Content
I.
Decentralization of industrial production in China................................................2
From a trading company’s perspective – diversify sourcing from the traditional
manufacturing hubs ...............................................................................................2
Industry consolidation and upgrade ......................................................................3
Relocation ..............................................................................................................4
A case study: toys sourcing in China .....................................................................7
II.
The prospect of manufacturing for the domestic market .......................................8
The booming consumer market in China ...............................................................8
Manufacturing for the domestic market: constraints and policy suggestions .......9
Distribution challenges........................................................................................ 11
Appendix 1: Government policies on industry relocation ...........................................14
1
I. Decentralization of industrial production
in China
From a trading company’s perspective – diversify
sourcing from the traditional manufacturing hubs
Industrial decentralization is underway in China but at a slow and gradual speed.
Traditionally, due to better transportation and the government’s preferential
policy towards the coastal region, export-oriented factories have long been
developing along the east coast of China with major hubs in Yangtze River Delta
(YRD), Pearl River Delta (PRD) and Bohai-rim region.
As domestic demand and other region’s economic growth pick up, competitive
manufacturing enterprises are emerging in other parts of China, especially in the
less developed coastal cities and the Central and Western regions. These regions
generally have lower production costs and many of them are domestic-focused. .
Li & Fung Limited’s (hereafter referred to as LF, the trading arm of The Li &
Fung Group) sourcing strategy change in China can partly depict the
decentralization process.
In China, LF sources most of their products from the PRD and YRD but it is now
expanding the sourcing network across China and exploring the lower cost
regions.
While PRD will continue to be an important sourcing base, its importance will
drop in the coming five years. LF foresees that, in absolute term, the sourcing
value in PRD will increase but the share of PRD in its total China sourcing will
decrease. PRD will be a place to source higher value items.
Smaller and less developed coastal cities (such as cities in Jiangxi, Xiamen、
Fuzhou, Ningbo and Hangzhou), in particular, will emerge as good sourcing
places with lower wages, better infrastructure and logistic costs.
Transportation costs and quality of the factories are two important factors
affecting LF’s sourcing decisions. The inland regions may have cost advantage in
production but logistics cost remain high. For many of the newly-formed
domestic-focused factories, the costs may be lower but their products may not be
up to the export standards.
As China’s infrastructure develops, many smaller coastal cities, which is closer
to the ports and have skilled labors, will be the priority for sourcing.
2
Industry consolidation and upgrade
Factory consolidation and upgrade in the traditional production hubs and the
emergence of manufacturing enterprises in the less developed regions have
pushed forward the decentralization movement.
A year before the financial tsunami, manufacturing enterprises in the coastal
areas were faced with tremendous pressure such as production cost hikes (fuel,
land, labor cost), Renminbi (RMB) appreciation, processing trade policy change
and tightening monetary policy). The financial tsunami (liquidity crunch,
slackening global demand, the collapse of orders, the rise of protectionism) has
made their lives even more difficult.
A large number of export-oriented manufactures, especially those in the PRD,
could not withstand the pressure and had ceased operation.
For those which managed to stay are eager to reduce costs and upgrade to cope
with the financial crisis.
According to a survey conducted by the Chinese Manufacturers’ Association of
Hong Kong (CMA) in April 20091, most of their members operating in the Pearl
River Delta (PRD) chose cost reduction (94.0%) as the main strategy to
overcome current difficulties. Other major strategies include strengthening
marketing (89.2%), improving product designs (74.1%) and upgrading
technologies and equipment (57.8%).
We witnessed a factory consolidation and upgrading trend in the traditional
production hubs– the marginal players had been phased out while the survivors
were striving to upgrade.
