Accelerate The Survival Of The Fittest In &Nbsp With Electricity Shortage, And Boost The Motive Force Of Development.

June 3rd, China is still continuing.

The industry expects that in the next few years, 1/3 of the small and medium enterprises will not be able to stand up to the test and to shrink their businesses or even go out of business.

However

Wu Yuying, vice president of the Chinese manufacturers' Association of Hongkong, even used the "ice on snow" to describe the current business difficulties of the manufacturers. "The cost of raw materials has risen, the renminbi has appreciated, the regulations have been tightened, the minimum wage has been raised, and now with the power shortage, all the problems are coming together. There is no good news, and every day is bad news.

"

Yan Wu Yuying himself runs a toy factory in Dongguan, Guangdong.

Dongguan is the most concentrated area for Hong Kong businessmen and Taiwan businessmen. According to local manufacturers, since the power supply situation is tight, most of the towns began to implement "power five (days)" two days (two days) and even "four stops three" power supply restrictions since the middle of the month.

Cheng Fengyuan, President of the Guangzhou Association of Taiwanese businessmen, also said that although Guangzhou has not yet received the electricity supply bureau's notice of reducing electricity supply, "this year the situation is not optimistic. The electricity supply in previous years has decreased by 20-30%. This year, I am afraid it will be 50%.

"

In order to alleviate the shortage of electricity supply in some areas, China has increased the electricity and agricultural electricity prices in 15 provinces and cities since June 1st, about 3%, the first increase since 2009. The national Power Grid Corp has said that some provinces in East China and central China have begun to limit production and power consumption to industrial users, and the scale of production and power limitation will be further expanded during the peak season.

Increase in electricity costs

The problem of power shortage has obviously exacerbated the problems of Hong Kong funded and Taiwan funded enterprises in the Pearl River Delta.

In the past, the power supply shortage was widespread in the summer of the mainland, and many manufacturers were prepared to configure backup generators to ensure that factories could continue to produce electricity when the supply of electricity was temporarily suspended. But this year, under severe drought, the situation of electricity shortage is even more serious, and the price of diesel fuel for the generators has risen sharply, so that manufacturers can add hundreds of pounds.

Liu Zhanhao, vice chairman of the Hongkong Federation of industry and chairman of the Pearl River Delta Industrial Association, pointed out that the current electricity consumption in Dongguan is about 0.9 yuan, but the cost of generating electricity by fuel generators is 2 yuan or more per degree.

He said that the cost of fuel generated by a large number of backup generators is difficult to pass on to customers. "Some manufacturers prefer to stop work or extend the delivery date, reduce the reserve power, increase the cost pressure, but reduce the capacity of receiving orders."

"

22 years ago, Cheng Fengyuan, who was in Guangzhou, engaged in curtains and other decorative materials, said that after the rise in diesel prices, self generating electricity was no longer cost, and could only be used to compress electricity as much as possible, or to make use of peak shifting (off peak) time, or to adjust production lines.

As for the iron and steel industry, known as the "electric tiger", the vice president of Taiwan Meyer steel tube (2020.TW: market) vice president Wu Ling Ji said that power shortage is a problem that will happen every 7-9 months. The company usually decides whether to adjust the production process or reduce the working hours according to the power arrangement. If it can adjust the production schedule, it will not affect the production capacity.

Accelerated elimination

In the increasingly competitive environment of the mainland and rising costs, upgrading and pformation of enterprises is a long way to go. However, a number of small and medium-sized enterprises in Hong Kong and Taiwan may have left behind before the "revolution" has yet to succeed.

{page_break}

Liu Zhanhao said that China's industrial manufacturing industry has entered a period of adjustment. The next three to five years will be a phase of elimination and integration. It is estimated that 30% enterprises will have to shrink or even go out of business without experiencing such changes.

Huang Mingzhi, one of the leading Taiwanese businessmen and vice president of the Taiwan Business Association, pointed out that some Taiwanese businesses have been closed this year. "(Taiwanese businessmen leaving) is particularly serious in the capital of Guangdong province. This trend will be more obvious in the future.

"

Both small and medium-sized enterprises or large enterprises are facing the same problem at present. However, the latter's "foundation" is thicker, and they also achieve certain scale benefits, so they have an advantage in the industrial adjustment elimination tournament.

CEN Li, director of investor relations at Yuyuan group (0551.HK: quotes), a sports and leisure footwear manufacturer with 35 production plants in the mainland, said that its powerhouse has backup generators, and there is no need for special policies to deal with power shortages.

"The power shortage will be a small and medium sized factory, and the backup power supply is a very important strategy to ensure quality and delivery time," he said.

Chen Jiliang, vice president of 2314.HK:, China's second largest box board manufacturer, also said that four of the paper-making factories in Dongguan, Jiangsu and Chongqing had their own coal and electricity generating units, and electric power had always been 100% self sufficient. Therefore, the power rationing had no effect on the production and cost of the company. "Paper making requires a lot of electricity and steam, and large large paper mills have self-sufficiency in power generation equipment, but the fine scale paper mills may be affected.

"

Resource reallocation

In the process of industrial upgrading, a group of enterprises with inferior strength will be eliminated.

Tang Zhigang, an investment banking strategist at UBS China, believes that this year's industry consolidation rate will be significantly higher than in the past.

"Extensive development in the past few years has led to environmental pollution, and labor, raw materials, resources and so on are not enough, and now electricity is not enough." but Tang Zhigang also pointed out that elimination through integration is not a bad thing.