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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)