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Case Study: Light industries in Pearl River

Delta (PRD)

Group Member: 6B Chan Chau In, Iris(1)

Chan Ching Chak, Alex(2) Chan Han Tat, Bill(3) Cheng Ki Fung, Lemon(6) Wong Man Yeung, Isis(25)

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Content

• Geographical location of Pearl River Delta • Characteristics of light industries in PRD• Important locational factor of PRD• Future development of PRD

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Where is Pearl River Delta?

• Southern Part of China

• Guangdong Province

• Not much flatland• Monsoon climateMain River• 西江 北江• 東江 韓江Population: 64 million

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Where is Pearl River Delta?• 9 key cities• 2 special

administrative regions(GPRD)

Mainly :• HongKong• Shenzhen• Dongguan• Gunagzhou

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The importance of PRD to China

---------Increasing trend in importance of PRD

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• Lccounted for 29.7% of China's total export ----2006

• Foreign direct investment reached US$11.3 billion, 19.2% of the national total----2006

• Largest manufacturing base and export centre base for China to maintain her position ----- the World Factory

The importance of PRD to China

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Distribution of Light industries• East bank : Guangzhou, Dongguan, Shenzhen,

Huizhou--------electronics and IT products

• West bank : Foshan, Zhongshan, Zhuhai, Jiangmen, Zhaoqing--------household appliance products

regional specialization : each region specialize in different manufacturing production

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Dominating industries in PRD

According to the Guangdong Statistical Yearbook 2007

Ranking Items Number of Enterprises

Gross Industrial Output Value2006 (100 million yuan)

1 Manufacture of Communication Equipment,Computers and Other ElectronicEquipment

2929 11653.41

2 Production and Supply of Electric

132 2257.88

3 Manufacture of Raw Chemical Materials and Chemical Products

1547 1803.65

4 Plastic Products 2335 1340.83

5 Textile Industry 1715 1030.67

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Characteristics of light industries in PRD

• Labour intensive / Less capital intensive• Lower labour requirements

------lower education level • Finished products are mainly for export

------the US,Hong Kong ,all over the world.• Most factories are owned by foreign

companies----over 7500 multinational companies eg.Samsung( 三星 ),Nissan( 日清 ).

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Light Industries in PRD

Institutional Factors

Market

Labor Factors

Transportation Factors

Power Resour

ces

Others

Raw-Material

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Institution

• China is a socialist country which adopts planned economy

• PRD follows less restrictive economic policies and as the China’s first Special Economic Zone (SEZ)

• a number of features designed to attract foreign investment, such as a 15 percent tax rate, duty free treatment of imports of raw materials of exported products as well as exemption from export taxes.

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• Example: CEPA which is a free trade deal signed between Hong Kong and Mainland China.

• Almost all goods which qualify as 'Made in Hong Kong' can be exported duty-free to Mainland China. Non-Hong Kong companies can benefit by outsourcing production or partnering with a manufacturer whose products satisfy the CEPA 'Rules of Origin'.

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• 4 Economic and Technological Development Zones (e.g. Wenzhou , Chengdu )

• 6 New- and High-tech Development Zones

(e.g. Lanzhou , Kunming )• 6 Tariff Free Zones (e.g. Guangzhou , Shanghai )• 2 Export Processing Zones (e.g. Shenzhen,

Shanghai )

→ aims at attracting investment + providing employment opportunities → stimulate economic growth

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Labour• Light industry: labour intensive• Efficient transportation also attracts imgrant workers

from other provinces• PRD Economic Zone has a population of 45.5 million

people → stable and abandon supply of labour• Semi-skilled/unskilled labour is essential to take up jobs

which repeat mechanical operation• Women are often preferred because they are more

patient + able to do sophisticated jobs• Low labour cost (10% of that in US) → lower production

cost → competitiveness of the manufactured products

Transportation• interconnected by highways and railways• E.g. Guangdong- Shenzhen Highway• improving its land network to strengthen linkages

among cities• "Plan of High Speed Express Ways Network Linking

Cities of the PRD“• takes just 2 hours from Guangzhou to Hong Kong by

train (Shorter time distance)• 5 airports in PRD (Guangzhou Baiyun International

Airport, HK International Airport)

Transportation

• largest and most advanced airport in China• Ports in PRD play a critical role for

transporting manufactured goods abroad (For import of Raw material)• Major ports in PRD include Guangzhou Port,

Yantian Port, Shekou Port and Chiwan Port of Shenzhen (Expand for manufactured products)

Transportation

• light industries in PRD have developed rapidly → exported through Zhuhai, Shenzhen, Guangzhou, Macau

• offer lower price → Lower distribution costs• More railways and ports → Import/Export

→Importance of Market/Raw Material become lower.

