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China's Wages No Longer Viable For Cheap Labor

Mon, 06/07/2010 - 4:31am

TAIPEI, Taiwan (AP) — Recent wage hikes in China could force Taiwanese electronics firms operating there to relocate to other Asian countries, a Taiwanese industry leader has said.

Chairman Arthur Chiao of the Taiwan Electronics and Electrical Appliances Association said his group is assisting China-based Taiwanese companies to seek out new manufacturing sites in India, Indonesia and Vietnam in the wake of steadily rising labor costs on the mainland.

His remarks, confirmed by an assistant, were published Monday in Taiwan's Economic Daily News.

Wages in China have been on the upswing since earlier this year, prompted by labor shortages amid the global economic recovery. Taiwanese electronics maker Foxconn Technology Group said Sunday that basic salaries at its mammoth Shenzhen facility in Guangdong province would increase in October to 2,000 yuan (US$293) per month, the second wage rise the company has announced in recent weeks. Up until May, basic pay was 900 yuan ($130).

The rises follow a spate of suicides at the Shenzhen plant, where more than 300,000 workers churn out iPhones, iPads and other electronics gadgets for well known global corporations including Apple and Hewlett-Packard.

Since the early 1990s China has emerged as a preferred location for Taiwanese companies in search of cheap land and low wages. Upward of 500,000 Taiwanese businesspeople and their families are believed to live on the mainland, and total Taiwanese investment there now exceeds $100 billion.

In the Economic Daily News interview, Chiao said the uptick in Chinese wages was putting intense pressure on the bottom line for Taiwanese companies.

"Taiwanese manufacturers have gradually moved their bases from coastal areas (in China) toward the interior, but may face limitations there in the next three to five years" as wages catch up, he said.

Chiao said a silver lining of the wage rises was the possibility of increased sales by Taiwanese electronics companies to newly enfranchised Chinese consumers.

He urged Taiwanese manufacturers to target China's domestic market, either alone, or together with Japanese companies also eager to push their own sales on the mainland.

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