Bloomberg News

China City Woos Apple Supplier With Workers, Low Wages

December 24, 2011

(Corrects year to 2010 in seventh paragraph of story published Dec. 23.)

Dec. 23 (Bloomberg) -- The Chinese city of Zhengzhou will help Foxconn Technology Group recruit more than 100,000 workers next year for its local factory, matching the number it helped the maker of Apple Inc. iPhones and iPads hire in 2011.

Zhengzhou has a large workforce, with labor costs that are about two-thirds of those in China’s wealthier coastal cities, Deputy Mayor Xue Yunwei said in an interview. That’s given Zhengzhou, the capital of the mostly rural province of Henan, an advantage luring investment from manufacturers, he said.

“You can’t find entry-level workers in Shanghai offering only 1,500 yuan ($237) of monthly salary,” Xue said in Beijing yesterday. “But we can.”

Efforts to sway companies including Foxconn, Intel Corp. and Ford Motor Co. to invest inland instead of moving production to nations such as Vietnam and Bangladesh as wages rise in China’s coastal areas may help sustain economic growth that’s averaged 10 percent in the last three decades. In addition to helping find workers, authorities are offering reduced tax rates and preferential access to land to attract companies.

“In the past 30 years, China created what might be the world’s greatest miracle by attracting global capital to its coastal cities,” Xue said. “The new story for the next few decades will be the inland story.”

Economic Growth

Zhengzhou’s economy may grow 13 percent this year and maintain a double-digit pace of expansion for the “next few years,” Xue said. The national economy may grow 9.2 percent this year and 8.5 percent in 2012, according the median of 15 economists surveyed by Bloomberg.

Foxconn, which began exporting goods from its Zhengzhou factory in August, has been a major factor for the city’s growth, Xue said. Zhengzhou’s exports and imports combined will exceed $15 billion this year, triple what it was in 2010, he said.

Foreign direct investment in the city, with a population of more than 8 million, has grown 43 percent in the first 11 months of the year, Xue said. Nationally, foreign investment gained 13 percent during the same period.

To help Foxconn, Nissan Motor Co.’s local vehicle venture, and other companies to find workers, Xue said, the Zhengzhou government has encouraged some of the more than 21 million people from Henan working in other parts of China to return to the province. The government has also organized students from 40 universities and over 100 technical-training high schools in Henan to do internships at the plants in the city, he said.

Intel and Ford

Edmund Ding, a spokesman for Hon Hai Precision Industry Co., the Taipei-based flagship of Foxconn, didn’t answer several calls to his mobile phones today.

Intel announced plans in February 2009 to close down its assembly and test operations in Shanghai and move the work to the western city of Chengdu, capital of Sichuan province. In September of this year, Ford Chief Executive Officer Alan Mulally broke ground on an engine transmission plant in the western municipality of Chongqing.

Annual wages of private companies’ urban manufacturing workers in coastal Guangdong province averaged 21,644 yuan last year, compared with 16,391 yuan in Hunan and 15,495 yuan in Henan, according to government data.

“Nobody was available to meet us three to five years ago when we wanted to persuade them to do business here,” Xue said. “But now, all kinds of foreign and domestic companies visit us every week.”

Airport Plans

To make Zhengzhou even more attractive, Xue said the city also wants to spend as much as 30 billion yuan in the next decade to expand its airport to accommodate more cargo transport. The National Development and Reform Commission, China’s top economic planner, and the nation’s aviation regulator have already approved plans to start building a second runway at Zhengzhou’s airport next month, he said.

Local authorities want five runways as part of a 30-year blueprint for developing the city, Xue said.

The local government hasn’t taken on much debt to make these investments, Xue said. Zhengzhou plans to merge about 10 companies the city set up to finance products into three larger entities, each with assets in the tens of billions of yuan, he said. These three companies will focus on investing in selected industries, infrastructure projects and property development, he said, without giving more details.

Xue said the city government wants to make Zhengzhou an industrial base, a transportation hub and a large metropolis. “That’ our vision,” he said.

--Victoria Ruan, with assistance from Tim Culpan in Taipei. Editors: Bloomberg News, Nicholas Wadhams

To contact Bloomberg News staff for this story: Victoria Ruan in Beijing at vruan1@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net


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