Meanwhile, the closure of some foreign-invested manufacturers gave room for
local SMEs with strong capability to compete. In the less developed regions,
many manufacturers are growing fast amid the rapid economic growth. We saw
an increasing number of labors who used to work in coastal regions went back to
their hometowns (mostly in inland provinces) and started their own business
there after accumulating sufficient experience, network and capital. Also, after
some years of efforts, some retailers managed to get a foothold in the inland
provinces, and they set up production facilities in the vicinity of their retail sites
to take advantage of proximity to market.
1
The Chinese Manufacturers’ Association of Hong Kong (CMA), 2009 Survey on CMA Members’ Operation in the
PRD, April 2009. The respondents are Hong Kong manufacturers operating in the PRD.
3
Relocation
A year before the financial tsunami, the central and local governments actively
encouraged relocation and had launch numerous policies (see Appendix 1). After
the financial tsunami, survival and unemployment topped the agenda. The
government no longer pushed industrial relocation as hard as it used to be.
Industry relocation has paused for the time being, but in the long term, it is an
inevitable trend.
Constraints
In fact, there are a lot of constraints hindering relocation. From our study on the
relocation trend in China in 2008, we found that despite the pressure from the
business environment and the government, many manufacturers adopted a
wait-and-see attitude and were not ready to relocate. Instead, they sought for
industrial upgrade to increase competitiveness such as developing own brands,
developing products of better quality, improving product design and making
innovations.
A survey from Hong Kong Trade Development Council (HKTDC) in March
2007 showed that 62.7% of the interviewed HK-invested production
enterprises in the PRD had no plan to relocate.
The Federation of Hong Kong Industries (FHKI) interviewed about 200
enterprises in the PRD in March 2008 and found that shortage of skilled
labor, high logistics costs and inadequate support from local governments of
the less developed regions were the major obstacles barring enterprises from
relocating at the moment. However, as the transport infrastructure develops,
the increasing penetration of highways and rail lines into the inland regions
should be a catalyst for relocation.
Suggested by Professor Chen Yao and Feng Chao from the Chinese Academy of
Social Sciences, an enterprise’s relocation decision is basically affected by two
major factors, namely the degree of dependency on local industrial clusters and
the level of export reliance (see Exhibit 1).
4
Exhibit 1: Factors affecting relocation decision
Type I
Strong
Degree of
dependency on local
industrial clusters
Type II
Type III
Relatively weak- Relatively weakmost intermediate substitutes of intermediate inputs are
inputs are imported readily available elsewhere in China
Level of export
reliance
High
High
Relatively low
Tendency to
relocate
Slight
Strongmainly to other
Strongmainly to central and western China;
low-cost countries some to low-cost countries nearby
Source: Trade cost, local linkage and industrial clusters relocation, Chen Yao & Feng
Chao
It is difficult for Type I enterprises to relocate since they are deeply rooted
in their original locations, where their cost advantages and efficiency are
derived from strong cluster effect.. As relocation is not an option, these
enterprises are under strong pressure to enhance competitiveness and
upgrade.
Type II enterprises are mainly foreign-invested processing trade enterprises
with strong mobility. Given its export-oriented nature, they are unlikely to
move to inner provinces of China due to the high transportation cost from
the inland to the coast. They are more likely to relocate to less developed
cities along the coast or other low-cost countries in South or Southeast Asia.
Type III enterprises are cost-cautious. As they focus on the domestic market,
they will tend to stay in China and relocate from the high-cost coastal
region to the inland regions; while some may move to other low-cost
countries nearby.
Gradual relocation approach
In 2007-2008 before the outbreak of the financial tsunami, we saw that instead of
relocating the whole factory or production base, a number of manufacturing
enterprises opt for expansionary relocation.
Many manufacturers maintained the original scale and operation of their
production bases in the coast, while setting up satellite factories in less
developed areas. The higher value-added functions such as sourcing of raw
5
materials, product development and design are generally handled by the
main factory in the coastal area in a centralized manner, while the inland
facilities focus on production. In this way, the coastal and inland regions
complement each other and the overall competitiveness is enhanced.
