Stories about businesses turning their back on China first surfaced a couple of years ago. The national media focused in particular on South Korean firms in Qingdao that scurried away in the middle of the night, leaving workers and bills unpaid. The Qingdao Morning Post, for example, characterized these Korean businesses as, “leaving without saying goodbye.”
Among the largest firms in Qingdao to do so were two leather factories – Xinyi Leather Products and Xinwu Leather Products – that left in December 2006, leaving behind 300 employees and some US$30 million in debt.
Reporting on the departure, the 21st Century Economic Report said the two factories wanted to get away from tough environmental regulations in South Korea, since leather production is both energy-consuming and polluting. At first, nearby Qingdao offered them tax benefits for five years and fewer controls. However, things started to tighten up.
The newspaper quoted anonymous officials as saying that both environmental regulations and labor legislation had become an issue for some South Korean enterprises.
These stories may have been seen as examples of low-rent companies trying to pull a fast one, but since early 2007, the media in China and abroad have picked up on the theme that the country is no longer the place to be for manufacturers. There have been reports of thousands of factories in Guangdong province shutting down in favor of alternative locations in China or countries like Vietnam.
The Hong Kong Federation of Industries has said that up to 7,000 Guangdong factories owned by Hong Kong enterprises could close their doors this year. Last year, more than 1,000 shoe factories left.
However, Beijing does not appear to be too worried about this exodus because the factories involved are small-scale and the country’s economy is robust enough to take the loss.
Meanwhile, bigger operations that require thousands of workers are staying put, according to Steven Dickinson, a Shanghai-based partner at law firm Harris & Moure.
Cambodia, Dickinson notes, is a country of around 14 million people, while Taiwan has about 20 million. Vietnam is bigger, with some 85 million people, but its workforce is not as well trained, corruption is more of an issue and workers there are also increasingly demanding better conditions.
“People who have these huge facilities with thousands of people don’t have anywhere to go,” Dickinson said.