The Pearl River Delta Industry May Be Faced With Hollowing Out.

Foreword: "Pearl River Delta, the world factory of low-end products in the past 20 years, is losing thousands of enterprises.

Increasing costs and increasingly stringent norms are reducing the competitiveness of the region.

The new labor contract law, the enterprise income tax law, strict environmental regulations and the appreciation of the renminbi are squeezing the living space of labor-intensive enterprises such as toys, clothing and furniture.

The Wall Street journal, 2008, 2, 22 thirty years ago, the Pearl River Delta sounded the clarion call for China's reform and opening up. After the rapid development of thirty years, the Pearl River Delta once again stood at a crossroads.

For many entrepreneurs in the Pearl River Delta, the grim situation in recent years may be far beyond the original expectations.

Since 2007, the adoption of the new enterprise income tax law, the introduction of new catalogue of processing trade restricted commodities, the notice of reducing the export tax rebate rate of some commodities, the continuous appreciation of RMB, the increase of raw material prices, and the implementation of the new labor contract law.

This series of "combined boxing" has greatly reduced the small profit margins of enterprises that rely on low cost survival.

Faced with a deteriorating business environment, some labor-intensive enterprises such as shoes, textiles, furniture and so on have chosen to migrate.

Walking in the prosperous Pearl River Delta, it is easy to see that some busy factories in the past are now empty.

Domestic reports on the relocation of enterprises in cities such as Shenzhen and Dongguan have attracted a lot of heated discussions, including academics and local officials.

But at present, there are still some deviations in understanding some important issues of industrial pfer, which need to be examined from an objective and rational perspective.

"Made in China": low cost chasing industry pfer is a very fashionable concept in China.

But if we take a long view, industrial pfer has been going on for more than a century.

Taking the textile and garment industry as an example, there have been three major shifts since the 50s of last century: from North America to Western Europe to Japan from 50s to early 60s, from Japan to Hongkong, Taiwan and Korea in 70s, and to other developing countries in recent ten years, in 80s China, Southeast Asia and Sri Lanka, and South Asia and Latin America in 90s.

Even now, the relocation and bankruptcy of enterprises are still very common in developed countries.

Steven Greenhouse described it as "a serious infectious disease in the United States" in the New York Times (December 26, 2002). The loss of employment and the relocation of industrial capital to other parts of the world have stimulated the adoption of protectionism or raising the standard of global labour force to prevent capital relocation and alleviate the plight of unemployment and de industrialization.

There is a misunderstanding about the understanding of domestic industrial pfer, that is to say, simply pferring industrial pfer to labor-intensive industries will be pferred to the lowest cost, for example, the three big shift of textile and garment industry is to migrate to countries and regions with lower cost in turn.

But this kind of cost based understanding is not necessarily correct.

For example, the cost of textile and garment industry in South Asia and Latin America is still higher than that in China. In addition, Hongkong, Taiwan and South Korea are still important countries and regions for the export of textile and garment industry in Asia, despite the high cost.

Industrial pfer is simply regarded as the pursuit of the lowest cost, ignoring many other important factors.

In the international migration of textile and garment industry, quota system, exchange rate and trade policy also play an important role.

For enterprises in the Pearl River Delta region, low cost is only one side of the coin.

Some enterprises expand rather than pfer.

For example, Dongpeng ceramics, because of the small scale and outdated equipment in Foshan, it is difficult to compete with other enterprises. As early as 2000, it began to go out of action, which is the choice of enterprise development strategy.

For example, in Dongguan, some of the dominant shoemaking enterprises have not moved.

Charles, President of the world's largest female footwear trader and American Liwei Footwear Company, told Xinhua in an interview that they did not plan to leave Dongguan, because no local industry matching system was as perfect as Dongguan, and the workers who worked here for more than 10 years were very professional and are still the best place in the world.

Similarly, the footwear industry, some enterprises are unable to bear the change of the external environment, while others are "unmoved", which is of course related to the management mode and competitive strategy of the enterprises.

Many labor intensive industries in the Pearl River Delta region have the phenomenon of specialized towns, that is, the so-called industrial clusters.

From the perspective of cluster, the current industrial pfer is the process of regrouping or reintegrating into another place (relocalization).

The process of relocalization is not overnight.

In addition, the relocation of enterprises to areas with abundant land and cheaper labor does not necessarily mean lower comprehensive cost.

After 20 years of development, the Pearl River Delta has formed a complete supporting system which is not available in other regions.

Relocation to the field can certainly reduce the cost of labor, but incomplete supporting system will lead to an increase in the cost of raw material procurement and pportation.

How to treat "mass migration"?

In November 13, 2007, the Southern Metropolis Daily reported that in 2006, the Shenzhen Bureau of trade and industry launched an investigation into the relocation of enterprises.

The results showed that 119 industrial enterprises in Shenzhen had been planned or moved out, involving 9 billion yuan in total industrial output value.

Among them, a total of 18 industrial sectors, the relocation of enterprises, including machinery, toys, instrumentation, plastics, four industries, the number of relocation enterprises.

The location of migration is concentrated in Dongguan, Huizhou, Zhongshan, Heyuan and other places, and most of them migrate to Hunan, Jiangxi and Jiangsu.

According to the survey conducted in June 2007, only four enterprises in Luohu, Nanshan, Baoan and Longgang have moved out of 522 enterprises, and 499 of them have moved out.

In terms of scope, the scale of enterprise migration in the Pearl River Delta region is indeed unprecedented.

But is this a large-scale and industrial shift?

Take Shenzhen as an example, compared with the base number of more than 30 SMEs registered in Shenzhen, the proportion of hundreds of enterprises pferred is very small. It does not mean that the migration of enterprises in Shenzhen has become a common and industrial phenomenon.

