New risk for HK manufacturers

Policy change in Beijing will mean extra costs for many companies.
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Hong Kong-based manufacturers are facing a new challenge, as the central government looks to further trim the country's ever increasing trade surplus.

The decision to expand its export catalogue to 15 per cent of the country's trade categories as of August 23rd will mean that exporters of goods listed in the catalogue will be required to deposit half the amount of their payable levies in the Bank of China before they can continue their business.

Vast numbers of Hong Kong enterprises will have to give up their labour-intensive production or move out of familiar coastal bases, or upgrade their technology and product quality quickly.

Simon Lam, boss of a Hong Kong-funded toy firm, told China Daily that he will consisder moving his firm from Dongguan, a processing industry centre in South China, to either Thailand or Vietnam to avoid the costs incurred by the policy change.

His factory is used to import processing materials at a price of about 80 million yuan per manufacturing unit. This would mean, according to the new regulation, he would have to pay an additional deposit of as much as 23 million yuan.

At a maximum, TDC estimates, processing companies will have to cut some 370,000 jobs on the mainland and another 10,000 in Hong Kong.

A delegation of Hong Kong industry and trade bodies have visited the Guangdong provincial government to seek a grace period in the enforcement of the policy. However, Beijing is under mounting pressure to reduce the trade surplus, according to sources.

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