Empty factory buildings in Dongguan
Yesterday I had a discussion with a friend based in Dongguan city (a major export manufacturing base between Shenzhen and Guangzhou). He estimates that 25% to 35% of factory buildings are empty and unoccupied. In his area, the rental fee for factory buildings has gone down from rmb14 per sq.m. before the crisis, to rmb6 per sq.m. today.
Why such a drop in manufacturing activity there? I see a few reasons:
First, the volumes of goods exported from China are still lower than two years ago. There was a sharp decline in activity (both import and export) for all Chinese ports. See the graphs in this article prepared by the Global Supply Chain Council: China Ports and Global Integration.
Second, the city of Dongguan started to push some industries out of its limits. Higher taxes and regulations were designed to get rid of polluting and labor-intensive activities. They are still looking for new investors, but mostly for high-tech manufacturing and R&D centers.
Third, and more generally, there is a transfer of the manufacturing center of gravity from the Pearl River Delta (close to Hong Kong) to other provinces (mostly to Fujian, Zhejiang and Jiangsu for consumer products and light industry).
Anybody comes up with other/better reasons for the current situation in Dongguan?
