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More companies are leaving China’s coastal cities for inland cities to cut down on production costs.  Wages are significantly lower inland, thus significantly boosting operating-profit margins.  This growing trend could double China’s share of global exports to 23% in the next 10 years.

Companies are moving due to rising costs of labor in the more urban coastal cities.  Factory wages in coastal areas have risen 94% in the past 7 years and continue to increase.  Cities in inland provinces such as Hunan or Henan have become popular alternatives with lower wages.  For 2010, average annual wages in the coastal province Guangdong was $3,405, while the inland province Henan was $2,400.  This transfer to inland factories may prevent foreign companies from moving to countries such as India or Vietnam for lower wages. 

Companies must balance their savings on wages from moving inland with the increased costs inherent to the transfer.  For example, leaving the coastal city of Guangzhou for inland Yongzhou can cut wages by 17%.  However, transportation costs would increase by 20% because of the longer distance from available ports.  Younger inland workers are also more reluctant to take factory jobs.  Other issues to look out for may include fewer suppliers and less business savvy local governments.