Jane Lai

    MEMBERS of the American Chamber of Commerce in South China (Amcham) said that China is still their favorite investment destination despite a long list of concerns over China’s economy ranging from higher labor costs, rising raw material prices, a strengthening yuan and power shortages.

    A forum, co-organized by Amcham and the Shenzhen Municipal Labor and Social Security Bureau (SMLSSB), was held Wednesday aimed at providing clarifications of some unclear issues of the new labor law, which came into effect in January.

    The new law, which has made it harder for employers to avoid paying employees’ benefits, has triggered a number of disputes in the country and a majority of complaints are related to overtime payments and breach of contracts, which could increase employers’ costs, Qing Xiaolan, section chief with the SMLSSB, told the forum.

    The Amcham likes the law because “American enterprises have always complied with the labor law here and the new law helps them compete with those who pay less than what workers deserved,” Harley Seyedin, president of the Amcham, said at the forum.

    But many companies have complained that the new law has significantly increased their costs and may erode China’s competitive advantage as the “world’s factory.”

    Mou Weidong, who runs a small factory in Dongguan, Guangdong, said his monthly wage per employee has shot up 30 percent to 1,300 yuan (US$191.18) since the new labor law went into effect.

    Adding to the headaches of many employers are also high oil prices, a rising yuan, weaker demand overseas and surging land and raw material costs.

    Guangdong, which accounts for 40 percent of the country’s exports of products assembled from imported components, is taking the biggest blow. Xinhua reported early this month that almost half of the shoemakers in the province’s Pearl River Delta, the world’s largest footwear production region, closed in the first five months of this year.

    As it is getting more expensive to manufacture in China, a growing number of multinational corporations are pursuing a strategy that companies and analysts call “China plus one,” establishing or expanding Asian bases outside China to control costs.

    But rising costs are not enough to shake China’s status as a popular investment destination, said some companies attending Wednesday’s forum.

    Some members had followed the “China plus one” trend and expanded factories in Vietnam, Thailand, Cambodia and Malaysia, but were quick to realize that these countries do not have massive markets, comprehensive infrastructure, convenient transportation system and ready availability of everything that had spoiled them when they were in China, Seyedin said.

    “The industrial clusters scattered across the Pearl River Delta have played such an important role in offering us availability of everything we want that we can hardly find a better region in other countries to settle down and make a profit in such a smooth way,” John Chan, senior human resources manager with Jardine OneSolution, said.

    What has attracted foreign companies to stay is also the effect of market size.

    “Around 57.5 percent of our members have shifted to manufacturing and selling goods in China over the past five years because of its market size, which has generated strong consumption power that even India and Vietnam need time to catch up with,” Seyedin said.