10/01/2008, 00.00
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Thousands of factories closing in the Pearl River delta

The more than 70,000 factories belonging to Hong Kong companies have been in difficulty for some time because of the rise in the cost of credit and manual labor, energy, raw materials. Now exports to the United States and Europe are falling, and large numbers of facilities are expected to close.

Beijing (AsiaNews/Agencies) - The global financial crisis and the consequent reduction in imports is causing the closure of many of the factories in the Pearl River delta, already in difficulty because of the constant increase in the cost of labor, energy, and raw materials. There are more than 70,000 factories in the area, mostly belonging to Hong Kong companies, attracted by the low cost of manual labor and energy, and by tax exemptions. But last March, a survey showed that between 10 and 20% of the facilities would close within two years, possibly moving their production to other areas of China where the cost of manual labor is still very low.

Lau Chin-ho, vice president of the Hong Kong federation of industries, tells the South China Morning Post that these problems were already foreseen in consequence of the new law for workers rights, which went into effect at the end of January, granting greater economic rights. There has also been a tightening of credit as a result of the government's anti-inflation measures: it is more difficult to obtain financing, and interest expenses have risen, causing liquidity problems for many companies.

But now, the serious financial crisis is causing a drastic reduction in exports, not only to the United States, but also to Europe. This is confirmed by toymakers, which have always had a significant presence in the area and are now seeing Christmas orders drop significantly. Many factories have already closed. "The banks of Hong Kong are more cautious now", Lau observes, "because they have been hit by the U.S. credit crisis. Many Hong Kong toymakers are facing a shortage of cash. They must cut back, or shut down".

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See also
International Monetary Fund: China will be "an oasis" of stability in the global crisis
Record rise in production costs, China's economy slows
World Bank: Chinese growth will fall to 1990 levels
Chinese economy slows to lowest level in years. Wen: 2009 hardest year of century so far
India faces repercussions of financial "shock"


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