Shanxi Coking Coal Group workers in Taiyuan, Shanxi province. (Photo/Xinhua)
Due to the country's industrial slowdown, China's state-run and private enterprises have been shifting their investments and factories to other countries to reduce production costs, the Beijing-based Huaxia Shibao reports.
A 16-year-old refractory material manufacturing company in Jiangsu in eastern China suspended its factory's operations earlier this year, said a spokesman for the company, surnamed Shan.
Between February and June this year, growth in production slid nearly 10 percentage points from the same period last year, a record low.
In the past few months, the sluggishness of state-owned companies has spread to private enterprises at various levels, an expert said, adding that although major banks had rolled out a series of stimulus measures such as tax reductions, they wouldn't have an effect in the short term, the newspaper reported.
However, economic researcher Guan Qingyou said on his microblog that the gloomy market environment also holds opportunities as well as challenges. Guan said the logistics and express delivery, warehousing, animal breeding, consultation, surveying, and audio visual entertainment industries could stage a reversal despite the current business climate.
Most private enterprises are facing difficulties, with some closing down due to soaring labor, material and factory lease costs. Export-reliant enterprises have been affected the most.
These developments have caused some exporters to clear their inventory and work with foreign enterprises to set up factories abroad, Shan said, adding that some factories had moved to India and Cambodia to take advantage of lower local labor costs. Factories can reportedly hire a worker for as little as 1,000 yuan (US$157) a month in the two countries, much lower than the minimum wage in China.
In addition to reducing labor costs, relocating to these foreign destinations would help them cut production costs, avert trade barriers, shorten their supply chain and speed up transformation and upgrades.
However, while moving abroad may be good policy for manufacturers who rely on exports, it is infeasible for those relying on imports.
The report said that after the government warned state-run enterprises to prepare for a slowdown, some firms, including public companies, have shifted their investment to the transport, public utilities and services, and animal husbandry industries.