Secondly, the rapid expansion of Guangdong gas let to shortages of power which in turn led to power rationing and the use of diesel generators (price aligned to oil) which has again pushed up production costs and disrupted the supply performance of many suppliers.  

Thirdly, somewhat ironically, cities such as Shenzhen and Guangzhou which have reaped the benefits of the economic boom, are now demanding higher environmental standards and better wage rates for its workers who in turn, with improving living standards, are consuming more electricity, further exacerbating the problems faced by manufacturers.

Additionally, these same cities having suffered huge environmental damage from their successes are now actively discouraging and penalizing polluting industries.

As if all these raised production costs and disrupted production levels were not enough, there is a labour shortage of migrant workers in a country of 1.3 billion people! Increased farm gate prices and competition from other emerging provinces closer to home, means that workers who traditionally migrated to Guangdong in there thousands now can stay at home or work closer to their homes.

The question facing multinationals is whether they really want to source in an area with power and labour shortages, rising production costs, wages and increasing environmental restrictions. The answer is¡Kyes, of course!  As supply markets in China mature so they will become responsive to the full gambit of strategic sourcing opportunities¡Knot only price. As these strategies are introduced into a developing and economically strong Guangdong linked to the know-how of its Hong Kong investors, we anticipate that new and creative practices will develop which will deliver benefits far in excess of those seen so far.