To counter domestic inflation, several provinces in China including Guangdong and Jilin are set to increase their minimum wage in early 2012, while cities such as Chongqing, where most PC related players have recently made investments for saving costs, also reportedly will raise the minimum wage on January 1, 2012, making upstream PC component suppliers face a severe crisis, according to sources from upstream component players.

Facing declining orders from the retail channel in the second half of the year while labor costs have been rising, the quality of China's investment environment is dropping quickly and could cause a new wave of bankruptcy for smaller players in 2012.

Since smaller and local players are unable to accumulate funds from banks in China, some of the players are forced to borrow money from underground banks with an interest rate as high as 36%.

With smaller and local players closing down, orders are expected to return back to larger players. The same situation also happens in the notebook manufacturing industry with most notebook orders being accumulated at the top-three makers - Quanta Computer, Compal Electronics and Wistron

Since raising minimum wages is an important part of China's "125" plan and the government is set to have an average increase rate above 13% every year for the next five year. By the end of China's "125" plan, the average minimum wage is expected to increase by 84% comparing to that of 2010.

Source:digitimes