Transformation In The Pearl River Delta Region

In the past 20 years, the Pearl River Delta region adjacent to Hongkong has become the "world factory" in Guangdong.

Today, the region is in a difficult pition.

Guangdong is trying to get rid of the low cost.

The fuse for pformation was a series of suicides in the factory of Foxconn (Foxconn) in Longhua District of Shenzhen in 2010.

Foxconn is an electronics manufacturer in Taiwan with a staff number of 300 thousand, mostly from young workers in the mainland of China.

After the incident, people's criticism of the working conditions of migrant workers brought about a two digit increase in the income of migrant workers in the Pearl River Delta region.

However, the "Foxconn effect" is not just the private sector.

Official policy tends to increase wages, not only to promote domestic consumption, but also because the government hopes that industries will be pferred from coastal areas to inland provinces such as Sichuan and Henan, so as to spread the fruits of industrialization to the mainland.

This situation has created creative destruction in several complex industrial cities of Guangdong province (Shenzhen, Guangzhou and Dongguan).

Some companies are investing in new production facilities and manufacturing higher margin products, while others are pferring to other provinces or other low wage countries such as Bangladesh and Vietnam.

The rest simply shut down.

"As the cost goes up, many traditional manufacturing industries are going forward.

Feng Guojing (Victor Pearl), chairman of the Greater Pearl River Delta Business Council (Li & Fung), said: "the Foxconn incident has completely changed the treatment of migrant workers and the pattern of income distribution.

In the post Foxconn era, we are seeing a sharp increase in labor costs.

Rui Yin (UBS) analyst Spencer Leung said that in the first few months after the Foxconn incident, the local factory owner predicted that the annual salary increase would reach 10% to 12%, but in fact the increase would be 18% to 20%.

In the case of low operating profit margins, factory owners are facing enormous cost pressures.

"We witnessed many factories closing down.

The factory owners usually wait until the new year (Chinese Lunar New Year, many migrant workers will return home at this time) to leave and never come back.

Liang Yuchang said, "but this year,

Many companies are trying to move to the mainland. Foxconn has opened a large factory in Chengdu, Sichuan.

Last month, Ma Kaibo (Mark McCombe), who resigned as chief executive officer of HSBC in Hongkong and became chairman of Asia Pacific region of Black Rock, is arguing that industrial restructuring has already started.

"This is not a crisis.

It is an evolutionary trend that has been going on for many years.

Some industries, such as textile industry, have already begun to change. "

However, Guangdong has a mature supplier and logistics network, and has a large and mobile workforce, and those inland provinces are still developing.

"Dongguan is like New York or London.

It attracts talents from all over the country.

Liang Yuchang said, "in the mainland, you can buy land at a very cheap price, but there is no talent there."

Another obstacle is the cost and complexity of manufactured exports. Compared to inland cities such as Chongqing, the PRD has the advantage of being close to ports.

China's road network is facing some resistance, such as the requirement of unloading and re loading across the province.

Feng Guojing sniffed an opportunity: Hongkong companies can act as intermediaries, and Li Feng Group is the largest.

"I think we have been reborn.

People think this way: "these guys will stick to their past 30 years' practice and be left behind", but this new mode requires some tricks.

This means helping mainland producers to organize supply chain and logistics systems and help multinational companies to open up the Chinese market.

Hongkong companies also found that their experience in pforming from domestic companies to exporters also had a strong market.

Feng Guojing said: "the Pearl River Delta region is entering a new era."

So far, people have been concerned about purchasing goods from the East and selling them to the western countries.

Everyone trades in this way, because the OECD member countries take up the whole world.

Ma Kaibo also argues that this shift will also benefit the Pearl River Delta region and Hongkong, not just for the mainland.

"Those customers who think about how to find the quickest export path in the past 20 years are now thinking about China's local supply chain.

At the same time, as Chinese enterprises become more confident, they are coming here to explore export markets.

The question is whether such changes can bring high value-added industries and jobs quickly to replace the original industries in the PRD region.

In Hongkong, people's views are more optimistic. This is partly due to the obvious impact of China's economic growth, but the fact remains that we need to wait for time to test.