Transcript Light Industry in Pearl River Delta

Light Industry in Pearl River Delta
Group 4:Zoe(1)
Kitty (4)
Kevin Lai (12)
Marco (15)
Mandy (16)
Kevin Tsang (23)
Pearl River Delta
-Content
 Background information of Pearl River Delta
 Dominant industries and their characteristics
 Locational factors assist the existence of
industries
 Future Development of PRD
 Western PRD
 Front Office-Back Factory
Pearl River Delta -background information
 Location:
 southern part of
China
 Guangdong Province
 at Pearl River mouth
where the river
enters the South
China Sea
 Area: 41698 sq.km
 Population size : 64
million
Cities in Pearl River Delta
PRD is made up by 9 cities:
 Central district
 Guangzhou*
 FoShan
 Zhouqing
 East district
 Shenzhen*
 Dongguan
 Huizhou
 West district
 Zhuhai*
 Zhongshan
 Jiangmen
*Centre of each district
Relief and Resources in PRD
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Relief
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Gentle flat land
With spare isolated small hills
None of lands exceed 1000m

PRD as a drainage basin of Zhu Jiang
Water resources
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Sufficient water from the river streams
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Annual rainfall of South China is over 2000mm
Rainfall concentrated in Summer

Thermal power is the main source of electricity
Electricity resources
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Combustion of fossil fuels
2 nuclear plants at Daya Bay and Ling’ao
Some factories may install their own power generators
Value of China Trade
From 2003-2007,
 the value of exports,
imports and GDP
(excluding imports and
exports) are increasing
steadily,
 showing an optimistic
economic environment
in China
Importance of PRD to China
In 2007, PRD accounted for
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10.2% of China’s GDP
29.1% of China’s total export
11.8% of China’s gross industrial output
PRD also receive 11.6 billion US dollars of foreign investment
PRD is greatly crucial to the economic development of China
Reference: http://www.hktdc.com/info/mi/a/mp/en/1X003JXI/1/Market-Profiles/PRD-Economic-Profile.htm
History of development
–Before 1978
 PRD was an agricultural base
 There are less industries because,
 government focus on heavy industry like Iron
and Steel
 BUT PRD lack of coal mines, iron ore mines or
oilfields
 Development on heavy industry was in the
inland part of China, not the coastal part.
 Other factors like
 lower education level,
 Lack of technology knowledge,
 and Lack of managerial skills.
History of development
–since 1978
 Change in government economic policy – Open Door
policy
 Opened up special economic zones like Shengzhen
and Zhuhai
 Earning large amount of foreign investment
 Rising of local entrepreneurs
 Contribution of Hong Kong
 Industrialists in HK facing problems like,
 Rising production cost
 Limited land provided
 Rising labour wages
 Since PRD provided huge supply of flat land and
cheap labour (because of Rural-urban migration), HK
Industrialists keen on setting up labour-intensive
factories like textile and garment industry in PRD
Types of Industries in PRD
 Mainly light industries
 Difference between East and West
 Eastern PRD
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machinery manufacturing
Hi-tech electronic equipment
chemical products
automobile
 Western PRD mainly
 traditional industries, including
 domestic machinery
 textiles and garment
 ceramics
Characteristics of the Industries
 West
 East

Due to adequate capital for
foreign investment
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mechanization
Research & Development

Less labour-intensive
-e.g. Automobile, computer
manufacturing

Better infrastructure linked
with HK
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Shekou Terminal (Sea)
Kowloon-Canton Railway
(Rail)
Lack of external innovation
Rely more on local
enterprises

count on labour force
(more labour-intensive)
Not required hightechnology
-e.g. Textile and garment

