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Special Report – PRD’s Pain, China and ASEAN’s Gain

By Standard Chartered Bank

Summary

Companies in the Pearl River Delta (PRD) – China’s leading manufacturing hub – still face plenty of challenges, according to our sixth annual survey of manufacturers in the region. A labour shortage persists, and wages are likely to rise 8.4% this year.

The PRD’s short-term pain is part of China’s longer-term pursuit of a more sustainable growth model, in our view. Rising wages reflect China’s improving productivity and the increasing complexity of the goods it produces as it moves up the value chain. Rising FDI flows into the services sector reflect this shift.

Investing more in automation and streamlining processes is the most common response to labour shortages and rising wages for PRD manufacturers. Among those planning to relocate factories, the preferred offshore destinations are Vietnam and Cambodia.

ASEAN – with its lower wages, abundant labour supply and rising household affluence – is well positioned to benefit from the PRD’s shift towards high-end manufacturing and services. Infrastructure development would allow it to become Asia’s next PRD, in our view.

Please click here for the full report.

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