Hong Kong Manufacturing SMEs: Preparing for the Future

15hour in Bangladesh, US$0.33 per hour in Cambodia,US$0.38 in Vietnam, US$0.44 per hour in Indonesia,and US$0.51 per hour in India, while they wereUS$0.55-0.80 per hour in China’s inland andUS$0.86-0.94 per hour in China’s coastal area, 20further suggesting that China is no longer the lowcost location for manufacturing that it once was inrelative terms.While wages in the Pearl River Delta stagnatedfor a while with the onset of the global economiccrisis and export downturn in 2008, in 2010 severalGuangdong jurisdictions announced additionalminimum wage increases on the order of 20 percent. 21 Even with these increases, there were signs ofincreasing dissatisfaction with wages by workers inthe Pearl River Delta region. Foxconn provided a 70per cent rise for workers in some of its PRD facilitiesafter a number of suicides occurred among itsworkers in May 2010. In late May 2010, Honda wasforced to rise the wages of many of its employees bymore than 20 per cent to satisfy workers who hadstruck over the objections of the officially recognisedtrade union. These instances pointed towardsincreasing wage pressure over and above thestatutory increases. It should be noted that Foxconnhas indicated that it is likely to move on the order of300,000 of 400,000 jobs out of Guangdong in orderto have easier access to lower cost labour. It was notclear whether this would start a trend or not.In addition to wage rates, jurisdictions in Chinain general, and Guangdong in particular, havebecome more active in expanding the coverageof the social security system to more and moreworkers. The various insurance schemes now costemployers an amount that is 20 per cent to 30 percent of the wage bill. 22 Interviewees for the presentstudy also confirmed that rising social security costsand the introduction of separate social securitycharges are an issue for manufacturing firms inthe PRD. The cost increase is unwelcome and theseparate charges, all of which are administeredby separate bureaus and have separate recordkeeping requirements are seen as being extremelyburdensome, particularly for SMEs. 2320 www.emergingtextiles.com.21 “Guangdong raises minimum wage by 20% amid Chinainflation fears,” Financial Times, p.1, 19 March 2010.22 Enright, Scott & Associates estimates based on officialsources.23 ESA Project Interview, 2010-04-07.24 The minimum wage for Huadu, Panyu, Nansha, Conghua,and Zengcheng Districts of Guangzhou as of mid-2010 wereRMB 960 per month for full-time employees and RMB 5.52per hour for part-time employees. www.gzlss.gov.cn.25 The Zhuhai Municipal Government has set the minimumwage for full-time employees at RMB 960 per month and theminimum wage for part-time employees at RMB 9.2, per hour,higher than that mandated by the Guangdong ProvincialGovernment. www.zhldj.gov.cn. www.gd.lss.gov.cn.26 On 27 May 2010, the State Council approved the expansionof the Shenzhen Special Economic Zone to the whole city.Therefore, Bao’an and Longgang districts have been includedin the Special Economic Zone since 1 July 2010.Exhibit 9. Minimum Wage Rates Mandated by Guangdong ProvinceCategoriesMonthlyMinimum Wage( RMB)2008-09 2010Hourly MinimumWage for Part-timeWorkers (RMB)MonthlyMinimumWage (RMB)Hourly MinimumWage for Part-timeWorkers (RMB)1 860 8.3 1100 10.6 Parts of Guangzhou 24Applicable Areas2 770 7.4 920 8.8 Zhuhai 25 , Foshan, Dongguan, Zhongshan3 670 6.5 810 7.9 Shantou, Huizhou, Jiangmen4 580 5.6 710 6.9Shaoguan, Heyuan, Meizhou, Shanwei,Yangjiang, Chaozhou, Jieyang, Yunfu530 5.1 660 6.4 Selected counties in northern Guangdong51000 8.8 1100 9.8 Shenzhen SEZ900 8.0 1100 9.8 Shenzhen outside SEZ 26Source: Guangdong Government