Lack of infrastructure
linked with HK
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
Hong Kong-ZhuhaiMacau Bridge (not
constructed)
Sea transport (not
directly accessible)
west
east
Further discuss on particular industry
–Textile and garment
Industrial Enterprises
Number in Guangdong Province
Manufacture of Textile and
Garments, Footwear and
Headgear
6528
Manufacture of Electrical
Machinery and Equipment
5469
Plastic Products
4244
Manufacture of Raw Chemical
Materials and Chemical Products
2669
Guangdong statistic Yearbook 2009
Locational Factor of textile and garment industry
Government
Transportation
Pearl River
Delta
Labour
Power
Market
Rawmaterial
Locational Factor
–labour
Textile and Garment
industry is labour-intensive,
it requires
 HIGH Quantity

Due to large population size,
abundant and cheap labour
will be easily found
 LOW Quality
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unskilled labour is
required, therefore low
education level accepted
 BUT there is low stability

Frequent strikes
Chinese labour strike
Locational Factor
Incentives

For Special Economic Zones
 Low profit tax rate
(15%)
 Exemption of export
duties
 Exemption of import tax
of raw material
 Etc.
–Government
Penalties
 Increase charge on
discharging air pollutants
such as SO2 & NOx
 Pass new law requiring
factories to meet the
tighter emission
standards, otherwise will
be punished or closed
 Restrict illegal dumping
of waste and sewage into
rivers and seas
Reference: http://www.hktdc.com/info/mi/a/mp/en/1X003JXI/1/Market-Profiles/PRD-Economic-Profile.htm
Locational Factor
–Government (Incentives)

Despite of the internal improvement,
China also strove to improve the
PRD through different means.

Following China’s entrance into the
WTO and the signing of “Closer
Economic Partnership Arrangement
(CEPA)” with Hong Kong,
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PRD steps up to welcome the
foreign bankers
continues to improve the banking
system.
Increasing numbers of trade shows,
exhibition with the growing scale
and influence,
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Private companies will contributed
significantly to the PRD
maintain the sustainable
development of the PRD.
Locational Factor
 In the early 1980s,
 Shenzhen and Zhuhai
became the Special
Economic Zones (SEZs)
 Hoping Hong Kong and
Macau can give support
and assistance to them

With the above government
supports, it shows the impressive
willingness of the Government to
further develop the PRD.
–Government (Incentives)
Locational Factor

As the PRD are proximity to Hong
Kong,
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The Hong Kong-Shenzhen
Western Corridor had been put to
use
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takes 2 hours from Guangzhou to
Hong Kong by train.
4th road crossing between
Shenzhen and Hong Kong.
A key project – Hong KongZhuhai-Macau Bridge
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new “Y-shaped” bridge
constructed for connecting Hong
Kong, Zhuhai and Macau
aim of boosting the economy in
west PRD by improving
accessibility to Hong Kong
-Transports
Locational Factor

Cities in the PRD are interconnected
by highways and railways
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Improving the transport network to
strengthen linkages among cities
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5 well-developed airport in PRD
(include Hong Kong and Macao).
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-Transports
New Baiyun Airport in Guangzhou,
one of the 3 air hubs of China, is the
largest and most advanced airport in
China.
Top three container ports in China:
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Shanghai ports,
Shenzhen ports
Guangzhou ports
2 ports are in the PRD
Increase in mobility of labour
Decrease in transportation cost of production in the textile and garment industry
Locational Factor

Products from Textile and
garment industries are mainly
exported to foreign countries, like
US and UK

Yet, growing market demand for
consumer goods in China
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growing income & better living
condition
Influx of tourists.
For example,
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–Market
retail sales of consumer goods
in the region reached RMB 781
billion in 2007, grew by 16.9%
from 2006.
Major consumers markets are in
Guangzhou and Shenzhen,
accounting for 33.2% and 24.5%
of PRD ‘s retail sales respectively.
Reference: http://www.hktdc.com/info/mi/a/mp/en/1X003JXI/1/Market-Profiles/PRD-Economic-Profile.htm
Challenges faced by textile and garment industry
Textile and garment, as a labour-intensive industry,
might no longer survive in PRD because of
 Labour shortage and machines as a substitutes

