7, 2008
According to a report in the New Express Daily (3 May,2008), China's People's University Professor Huang Weiping told a seminar yesterday that there is a strong link between the closure of 8,000 enterprises in the Pearl River Delta and the implementation of the labour contract law on 1 January this year 2008). Huang called for the law to be amended after data from the PRD Manufacturers' Association showed that 8,000 companies had either shut down or moved out of the area due to increased costs relating to the new law.

South China Factories Lose Edge

The Wall Street Journal, February 25, 2008
"Thousands of plants are closing as firms go elsewhere in Asia. China's Pearl River Delta...is losing thousands of factories. Rising costs and tighter regulations are making the region less competitive than other Asian manufacturing hubs, including other parts of China. New labour laws and higher taxes for foreign invested companies, combined with tougher environmental rules and a strengthening yuan, are squeezing Chinese companies that make labour intensive products such as toys, clothing, and furniture. The Federation of Hong Kong Industries estimates 10% of the 60,000 to 70,000 Hong Kong owned factories in the delta region will close this year-likely the highest rate of closures in 20 years. Some of these operations have closed for good, some have moved inland, and some relocated outside of China."

Rising Costs Squeeze Factories

Bangkok Post, February 25, 2008
"...despite its huge pool of unskilled rural labourers, China's supply of experienced, skilled talent falls far short of demand. The gap has been pushing up wages by 10-15% per year." "Over the medium term, where are you going to invest? Maybe not China anymore. Maybe Bangladesh, Vietnam, Indonesia. Maybe India," says UBS economist Jonathan Anderson.