More foreign companies are expected to join in the new wave of closures in Dongguan, a key manufacturing city in southern China's Guangdong Province, amid a slowing economy, according to a report on CRNTT.com, the website of the China Review News Agency.
It was estimated that nearly 4,000 enterprises closed last year and a number of electronics manufacturers, which include some Taiwanese firms, are expected to join them in the next few years, the report said.
After the financial crisis of 2008, toy and furniture manufacturers led the first wave of factory closures while technology manufacturers joined the exodus from the manufacturing hub.
Late last year, Wintek, a Taiwanese touchscreen manufacturer, closed its two factories in Dongguan.
The latest wave of business closures has affected small and medium enterprises as well as listed companies. The report said that one-third of the 17 listed companies in Dongguan have reported a decline in sales in the first half of this year compared with the same period of last year, with one mobile phone contract manufacturer having more than 800 percent drop in sales.
The report added that the electronics manufacturing industry has an even more difficult position than during the 2008 financial crisis due mainly to the rising costs as a result of China's stricter regulations for production and stringent environmental protection rules introduced earlier this year.
The companies in the last wave of closures include mostly those that rely on cheap labor and policy incentives and those that are subject to lower requirements in terms of environmental protection, while enterprises in the current wave of closures are mostly contract manufacturing companies, which lack of branding and technology, the report said.
According to a Taiwan think tank, an estimated 4,000-5,000 Taiwanese enterprises have moved out of Dongguan since 2008, adding that Taiwanese companies have to pay attention to the policies implemented by Dongguan authorities and the State Council for the development of prioritized businesses, which include smart and green manufacturing.