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Shenzhen ‘wants to kill’ HK factories

South China Morning Post – Jan 4, 2012

Of course Hong Kong still needs a third runway to handle the dwindling exports from the PRD ?

Manufacturers angered by the decision to implement pay rise next month, after municipal authorities had earlier offered to shelve any increase

Shenzhen’s minimum wage will rise from next month, ending a one-month delay to the increase rather than a year-long grace period that angry Hong Kong manufacturers had asked the municipal authorities for in December.

Manufacturers received government notices on Monday that the minimum wage will jump 13.6 per cent to 1,500 yuan (HK$1,850) on February 1, the second rise in 10 months and the highest minimum wage in the nation.

Major trade body representatives said they were disappointed at the special economic zone’s decision, especially since officials had earlier offered to shelve the pay rise.

Pauline Ngan Po-ling, the chairman of the Hong Kong Young Industrialists Council, said the decision effectively ignored manufacturers’ call for a one-year delay due to the escalating euro-zone crisis and poor demand in the United States.

Trade members met Shenzhen government officials and representatives of the Hong Kong Economic and Trade Office in Guangdong as recently as December 16.

“They assured us by promising to share our burden but two weeks later, they raised wages by almost 14 per cent,” Ngan said. “On the one hand, they say they will help us, on the other hand, they want to kill us.”

Ngan, the deputy chairman of Mainland Headwear, which runs a factory in Shenzhen with about 2,500 workers making caps for export, said the wage rise was ill-timed.

The increase would raise the company’s labour costs by 20 per cent and prompt it to set up its second production base outside the mainland, she said.

Higher wages have exacerbated manufacturers’ recent problems, which range from a credit crunch and dwindling orders to labour shortages and changing industrial policies.

A Grant Thornton survey revealed yesterday that confidence among Hong Kong businesspeople about the next 12 months sank to its lowest in the fourth quarter of last year. Their biggest worries were shrinking orders and profitability as a result of rising finance costs.

“We are disappointed at the sudden pay increase, which came at a very inappropriate time and hit badly our confidence in the prospect of the manufacturing sector,” said Jimmy Kwok Chun-wah, who runs petrochemical plant Rambo Chemicals in Shenzhen and is a deputy chairman of the Federation of Hong Kong Industries. “It looks like Shenzhen is testing how much pressure manufacturers can bear because it is the first and only region in Guangdong to lift minimum pay.”

Federation deputy chairman Stanley Lau Chin-ho said Guangdong provincial vice-governor Zhao Yufang promised last month that the province’s proposed minimum wage would be shelved from January 1, but did not say until when.

“We got this verbal promise during her visit last month, but she did not say when the proposals would be implemented,” Lau said.

After outcries from trade bodies, Guangdong put on hold two proposals that would have lifted the minimum wage by 16 per cent or 17.9 per cent on average.

Last week, the Ministry of Human Resources and Social Security said 24 provincial or regional governments raised minimum wages by an average of 22 per cent in 2011, a year in which labour disputes had sparked protests.

China Labour Bulletin spokesman Geoffrey Crothall said that at the existing levels, the minimum wage could not be considered “a living wage” and workers were still banking on overtime and allowances to make a decent living.

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