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Taiwan firms pinched by wage hikes
By Wang Cong and Li Huiying |
June 24, 2010, Thursday
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Print Edition
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TAIWAN-funded firms on the Chinese mainland are likely to relocate from the mainland's coastal regions to its interior, or even to other Asian countries, in the wake of rising labor costs on the mainland.
Given the rising yuan and recent wage hikes, Taiwan companies operating on the mainland would have to either move to the central or western parts of the mainland or Southeast Asia, or focus less on labor-intensive industries and target the mainland's own market, said Tang Yonghong, deputy head of the economic research center of Xiamen University's Taiwan Research Institute. He spoke to Xinhua on Tuesday.
Since February, a dozen Chinese provinces and municipalities have increased their minimum wages. The most dramatic rise has been at Taiwan-owned Foxconn, the world's top contract cell phone manufacturer, which said it would raise salaries for assembly workers at its production base in Shenzhen by 66 percent to 2,000 yuan per month beginning October 1.
The rise followed a spate of suicides at Foxconn's Shenzhen plant, where 300,000 Chinese workers churn out iPhones, iPads, and other electronic products for corporations worldwide, including Apple and HP.
Beginning about two decades ago, the Chinese mainland emerged as a preferred location for Taiwan businesses in search of inexpensive land and labor. Today, about 90,000 enterprises from the island operate on the mainland, employing a work force even greater than Taiwan's entire population of 23 million.
But with labor costs steadily rising on the mainland, Taiwan entrepreneurs are likely to search for lower-wage alternatives, said Tang Yonghong from Xiamen University. He said that relocation for the sake of cheaper labor costs alone was "only a temporary solution."
Enterprises moving from the mainland's coastal areas to the interior or other countries might face similar problems soon as labor costs catch up. A better option was to transform into technology-intensive enterprises and target the mainland's domestic markets, Tang said.
"Taiwan-funded enterprises used to treat the mainland as just a production base," Tang said. "They ship raw materials, spare parts or half-finished products to the mainland for processing, then ship the finished products to Europe and the US for sale." The "triangular trade" pattern that relied heavily on cheap raw materials and labor, thus had to be changed now that the mainland's labor costs have risen, he said.
Liu Bih Jane, vice president of the Taiwan-based Chung-hua Institute for Economic Research, said: "It is high time that Taiwan firms on the mainland changed their development patterns, and the key in this process lies in the mainland's domestic market."
Tang Yonghong dismissed the notion that rising labor costs in the mainland would lead to the doom of Taiwan-funded businesses on the mainland, or that it would hurt the mainland's economy in the long run. "Companies change their strategies in search of greater profits. That is just how economy grows," he said.
(The authors are Xinhua writers.)
Given the rising yuan and recent wage hikes, Taiwan companies operating on the mainland would have to either move to the central or western parts of the mainland or Southeast Asia, or focus less on labor-intensive industries and target the mainland's own market, said Tang Yonghong, deputy head of the economic research center of Xiamen University's Taiwan Research Institute. He spoke to Xinhua on Tuesday.
Since February, a dozen Chinese provinces and municipalities have increased their minimum wages. The most dramatic rise has been at Taiwan-owned Foxconn, the world's top contract cell phone manufacturer, which said it would raise salaries for assembly workers at its production base in Shenzhen by 66 percent to 2,000 yuan per month beginning October 1.
The rise followed a spate of suicides at Foxconn's Shenzhen plant, where 300,000 Chinese workers churn out iPhones, iPads, and other electronic products for corporations worldwide, including Apple and HP.
Beginning about two decades ago, the Chinese mainland emerged as a preferred location for Taiwan businesses in search of inexpensive land and labor. Today, about 90,000 enterprises from the island operate on the mainland, employing a work force even greater than Taiwan's entire population of 23 million.
But with labor costs steadily rising on the mainland, Taiwan entrepreneurs are likely to search for lower-wage alternatives, said Tang Yonghong from Xiamen University. He said that relocation for the sake of cheaper labor costs alone was "only a temporary solution."
Enterprises moving from the mainland's coastal areas to the interior or other countries might face similar problems soon as labor costs catch up. A better option was to transform into technology-intensive enterprises and target the mainland's domestic markets, Tang said.
"Taiwan-funded enterprises used to treat the mainland as just a production base," Tang said. "They ship raw materials, spare parts or half-finished products to the mainland for processing, then ship the finished products to Europe and the US for sale." The "triangular trade" pattern that relied heavily on cheap raw materials and labor, thus had to be changed now that the mainland's labor costs have risen, he said.
Liu Bih Jane, vice president of the Taiwan-based Chung-hua Institute for Economic Research, said: "It is high time that Taiwan firms on the mainland changed their development patterns, and the key in this process lies in the mainland's domestic market."
Tang Yonghong dismissed the notion that rising labor costs in the mainland would lead to the doom of Taiwan-funded businesses on the mainland, or that it would hurt the mainland's economy in the long run. "Companies change their strategies in search of greater profits. That is just how economy grows," he said.
(The authors are Xinhua writers.)
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