Antony Chuang, an investor from Taiwan who has been operating a toy business in the southern Chinese city of Shenzhen, has not spent much of his time on business these days.
Chuang, the deputy head of a 2,000-member association of Taiwan investors in Shenzhen, Guangdong Province, has devoted most of his time to organizing tours for members to inland provinces, or even overseas as they seek new business locations.
He believes the shift of small- and medium-sized overseas-backed enterprises out of the Pearl River Delta, where Shenzhen is located, is only natural.
In the beginning, those overseas-invested businesses that were on the move were mainly environmental polluters. They involved sectors such as electroplating, leather making, printing and dyeing, among others. Nowadays, even more businesses in the fields for making footwear, toys, garments and electronic products are following suit, according to Chuang.
"Going back two decades, when Taiwan-invested businesses first appeared in the Pearl River Delta, the pattern of management was sloppy," he said. "Plenty of investors, with compasses in hand, decided on factory locations according to wherever they had their hearts set on.
"Some conventional enterprises built then can hardly meet the present requirements for fire safety and environmental protection. For them, the suggestion is either to upgrade or leave."
Guangdong, which used to be economically backward and labeled a "cultural desert", has been the biggest beneficiary of China's reform and opening-up drive.
Thanks to its geographic position, Guangdong has been the recipient of large amounts of investment from Hong Kong, Macao, Taiwan and other parts of the world. The money has fueled Guangdong into an economic powerhouse characterized by an export-oriented economy.
The southern province, now home to more than 50,000 overseas ventures, ranked first in the country in terms of gross economic volume. It chalked up more than 3 trillion yuan (about 411 billion U.S. dollars) in gross domestic product (GDP) last year, a rise of 14.3 percent from 2006.
Many small- and medium-sized overseas-backed companies have left sites in the delta, mainly Shenzhen, Dongguan, Guangzhou, Foshan and Shunde. Since 2005, more than 500 have left Shenzhen alone. Most were firms making electronic, plastic and metal products or toys and furniture.
Michael Wu, chairman of the Taiwan-invested Pegafus Footwear Co., predicted more small- and medium-sized enterprises would be eliminated from the Pearl River Delta in months to come because of poor operation and a lack of competitiveness.
Ding Li, a Guangdong Provincial Academy of Social Sciences fellow, cited rising costs as a prime factor for the flight by Hong Kong, Macao and Taiwan investors.
"Rising labor and environmental costs have exacerbated the pressure on conventional manufacturers. Labor-intensive businesses have been forced to make a transition or go where labor is cheaper."
Further, most of the long-established overseas-backed factories in the delta, which were export-oriented, saw profits dwindle as the central government repeatedly slashed export rebates to prompt economic transition.
"To flee the Pearl River Delta has become inevitable when there is little profit to make or not any profit at all," Ding said.
Businesses that solely depended on doing OEM but have no gross profits from their own brands or developments don't have space for survival in the delta, according to Cai Zhengfu, Airmate Electrical (Shenzhen) Co.Ltd vice chairman.
"The monthly salary for an ordinary worker has gone from 800 yuan (112 U.S. dollars) to 1,500 yuan in the past two or three years, coupled with the nearly 10 percent appreciation in the Chinese yuan currency," Cai said. "Many exported commodities saw cuts of five to six percentage points in rates of export tax rebate. Some products no longer get any tax rebate for export as they used to."
