The investment environment in China is rapidly deteriorating because rising labor, raw material and land costs squeeze profits, but similar concerns prevent Taiwanese firms from moving business home, an annual survey by Taiwan Electrical and Electronic Manufacturers’ Association (TEEMA, 電電公會) said.
Overall investment risks in China rose higher this year compared with last year, after showing improvement for three years, as sharp increases in labor and raw material costs erode profitability, Leu Horng-der (呂鴻德), a business management professor at Chungyuan Christian University, said as he briefed the media on the Taipei-based association’s findings.
“Taiwanese firms in China are losing competitive edge as they turn from labor intensive to technology intensive,” Leu said.
The upgrade helps boost China’s economic growth, a trend that fosters labor and electricity shortages in good time and profitability decline in bad time, he said.
The outbreak of Europe’s debt problems for the past two years put extra pressures on firms that are focused on exports of electronic products, according to Leu, who is also a director of the university’s center for global Taiwanese business studies.
Consequently, fewer Taiwanese firms are willing to up the stakes in China, from 50.95 percent last year to 49.39 percent this year, Leu said, citing the survey that polled 2,652 Taiwanese firms with operations in China.
It is unlikely that Taiwanese firms would choose to move their business back to Taiwan where labor costs are higher, he said.
“Overheads pose a big headache in Taiwan as well, unless the Council for Labor Affairs agrees to scrap the minimum wage requirements on foreign workers,” Leu said. “That easing is unlikely to happen given the council’s stance on the issue.”
Kunshan, Jiangsu Province tops the survey in overall investment rankings, followed by Nanjing and Tianjin, the survey showed.