Earlier today I did a post on how I do not see many companies moving out of China for countries like Vietnam and Mexico. One of the reasons I do not expect that to occur in large numbers is because there are still huge swaths of China that are still incredibly low cost. A number of readers pointed out to me an article in today’s China Daily, entitled, Moving Inland, that nicely brings this point home.
This article calls Anhui province, an historically poor agricultural province in China’s central region among the “new trendsetters” in securing foreign direct investment (FDI), “a fact that some observers find astonishing” but the numbers bear this out:
In the first three quarters of 2007, six central provinces, including Anhui, Henan, Hubei, Hunan, Jiangxi and Shanxi attracted $11.5 billion in foreign investment, a 46.2 percent increase over the same period the year previous and 24.3 percent of the national total.
Anhui ranked first in annual growth at 190 percent, 178 percent higher than the national average, and fifth place among the six by capital volume of $1.94 billion.
The province has attracted investment from both home and abroad, including big international names like ABB, Unilever and Hitachi.
In 2007 alone, 499 new foreign enterprises registered in the province’s cities of Hefei, Wuhu, Ma’anshan and Bengbu.
The capital Hefei, a six-hour bus ride west from Shanghai, is now home to more than 2,000 foreign enterprises, including 18 Fortune 500 companies. Along the Yangtze River, the city of Wuhu, another emerging spot for investment in Anhui, has attracted 34 Fortune 500 enterprises.
Needless to say, its big draw is lower costs than in the coastal regions, including considerably lower wages:
The minimum monthly salary in Guangdong has gone up seven times over the past few years and is set to rise again to 880 yuan from 780 yuan.
In Shanghai, the minimum monthly salary is 840 yuan, in Jiangsu it is 850 yuan and in Zhejiang, it ranges from 850 to 620 yuan. In Anhui, the wage varies from 560 to 390 yuan.
Given its 80-odd universities and colleges, Anhui also has abundant skilled labor to staff its factories, while in Guangdong and Zhejiang, companies have to look for talent in neighboring regions like Hunan, Anhui and Jiangxi.
Anhui also has sufficient energy and decent transportation.