Rising production costs and wages now faced by factories in the Pearl River Delta will also happen in central China five years from now, Metro Daily reported Monday, citing Irons Sze, president of the Chinese Manufacturers’ Association of Hong Kong.
Having set up factories in south-central China’s Hunan province in 1997, Sze was among the first batch of manufacturers to expand outside the Pearl River Delta and is now enjoying the move’s dividends.
But as production costs rise, he urged Hong Kong manufacturers to upgrade their operations and build their brands so that they can transfer the additional costs to consumers.
They should also shift their focus from exports to the domestic market, and exploit the market potential of a country with 1.3 billion people, he said.
Sze said the profit margin of an original equipment manufacturer, a company that supplies equipment to other companies, has dropped to a single digit compared with 20 to 30 percent in previous years, amid increasing production cost in China and sluggish growth in the United States and Europe.
Despite this, he said, virtual economy like finance and technology cannot replace real industries as manufacturing is essential to every part of people’s lives.
“The financial industry can only sustain its development with the support of the real economy. In the Asian financial crisis in 1997, manufacturers were the first group of people who came out to spend and invest on fixed assets,” Sze said.
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