Transcripts

China May Not Be As Cheap A Choice As First Thought

SUSIE GHARIB: The big attraction for foreign companies that set up in China is the cheap wages. But in the most developed manufacturing hubs along China`s coast, labor costs are rising. And as Nick Mackie reports from China, those rising wages are having an impact on where companies invest and how they recruit workers.

NICK MACKIE, NIGHTLY BUSINESS REPORT CORRESPONDENT: When U.S. Electronics Group Whitcomb (ph) decided to expand its China operation, instead of staying near its Shenzhen (ph) factory opposite Hong Kong, it set up production 900 miles inland at Fu Lin (ph). Amidst the dust and noise of construction work, Whitcomb discovered that the government is eager to offer financial incentives. After all, Fu Lin (ph) needs quality companies for a 10 square mile development park that will swallow up this neighboring township.

With the building work well under way, the local authorities now want to bring in the manufacturers. The big attraction for investors is the large labor pool and the low labor costs. The minimum wage in China`s booming coastal cities is around $90 per month. In western China it is under $50. Over the past 12 months, Whitcomb has recruited and trained 2,000 local workers. This is quite an achievement in an area where nimble fingered staff like 19-year-old Chen Rong would normally update sewing machines or decorate cakes.

CHEN RONG (THROUGH TRANSLATOR): Before here I worked for a food company but it was far away from my home. I chose this company because it was nearer.

MACKIE: (INAUDIBLE) has a workforce of 470,000. But as much of the available labor is from the outlying countryside, the authorities understand that training is a must. That`s why both urban and rural teenagers are encouraged to join one of the area`s 50 vocational schools. These teach a wide range of subjects from electronics to administration. And they find people jobs.

TAN MINGCE (THROUGH TRANSLATOR): We have contracts with many companies to train and supply students and for a few we prepare special courses appropriate to their needs where we train up a hundred students every year.

MACKIE: Companies with strict quality criteria, however should be prepared to invest heavily in in-house training and need to establish a production line work ethic that exists in the more developed regions, but not here. But the added training costs can be offset by other savings. Unlike factories by the coast, most of the workforce here is local. So the numbers requiring board and lodging are limited. The local workers are keen for good manufacturing jobs to move inland even though working away pays more.

RONG: I am the only child in my family. It would be difficult to go. So I found a job here. If this company wasn`t here, maybe I would have gone away.

MACKIE: For the past five years, governments in China`s heartland have had a tough job trying to woo investors with promises of tax breaks, cheap land and finance. Now with labor costs on the rise in China`s coastal cities, the traffic of executives checking out the interior is growing. Nick Mackie, NIGHTLY BUSINESS REPORT, Fu Lin, China.