The southern city of Shenzhen, once the center of Christmas gift
manufacturing, is losing its dominance due to rising costs and a
higher minimum wage for workers, said those in the industry.
"The working environment is worse for us, and I'm afraid I have
to move my factory out of here soon," said Zhang Renzhong, general
manager of Yuanxing Christmas Production Co.
Zhang's factory has produced artificial Christmas trees and
gifts in Dapeng of eastern Shenzhen for more than a decade, mainly
supplying the United States and European markets.
"This year the order for Christmas products decreased nearly 30
percent," Zhang said. "We tried to raise prices to cover losses
generated by the higher costs of raw materials, but many foreign
buyers wouldn't accept it."
Official figures for the export of Christmas gifts this year are
not yet available. In the past, reports said eight out of every 10
artificial trees sold in the United States were made in the
city.
Prices for raw materials such as plastic and color toner surged
20 to 30 percent from a year before, Zhang said.
Another factor making business tough is the government's new
policy for a higher minimum wage for workers, which went into
effect on July 1.
The policy requires employers outside Shenzhen to pay workers at
least 700 yuan (US$88.6) per month. The previous minimum was 580
yuan (US$73.4).
The city's labor department is also monitoring overtime hours.
No employee is to surpass 36 hours of work a week.
"We understand the government is protecting the legal rights of
migrant workers, but for private processing manufacturers like us,
it's a burden," Zhang said.
In the past, laborers worked grueling hours, well surpassing the
36-hour limit during the busy May to September season. They did,
however, work less during the rest of the year, Zhang said.
"We employ more than 100 workers during the busy season, but now
we only have about 20 to save on cost," Zhang said. "The problem is
we may not get back enough skilled workers for the next busy
season."
Zhang plans to move his factory to another city in Guangdong
Province where labour and production costs are lower.
"I'm thinking of it now. I haven't decided on a location yet
because I need time to do the research," Zhang said.
Wang Shaoqing, secretary -general of the city's chamber of
commerce on craftworks, said it's inevitable that low-end
manufacturers will move out of the city as more high-end industry
comes in.
"The provincial government's new policies encourage these
companies to move to underdeveloped areas in northern Guangdong,
where they will have lower costs, and the areas will have new
investments," Wang said.
A larger, Taiwan-funded company located in Kuichong of eastern
Shenzhen faced the same loss of orders, said production manager Wu
Chung-hsien.
In the past, Wu's company exported US$8 to US$10 million worth
of Christmas products. This year exports dropped at least 30
percent.
"It's really a tough time. The rising costs, rising salaries,
rising competition from other cities and provinces and the
appreciation of the renminbi," Wu said.
Luckily for Wu, the company had diversified by investing in the
catering industry a few years ago. "It was a sound decision," Wu
said. "The fast-food business is getting better now."
(China Daily November 28, 2006)