• Connections with HK River Trade Terminal

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Hong Kong

Transport infrastructure• H.K. International Airport• Victoria Harbour/ Sheltered Harbour• Kwai Chung Container Terminal

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ShenzhenTransport infrastructure

Yantian Container TerminalNext to Hong Kong

High population densityHigh accessibility

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High accessibility

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Dongguan Gunagzhou

• Cheap land and labour• Flat land• Next to the Pearl River

Market

• PRD is one of the mainland's largest and most sophisticated consumer markets.

• Strong demand because of growing income and influx of tourists.

Market(DATA)• In 2006, per capita GDP = RMB47,094, • three times of the national average of RMB 15,973. • 3.3% of China's total population, accounted for 8.7%

of the nation's total retail sales of consumer goods.• Retail sales of consumer goods = RMB668.2 billion in

2006(Grew by 15.3% from 2005). • Markets are in Guangzhou and Shenzhen, accounting

for 32% and 25% of PRD's retail sales respectively.

Market

• In Guangdong, there has been a shift in the consumption pattern towards higher level needs e.g. accommodation and traveling.

• In 2006, the following categories grew mostly rapidly in sales: household electric appliances & audio / visual equipment, autos, mobile phones & telecom equipment and building & decoration materials.

Market

• The retail sector has been developing quickly. • In 2006, when China entered WTO.• Competition between local retailers and foreign

giant retailers intensified. • PRD's retail landscape is now characterized by

diversified modern operations such as department stores, chain stores. Major foreign retailers present in PRD include Watson's and Park'N Shop etc.

FUTURE DEVELOPMENT IN THE PEARL RIVER DELTA

-CHALLENGES-MEANS TO TACKLE CHALLENGES

-NEW FORMS OF INDUSTRIES

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Internal challenges faced by the GPRD•The region is facing a number of issues and challenges that can influence •its futuredevelopment.•The rapid pace of development has placed great strains on the •infrastructure, environment, energy and other public services in the PRD.• Some issues, for instance, the problem of environmental degradation,have become a major concern for both Hong Kong and Guangdong.

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-The Yangtze River Delta (YRD), whose economy lagged behindthe PRD some ten years ago, is surging as another major economicengine of China. The YRD’s export growth recently overtook that of thePRD. -The Bohai Rim in Northern China is also going to play a key role ineconomic development.

With the lower cost( labour cost, land cost) found in the YRD , factory owners are then attracted to YRD. As a result , the number of factories found in the PRD would decrease quickly.

Challenges from other industrial zones in China

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Challenges from industrial areas in other parts of the world e.g. Thailand , Singapore

-cheaper labour , land cost-large supply of unskilled , semi-skilled labour-support from their government e.g. building infrastructure-large potential market

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MEANS TACKLING WITH THE CHALLENGES

Individually , the factory owners could simply move their factories to the areas with cheaper costs (e.g. YRD ) in order to increase their competitiveness.

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If they are really lack of capital to move their plants , they can only close their factories.

MEANS TACKLING THE CHALLENGES

(1)WTO and CEPA•China’s continuing process of economic liberalisation and openingwill have an important influence on the economies of the GPRD.•China has to gradually open up its service sector to the world.•With CEPA, the GPRD is expected to integrate even faster throughtrade in goods and services, investment facilitation and tourism.

(2) Pan-PRD cooperation•The Pan-PRD region comprises nine provinces and the HongKong and Macao Special Administrative Regions•A successful Pan-PRD regional collaboration will give a huge boost to the economic strength,status and influence of the region concerned and help realise theobjective of coordinated regional development.

(3) Improvement in transport infrastructure•The advanced planning work of the proposed bridge linking Hong Kong, Zhuhai and Macao•The preparatory work of the Guangzhou-Shenzhen-HK Express Rail Link and working at full Steam on the construction of HK-Shenzhen Western Corridor 34

Diversification of industries in the PRD

-New- and Hi-Tech Industries

-PRD produced more than 4,000 types of hi-tech products-four major categories, namely electronics and -information technology (IT), -biotechnology,-new materials-opto-electromechanical products. the output value of electronics and communications equipment accounts for more than 30% of the national total.

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The End

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