Rising salaries drives firms west
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Zhang at Aon Hewitt pointed out that an increasing number of companies are expanding their manufacturing footprint across the country's western or central areas to offset the rising labor costs.
"One of the biggest trends we have seen in 2010 was the industrial relocation to the country's interior and western provinces where the pay for workers is lower than those in the eastern coastal cities," he said.
Currently, a skilled worker's annual salary in Xi'an, capital of Northwest China's Shaanxi province, or in Chengdu, capital of Southwest China's Sichuan province, is roughly 20,000 yuan ($3,030). In coastal cities such as Guangzhou it is more than 24,000 yuan, according to 2010 Aon Hewitt's Total Compensation Measurement Study findings.
But in addition to the lower labor costs in the western or central regions, companies have also noticed that there is huge potential for growth in these areas, Zhang added.
The US computer maker Dell Inc announced in September that it will open its second China operations center with manufacturing, sales and services in Chengdu in 2011, in order to supply the booming demand in West China.
Hon Hai Precision Industry Co, the world's largest contract maker of electronics products by revenue, is also planning several major investments in China's interior regions, including Chengdu and Zhengzhou in Henan province and Langfang in Hebei province.
Companies could enjoy the benefits of the government's ongoing efforts to promote the development of western China since the "go-west" campaign implemented in 2000.
In recent years, local governments of the western or central regions have put much effort into attracting investment by implementing preferential tax policies, as well as improving traffic flow by building railways and highways to link inland areas with ports in coastal areas.
As more renowned companies arrive in western or central regions, many college graduates are now opting to choose to stay closer to their homes rather than find jobs in sprawling cities such as Beijing, Shanghai or Guangzhou.
Tang He, a senior at Beijing University of Posts and Telecommunications, said he will go back to his hometown, Chongqing, to work after graduation in June.
"I am majoring in electronic engineering. It has come to my attention that many high-tech companies including US computer maker Hewlett-Packard Co (HP), and Taiwan's Quanta Computer Inc have moved some of their operations to Chongqing,. Therefore, I decided to find a job in my hometown where living costs are much lower than in Beijing," he said.
For some multinational corporations that currently outsource largely to manufacturers in China, in addition to moving to China's interior regions, they are looking at other low-cost countries such as Vietnam, Thailand, Malaysia and Indonesia as alternative sources for global production, according to a recent report from global management consulting company Accenture. However, multinationals considering these locations could face challenges such as less developed infrastructure in ports, roads and facilities, shortages of skilled workers and political instability, said Accenture.
As the Chinese government now attaches great importance to economic restructuring and boosting domestic consumption, it presents significant opportunities for multinationals to transform their focus in China - from manufacturing to sales and distribution in China's domestic markets, it said.
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