Moving To Inland China: Anhui As The New Guangdong
Earlier today I did a post on how I do not see many companies moving out of China for countries like Vietnam. One of the reasons I do not expect that to occur is because there are still huge swaths of China that are still incredibly low cost. A number of readers pointed out to me an article in today's China Daily, entitled, "Moving Inland," that nicely brings this point home.
This article calls Anhui province, an historically poor agricultural province in China's central region among the "new trendsetters" in securing foreign direct investment (FDI), "a fact that some observers find astonishing." The numbers bear this out:
In the first three quarters of 2007, six central provinces, including Anhui, Henan, Hubei, Hunan, Jiangxi and Shanxi attracted $11.5 billion in foreign investment, a 46.2 percent increase over the same period the year previous and 24.3 percent of the national total.Anhui ranked first in annual growth at 190 percent, 178 percent higher than the national average, and fifth place among the six by capital volume of $1.94 billion.
The province has attracted investment from both home and abroad, including big international names like ABB, Unilever and Hitachi.
In 2007 alone, 499 new foreign enterprises registered in the province's cities of Hefei, Wuhu, Ma'anshan and Bengbu.
The capital Hefei, a six-hour bus ride west from Shanghai, is now home to more than 2,000 foreign enterprises, including 18 Fortune 500 companies. Along the Yangtze River, the city of Wuhu, another emerging spot for investment in Anhui, has attracted 34 Fortune 500 enterprises.
Needless to say, its big draw is lower costs than in the coastal regions, including considerably lower wages:
The minimum monthly salary in Guangdong has gone up seven times over the past few years and is set to rise again to 880 yuan from 780 yuan.In Shanghai, the minimum monthly salary is 840 yuan, in Jiangsu it is 850 yuan and in Zhejiang, it ranges from 850 to 620 yuan. In Anhui, the wage varies from 560 to 390 yuan.
Given its 80-odd universities and colleges, Anhui also has abundant skilled labor to staff its factories, while in Guangdong and Zhejiang, companies have to look for talent in neighboring regions like Hunan, Anhui and Jiangxi.
Anhui also has sufficient energy and decent transportation.
Comments
Anhui's proximity to Shanghai has also been a boost to Hefei and other cities there. Only about one hour by air and six-seven by automobile, transportation is convenient. Numerous Anhui residents populate Shanghai, hence their ability to attract businesses already in or interested in Shanghai to move.
This is becoming a trend, whereby natives of other provinces who move to the larger coastal cities and still retain close ties back home are the links to draw commerce and manufacturing back home, taking advantage of labor and real estate differentials, and exploiting home-grown guanxi. As transportation infrastructure develops and spreads, the long-term effects will be awesome.
Posted by: Law Office of Todd L. Platek | February 25, 2008 7:18 PM
I think you're spot on about the "trend" of companies moving away from China. I think China will remain the "Go-To" spot for manufacturing until it has been ravaged so greatly that the land and people physically cannot manufacture anymore.
I find this quoted sentence from the linked article to be specious, though:
"Given its 80-odd universities and colleges, Anhui also has abundant skilled labor to staff its factories"
We all know that number_of_universities is NOT equal to skilled_labor. It makes me question the article. Oh wait. It's a China Daily article. No wonder.
I wonder what the ulterior motive in writing this article is....
Posted by: Jeremy | February 25, 2008 8:01 PM
Is there a joke to had had somewhere in this story??
Cheers
Posted by: Hunxuer | February 26, 2008 12:11 AM
People have been talking about GD's demise for years. Factories are moving to Shanghai, or inland, or Vietnam. Not enough consideration is given to "manufacturing clusters". GD has a critical mass of sub-suppliers and service providers.
When manufacturing clusters were first formed, there was a huge difference between manufacturing costs in China and manufacturing costs elsewhere. Today, the incremental benefit – if there even is one – between GD and the inner provinces is marginal. You will get some savings associated with lower labor costs, but those savings will be eaten up by the added cost of poor logistics (and general inconvenience).
The only reason why GD has to look for talent in neighboring provinces is that the clusters work so well...
Posted by: Paul | February 26, 2008 6:03 AM
anyone knows where can I search for the salary differentials for a production supervisor & a manager between Guangzhou and Hefei
Posted by: Heng wy | April 21, 2008 2:30 AM