You Want Chinese Workers? Think Outside the Guangdong Box.

There has been a lot of press lately about shortages of Chinese workers. It is important to note that nearly all of those stories originate from and focus on Guangdong province. If China is the factory to the world, Guangdong is the factory to China. If you wanted to hit a massive factory by throwing a dart from the sky, you would be wise to choose to aim at Guangdong.

But that does not make Guangdong the place to locate your business now. Quite the contrary. Guangdong is expensive and its labor shortage is very real. There are plenty of good China locations outside Guangdong in which to locate your business that will be much cheaper than Guangdong, and with a much more plentiful labor supply.

A client emailed me a China Business Network interview with Tim Weckesser, President of Sino-Consulting. The interview is titled, "Success in China For Less: Don't Rent Office Space in Beijing," and in it, Weckesser provides an excellent explanation as to why companies should consider locating their China operations outside China's first tier cities:

If you need to be in the supply chain, then you need to be located where those are available. If you need to be right next to your customers then that often will determine where you are. We generally would advise companies - little market companies especially, I'm talking about - against setting up a manufacturing operation or processing operation in a city like Shanghai or Beijing. The costs are too high, turnover of staff is very high, expenses for staff is much higher than elsewhere.

So we generally look for areas, if you felt you had to be in middle China around Shanghai, then we would look in the circle from Ningbo in the south up through Hangzhou, Suzhou, Wuxi, Changzhou, Nanjing - up in that area. All highly, highly developed, and there even can be problems there with hiring and retaining people. That's a problem you're going to face anywhere in China.

We actually have an office; we're a little bit different. We have an office way out in Shandong province, in Weihai. It's a beautiful resort town actually. The reason we're doing that - we've had it for years, we've got a full staff there, and it's extremely stable. Devoted staff, very strong skilled staff. The reason we can do that is because this staff is almost never there. They're there only to process papers. We only have one or two people in the office that process orders and so on. Everybody else is out on the road. People do not come to us, we go to them. Now, would it be different if we were in Beijing? Probably. There would be a difference, because we could then invite people to our offices when they were in town. They're in town more often. There'd be more interaction. But we've not done it and we have done extremely well with that strategy. So far so good!

Summary: if you don't have to be in Beijing or Shanghai, to me, you should try to avoid it. You should try to look for some of the lesser known cities or some of the inland cities. There's a great deal of incentives for growing inland as the government's trying to push development inland. There's good reasons to take a look there. Our base, one of our big business [clients is] in Tianjin, which is the port city for Beijing, there's huge development going on there.... But you know, Tianjin is the size of New York City, and I would bet you most Americans never heard of it! The pay levels and pay grade there are significantly lower than Beijing or Shanghai, and they've got a hundred higher educational institutions. It's first class. The turnover's much lower, and so on. That's an example of a coastal city still with lots of development left, and there's more examples.

I agree.

For more on locating your China business in a second tier city, check out the following:

-- China's New Investment Rules. Second Tier Is First Rate

-- Which China City Is Best for Mordachai? (be sure to read the comments)

-- The Talent Difference Between China's Tier 1 And Tier 2 Cities. Let's Get All Snobby About It.

-- Tianjin, China -- Second Tier City With A Bright Future (written in 2006)

-- China is Expensive -- NOT. Go Second Tier and Life Will Be Good.

-- Where To Locate Your China Business.