Presentation on theme: "Light Industry in Pearl River Delta Group 4:Zoe(1) Kitty (4) Kevin Lai (12) Marco (15) Mandy (16) Kevin Tsang (23)"— Presentation transcript:
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 Relief Gentle flat land With spare isolated small hills None of lands exceed 1000m Water resources PRD as a drainage basin of Zhu Jiang Sufficient water from the river streams Annual rainfall of South China is over 2000mm Rainfall concentrated in Summer Electricity resources Thermal power is the main source of electricity 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 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 Reference: http://www.hktdc.com/info/mi/a/mp/en/1X003JXI/1/Market-Profiles/PRD-Economic-Profile.htm PRD is greatly crucial to the economic development of China
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 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 East Due to adequate capital for foreign investment mechanization Research & Development Less labour-intensive -e.g. Automobile, computer manufacturing Better infrastructure linked with HK Shekou Terminal (Sea) Kowloon-Canton Railway (Rail) West Lack of external innovation Rely more on local enterprises count on labour force (more labour-intensive) Not required high- technology -e.g. Textile and garment Lack of infrastructure linked with HK Hong Kong-Zhuhai- Macau Bridge (not constructed) Sea transport (not directly accessible)
Further discuss on particular industry –Textile and garment Industrial EnterprisesNumber in Guangdong Province Manufacture of Textile and Garments, Footwear and Headgear 6528 Manufacture of Electrical Machinery and Equipment 5469 Plastic Products4244 Manufacture of Raw Chemical Materials and Chemical Products 2669 Guangdong statistic Yearbook 2009
Locational Factor of textile and garment industry Pearl River Delta TransportationGovernment Market Labour Raw- material Power
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 unskilled labour is required, therefore low education level accepted BUT there is low stability Frequent strikes Chinese labour strike
Locational Factor –Government Incentives For Special Economic Zones Low profit tax rate (15%) Exemption of export duties Exemption of import tax of raw material Etc. 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, 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, Private companies will contributed significantly to the PRD maintain the sustainable development of the PRD.
Locational Factor –Government (Incentives) 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.
Locational Factor -Transports As the PRD are proximity to Hong Kong, takes 2 hours from Guangzhou to Hong Kong by train. The Hong Kong-Shenzhen Western Corridor had been put to use 4 th road crossing between Shenzhen and Hong Kong. A key project – Hong Kong- Zhuhai-Macau Bridge 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
Locational Factor -Transports Cities in the PRD are interconnected by highways and railways Improving the transport network to strengthen linkages among cities 5 well-developed airport in PRD (include Hong Kong and Macao). 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: 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 –Market 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 growing income & better living condition Influx of tourists. For example, 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 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 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- Western PRD -Zhuhai 珠海 -Zhongshan 中山 -Jiangmen 江門
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 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 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 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-Zhuhai- Macau 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 Japan: Mainland: Tainwan: Zhongshan Government 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 - Jiangmen Jiangmen includes numerous important types of indutry Nylon (artificial fiber) Motorbikes 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. Reference: http://www.ust.hk/HKUST_Forum/session_1_description_english.htm HK Front Office PRD Back Factory
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 PRD's rising capability growing Chinese Mainland market WTO assistence may lead to collpase of the partnership. HK Front Office PRD Back Factory
Future Development - Front Office-Back Factory Once suggestion is that HK should be Back Factory of China 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 Shenzhen Front Office