Just over one-third of the manufacturers in China’s Pearl River delta — the country’s export powerhouse — plan to shift production capacity to cheaper locations within the country or to bases in southeast Asia, Bangladesh, India and Sri Lanka, a survey of manufacturers shows.

The main motivation for the capacity relocations is labour shortages that are driving wages higher and reinforcing pressures for more generous social welfare payments, according to a survey of 290 manufacturers in the delta region conducted by Standard Chartered in February and March this year.

Survey respondents said they expected migrant worker wages to rise 8.4 per cent this year, up from 8.1 per cent last year (see chart) — suggesting a real wage growth of 6.8 per cent after allowing for a projected inflation of 1.6 per cent, according to Kelvin Lau, an author of the Standard Chartered report.