Off the Coast

It really isn't surprising to anyone who has lived in China or follows the news of the country. But, this article popped up today about foreign companies leaving the coastal manufacturing areas of China.

The article begins with tales of workers demanding higher wages and better working conditions, such as the Honda plant strike in Foshan. It then goes into the attractiveness of sending some of the manufacturing jobs back to the U.S. or Mexico, or even some other Southeast Asian countries that don't have the manpower or infrastructure of China.

It only glances over the migration of factory jobs to inland cities. These cities are cropping up because of better roads and transportation improvements that make such factories competitive with their coastal counterparts. Inland cities are also more attractive to migrant workers because they might be closer to home and the standard of living is much lower, enabling workers to save more money. These cities are also attractive to smaller businesses and factories because the costs are lower--construction, rent, and wages are significantly lower than in places like Shenzhen and Shanghai. Only some of the rising cost of business in major cities is attributed to the rising exchange rate of the Yuan--the minimum wage increases in the regions plays a more important role.

Around Spring Festival, China Daily ran an article about the lack of returning employees to the major industrial cities of Guangdong Province. The estimated shortage of workers was in the hundreds of thousands. There was speculation then that the employees who didn't plan to return to their jobs were searching for work closer to home. Of course, Spring Festival is also the time of year for job hopping around China, which means most factories were already searching for new employees.

The next phase of the migration of factories is converting the old factory districts. What will become of the enormous factories around coastal cities? Some of these structures were built to accommodate more than 100,000 workers. What can be done with structures than take up so much space? In Shenzhen and Guangzhou, private schools and universities are opening up outside the center of the cities--Shenzhen has three top-tier graduate schools that share a campus in the northern city limits; and Beijing converted its old factories near the airport into the 798 arts district.

A silver lining to the exodus of manufacturing jobs from major cities may be that the heavily inflated real estate market will become more reasonable. Of course, such predictions have been made before and nothing has changed. In the coming year I'm certain there will be more predictions about real estate, the Yuan, foreign business, and overall manufacturing from the "experts" that will be proven wrong, just as they have been in the past.