Over the past ten years, China has become the favorite location of foreign companies, who have come to China to set up factories and utilize China´s cheap labor.  Specifically, Guangdong Province in Southern China is home to millions of foreign company factories that manufacture cheap goods such as clothing, toys, and shoes.  Recently, however, factories in this region have been experiencing labor shortages.  Companies are now finding it necessary to increase wages in order to retain factory workers.  In the past, foreign companies enjoyed setting up factories in the southern region because of its close proximity to Hong Kong.  With these new developments and the growing scarcity of cheap labor, however, foreign companies are deciding to relocate to interior Chinese cities and other Asian countries where unskilled workers can be retained more cheaply. 

In fact, in mid-April 2006, the Shenzhen Labor Bureau announced plans to increase the minimum wage in Shenzhen, the burgeoning economic zone right next to Hong Kong.  The Shenzhen Labor Bureau plans to increase the minimum wage from about $85 dollars a month to about $100 - $110 a month.  This new policy is expected to take effect in July 2006.  Although the new policy will only regulate factory wages within the Shenzhen Economic Zone, it will set a new precedent for wages throughout the region of Guangdong Province. 

Foreign companies will need to increase their wages and benefits in order to retain workers in this region of China.  Many companies have already relocated to other areas of China where there are very low minimum wages.  However, relocating to more remote areas can create other problems such as logistics and sourcing.  New employees in more remote locations may also require more training that those found in Guangdong Province.