When talking about the relocation of enterprises, Shenzhen municipal Party committee secretary Li Hongzhong said that there was no large-scale relocation of enterprises in Shenzhen.

The total number of enterprises pferred in Shenzhen is less than 1/1000 of the total number of enterprises in the city.

Since 2005, there are more than 110 thousand newly registered enterprises in the city, which are far higher than those of less than 4 000 companies in the same period.

Recently, Luo Bin, deputy director of the Dongguan economic and Trade Bureau, also said that there was no large-scale and industrial pfer in Dongguan. A small number of enterprises shifted mainly in some specific industries (such as labor-intensive industries) and some areas with tight land use. Some enterprises arranged for the expansion of capital production or new projects in the field out of the strategic layout of the domestic market.

Be alert to the "hollow" industrial pfer of regional economy can bring the hollowing out of regional economy?

Without the support of other industries, the relocation of core enterprises will cause economic depression in the region.

In the New York Times (December 26, 2002) report, the move of the tech refrigerator factory from Mexico to 1600 directly caused local workers to lose their jobs and indirectly caused 2000 laid-off workers in logistics and other related industries, and the local economy deteriorated.

For many workers, long-term work will actually lock itself in an industry.

If the migration of enterprises, especially the relocation of an industry from one area to other areas, and local workers can not migrate from all aspects of family and other reasons, the negative impact of industry (or enterprise) migration on workers may be fatal.

Many workers are hard to change because of their age.

This happens in areas where industrial structure is too dependent on an industry or even an enterprise, especially small towns.

The hollowing out of industrial pfer has not yet appeared in China.

The relocation of enterprises is both a challenge and an opportunity for cities.

If challenges can not be met, it will bring "hollowing out". If we do not grasp the opportunity, it will be difficult to achieve industrial upgrading.

Therefore, it is not unreasonable to worry about the "hollowing" of industrial pfer. Local governments should be fully vigilant.

The development of Shenzhen from the early 80s of the last century to the present is the process of constantly facing the challenge of hollowing out. The earliest development of Futian District and its step up, Bagualing industrial zone and so on have been and are being successfully pformed.

Industrial upgrading should be gradual. The government should not simply, subjectively and impatiently shift the so-called low technology labor intensive enterprises into the so-called high-tech enterprises.

In today's world, traditional technology and high technology are becoming more and more integrated.

Because the use of high technology is not necessarily high technology industries, those that belong to high-tech industries do not necessarily use high technology or even use large quantities of cheap labor without social responsibility.

To simplify the view that we must upgrade to technology intensive industries or capital intensive industries, and shift the shoe industry to low cost areas will mislead the development of local economy.

In fact, the problem of local economy lies not in the products and industries it produces, but in the low end of the value chain of enterprises.

Traditional industries can also become an internationally competitive industry.

For example, fashion clothing and footwear product design, color, material selection has cultural or knowledge characteristics, these industries can also establish a dominant position in the developed society.

High tech industries are often accompanied by many high risks in the process of innovation, which may not be able to form competitiveness.

Moreover, some traditional industries also have high-tech links, which require high technology assistance and application.

Many products themselves have different grades. The whole value chain of their production includes design, R & D, manufacturing and brand marketing. When land costs and labor costs rise, local manufacturing can upgrade to high-end products, upgrade to creative design and marketing, and develop to producer services.

The upgrading of industries and upgrading of industries are essentially the same.

Moreover, the pformation and upgrading of the industrial structure is a gradual process. Abrupt changes in the industrial structure will bring about many problems for the local economic growth and social development.

The industrial development needs a perfect investment environment. The industrial pfer can revitalize the land resources, improve the environmental conditions, and achieve industrial upgrading. The relocation can directly promote the local economic development; from a macro perspective, it can promote regional interaction and reduce the imbalance of economic development.

Therefore, when going up to the central government and going down to the local government, the government generally encourages the pfer of industries.

Of course, the relocation government supports low value-added industries and does not want high-tech enterprises to go out.

The governments at all levels have promulgated regulations and regulations, including processing trade Restricted Commodities List with different regional treatment, planning and constructing industrial pfer industrial parks, all of which are intended to encourage orderly pfer of industries and promote coordinated development of regional economy.

However, industrial pfer is essentially an enterprise's market decision behavior.

If the intervention of industrial pfer is "going all out", forcing a certain type of enterprise to migrate will directly cause the local workers to lose their jobs and suddenly release a large amount of land. Because replacing the industry is difficult to get in place temporarily, resulting in the "hollowing out" consequences, it will also damage the local business atmosphere, and it is very difficult to really retain the high value-added enterprises.

Therefore, in the new round of industrial restructuring, the government does not lie in directing enterprises to go and stay, but in creating a more competitive soft and hard environment, attracting high value-added industries rooted in the local area, and promoting the growth of local innovative enterprises.

The differential rent effect of land will appear automatically, and enterprises will voluntarily pfer low value-added activities to other regions, and achieve industrial upgrading through market adjustment mechanism.

For the moving place of industrial pfer, the important thing is to improve the investment environment.

Zheng Liping, Secretary of the Yunfu Municipal Committee of Guangdong, said, "if the local government's services are not good and the development environment is not good, how do you grab it?"

I prefer to create a good environment and attract capital.

A good investment environment includes perfect infrastructure, the establishment of technical schools for workers and staff, the efficiency of the government itself, the mutual jealousy among enterprises, the business atmosphere of mutual disintegration, and the sound laws and regulations.

Wang Jici, Professor of School of urban and Environmental Sciences, Peking University, deputy director of economic geography, Specialized Committee, China, is mainly engaged in regional development and industrial cluster research.

Li Pengfei, Ph.D., School of urban and Environmental Sciences, Peking University, is mainly engaged in the study of regional industrial development.