China-wary firms go to Cambodia

Some of Japan's biggest manufacturers are rushing to set up operations in Phnom Penh to make wiring harnesses for cars and touch screens and vibration motors for cellphones. European firms are not far behind, making dance shoes and microfiber sleeves for sunglasses.

Some of Japan's biggest manufacturers are rushing to set up operations in Phnom Penh to make wiring harnesses for cars and touch screens and vibration motors for cellphones. European firms are not far behind, making dance shoes and microfiber sleeves for sunglasses.

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Foreign firms are flocking to Cambodia to limit their reliance on China factories.

Problems are multiplying fast for foreign investors in China. Blue-collar wages have surged, quadrupling in the last decade as a factory construction boom has coincided with waning numbers of young people interested in factory jobs. The labor force has begun shrinking because of a "one child" policy and an aging population.

But the populations, economies and even electricity output of most Southeast Asian countries are smaller than in many Chinese provinces, and sometimes smaller than a single Chinese city. As firms shift south, they quickly use up local labor supplies and push wages up sharply. While wages and benefits often remain low, the manufacturing investment - FDI in Cambodia rose 70% last year from 2011 - is starting to raise millions of people out of destitution.