From The Straits Times in Singapore comes an interesting article about Chinese sourcing.  Rising wages and government incentives are causing companies like Hewlett-Packard and Cisco to look inwards for new locations to locate factories.  Historically labor has migrated from the inland provinces to coastal locations like Shanghai in search of opportunities.  Now the opportunities are moving to less developed areas of China.

As the article states:

A growing number of foreign companies in China, faced with spiralling wages and a shortage of skilled workers, are moving their factories inland to contain rising costs, analysts say.

After a spate of strikes and minimum wage hikes resulted in hefty pay rises for millions of workers, firms are looking to capitalise on government incentives to shift their operations to impoverished western China.

Foreign-invested firms are also looking to tap into a young, talented labour force which no longer wants to sacrifice family ties by leaving home to work long days in the coastal industrial belt.

While wages have been increasing for years, Vajpayee said foreign and Chinese manufacturers had now reached a 'tipping point' where labour costs were growing at a faster pace than revenues. 'Investment in a new factory in an inland province is a better option than continuing with a high cost base in coastal regions,' he said.

Although the article deals specifically with manufacturing, support services such as Finance, HR, and IT will no doubt be impacted by the same factors.  Companies looking to establish or build Shared Service Centers in China will need to evaluate the migration of manufacturing labor and where support services should be located to best serve the organization.