20,000 factories on the brink of crisis
Bonnie Chen
Wednesday, November 09, 2011
More than 20,000 Hong Kong-owned factories in the Pearl River Delta may close or downsize because the Guangdong government is ready to raise the minimum wage once again in January, the Federation of Hong Kong industries warns.
Federation vice chairman Stanley Lau Chin-ho said provincial authorities are considering raising the minimum wage by 18-20 percent in January. The base wage was raised in March this year.
Overseas orders have fallen 5-30 percent and will decline further, Lau said, putting at risk 30 percent of 60,000 Hong Kong-owned factories in the delta.
The federation has now written to Guangdong authorities seeking delays in the implementation of the next increase in the base wage.
Chinese Manufacturers’ Association of Hong Kong vice president Johnny Yeung Chi-hung is holding out hope that wages will be adjusted upward in the second half of next year in stages, with a single-digit increase each time.
“Since 2009 the minimum wage increased at a double-digit rate yearly,” he said. “The latest rise was in March 2011. It was the worst time as many companies needed to settle outstanding payments.”
Lau said conditions are worse than during the 2008 financial tsunami, and he urged the SAR government to relaunch the special loan guarantee scheme introduced in 2008.
A government spokeswoman noted that while the scheme was wound up in 2010, the SME Financing Guarantee Scheme with 50-70 percent loan guarantees was launched in January this year.
To ride out the difficulties, Lau suggests that manufacturers move away from labor-intensive operations, enhance brand-building efforts and explore markets in emerging economies. He also points to selling more products in the domestic market.
In his policy address, Chief Executive Donald Tsang Yam-kuen proposed a HK$1 billion fund to help business explore the mainland market. Implementation details are being drawn up with the intention of applying for funding approval from the Legislative Council in the first half of next year.