China urges industry to move inland

China will intensify efforts to draw factories inland from crowded coastal regions, a government directive said, but warned officials to leave such decisions to companies.

The State Council, or cabinet, stressed the importance of relocating industry inland to keep manufacturing competitive and encourage job growth closer to the homes of China's vast rural population, which has long provided cheap factory labour.

The official push builds on growing momentum for factories to move from Guangdong, Zhejiang and other eastern coastal provinces facing rising land and labour costs.

"The international and domestic division of labour is now undergoing profound adjustments, and the pace of industry relocating from our country's eastern coastal regions to central and western regions is accelerating," said the document released late on Monday night and reported in papers on Tuesday.

"Actively guide the labour force to transfer to employment in areas close to home, encourage an agglomeration of industry and population and accelerate urbanisation," it said.

For more than a decade, Beijing has campaigned to "develop the west" by encouraging investment in inland provinces, and the new directive said taxation, finance, investment and land policies would be used to extend that effort.

But it warned officials not to pressure investors into shifting factories.

"Adhere to a market orientation and cut down on administrative meddling," said the directive, which was dated August 31 but released only now.

Last month, Taiwan's Hon Hai Precision Industry Co Ltd, a device maker for the world's top tech brands, said it will raise its total Chinese workforce by over 40% by next year but shift expansion inland and away from its plant in far southern Shenzhen.

Incentives for acquisitions

The industries targeted for possible relocation inland include textiles and garments, toys, electrical appliances, agricultural processing and equipment manufacturing.

A separate directive said taxation, financial and credit policies would be used to encourage acquisitions intended to improve the performance of Chinese companies in the motor vehicle, steel, cement and other sectors dogged by fragmentation.

The directive, which was also released late on Monday night, said the government would "encourage and support" private companies engaged in restructuring state-owned businesses.

"Nurture a group of major corporations that are internationally competitive, and promote the structural optimisation and upgrading of industry," the document said.

The two documents were issued on the central government's web site ( www.gov.cn ).