Since enterprises pay low wage to workers, PRD is less
attractive comparing with other developing areas like the
Western China
 Internal competitors, Western China
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Improvement in transport network
Lower rent
Entrepreneurs keen on open new market

Invest in inland/ west regions
Challenges faced by textile and garment industry
 Rise of capital-intensive industry
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Changes are begin in the East PRD
 Turned to be capital-intensive to tackle the labour shortage
problem
 Machines will be used widely rather than workers
e.g. Automobile, petro-chemical industries, electronics, IT
industry
Future Development
Western PRD
-Zhuhai珠海
-Zhongshan中山
-Jiangmen江門
–Western PRD-
Future Development
–Western PRD-

Difference & imbalance of
economic and Industrial
development

Eastern and Central part of PRD
 receiving plenty of foreign
investment (36.1%/47.3%)
 Larger proportion of export
volume (19.9%/67.4%)

Western part
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16.6% of foreign investment
12.8% of PRD total export
Future Development –Importance of Developing W. PRD
 Increasing competitiveness of PRD

Competitors:
Southeast Asian Countries
Yangtze River Delta (w/ Shanghai
cooperation)
 As a linkage between Southwest part of China

Guangxi; Yunnan; Sichuan; Guizhou
 Growing of large market
 Sufficient labour force
 Abundant energy and raw-material
available
Enhance inter-provinces trading
 Over-emphasis on Eastern and
Central PRD
Future Development -Zhuhai
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emphasize on land use
planning and greening
the Best Model of International
Residential Environment
Improvement" awarded by the
United Nations
Most suitable place to develop
IT industry, because
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Well-planned land use
Peaceful working environment
with less pollution
Highly accessible as Zhuhai is
a port city, the only terminal
on the W. PRD
Future Development -Zhuhai
 Once the HK-ZhuhaiMacau Bridge completed,
 Become the only city
which links with HK
and Macau
 Enhance the
relationship and aborb
the experience from
HK and Macau
 Assist the SW China
economic development
by exporting their local
products overseas
also act as another entrepot
Future Development
-Zhongshan
 Suitable to be a world-class domestic machinery
manufacturer

Nowadays a few of famous brands set factory in Zhongshan
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Japan:
Mainland:
Tainwan:
 Zhongshan Government
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keen on inviting foreign investors,
especially Hong Kong entrepreneurs
which contribute over 50% of total inflow captial in Zhongshan
With great promotion of the government, way to become world-class
domestic machinery manufacturer is not difficult to achieve
Reference: http://www.cmab.gov.hk/doc/study_report_on_the_development_of_western_prd_chi.pdf
Future Development
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- Jiangmen
Jiangmen includes numerous important types of indutry
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Nylon (artificial fiber)
Motorbikes
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Tissue paper
Jiangmen may continue its multi-aspect to develop
since significant brand have established their factories in there.
Future Development
- Front Office-Back Factory
 In the past two decades, Hong
Kong and the Pearl River Delta
(PRD) complement each other
based on a general framework
of "Front Office-Back Factory"
(前店後廠).
 Most manufacturing companies
have established a profitable
mode of operation under such
regional scheme.
HK Front Office
PRD Back Factory
Reference: http://www.ust.hk/HKUST_Forum/session_1_description_english.htm
Future Development
- Front Office-Back Factory
 However, since the business
environment has rapidly
changed, there are serious
concerns on the future
development of this scheme.
 Factors such as
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HK Front Office
PRD's rising capability
growing Chinese Mainland
market
WTO assistence
may lead to collpase of the
partnership.
PRD Back Factory
Future Development
 Once suggestion is that
HK should be Back
Factory of China
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- Front Office-Back Factory
Shenzhen Front Office
Provide well-developed
infrastructure
Better banking service
 Since competitiveness of
HK may be lower than
PRD in the future, HK
may rely on China’s
promotion
 Reputation of an
International Financial
Centre may be totally
vanished
 ..Really?
HK Back Factory
Pearl River Delta