Some large enterprises in coastal regions had already started to relocate part
of their non time-sensitive and simple production process to inland
provinces. In the long run, the coastal region is going to be
development-focused while the outlying regions will be more
production-focused.
Exhibit 2: Expansionary relocation
All in all, most enterprises will adopt a gradual approach instead of relocating the
whole production at one go. Many companies tend to relocate the labor- or
resource-intensive processes to inland cities as the first step. Once the supporting
facilities in the inland cities have improved, they will consider relocating the
more complicated processes. This approach allows a transitional period for
adaptation of new production sites, lowers operation risks and eases their
financial burden.
6
A case study: toys sourcing in China
We conducted a study on the relocation and upgrading trends in May 2008,
focusing on toys industry. Though the landscape has changed a lot but the
findings can serve as a good reference to predict future developments. Major
findings are as below:
Relocation is going to be a gradual and long-term process.
Simple toy manufactories are more likely to move inland to take advantage
of lower production costs.
Complicated toys manufacturers will remain in PRD or relocate along the
coast with industrial clusters.
PRD and YRD are still the key toy manufacturing areas, and will keep
spreading out in future, especially along their flanking coastal regions, made
possible with the fast growing transportation and ports network.
Manufacturers outside the traditional production base are fast developing in
terms of scale and strength. While PRD will be more development focused,
the outlying region will be more production focused.
YRD is becoming an important sourcing destination for soft plush toys
while hard plastic toys will still concentrate in PRD to take advantage of the
strong clusters.
Some outlying regions are already specialized and mature in different toy
and material types. Each region will be specialized in certain products
depends on its resources availability and development history.
Central and western China will be increasingly important with government
incentives, lower production costs, improved infrastructure, and robust
economic growth.
We foresee a more spread out sourcing landscape in China with pockets of
specialized manufacturing capabilities makes one-stop manufacturing
impossible.
There is huge sourcing potential in emerging suppliers and regions outside
PRD. However, most of them are in infancy stage and need time to mature.
7
II. The prospect of manufacturing for the
domestic market
The booming consumer market in China
The central government has established the target of more balanced growth, with
future depending more on domestic demand, particularly consumption demand.
From the view of the enterprises, China’s market has great potential. In May
2009, Li & Fung Research Centre paid a visit to the Guangzhou Nantian
International Hotel Facility Trading Centre2 and Shunde Furniture wholesale
market in Guangdong province. Their businesses, as observed, had not been
seriously affected by the global financial crisis as their products were mainly
sold in the domestic market.
The American Chamber of Commerce in South China3 conducted a survey in
2009 and found that 72.5% of respondents4 said that their main objective was to
provide goods or services to the China market, up from 46% in 2006.
The above-mentioned CMA’s survey in 2009 5 also demonstrated that the
importance of the China market to Hong Kong-owned enterprises is escalating.
Over half of the respondents (53.6%) have business operations in Chinese
Mainland in 2009, up from 44.0% in eight years ago. The China market
accounted for 15.5% of their business, up from 10.3% when compared eight
years ago.
According to the 2009 White Paper on the State of American Business in China6,
63% of their member companies (US companies in China) indicated that they are
in China to produce or source goods and services domestically for the Chinese
market, rather than for export. The figure represents a significant increase from
51% in 2008, indicating the companies are more interested in the maturing
Chinese consumer market.
2 The Guangzhou Nantian International Hotel Facility Trading Centre is the largest hotel supplies
wholesale market in China.
3 The American Chamber of Commerce in South China, 2009 Special Report on the State of Business
in South China, 2 March 2009
4 The respondents of the survey are companies (mainly US companies) that set up their headquarters
or main offices in South China.
5 CMA, 2009 Survey on CMA Members’ Operation in the PRD, April 2009
6 The American Chamber of Commerce in the People’s Republic of China (AmCham-China), 2009
White Paper on the State of American Business in China, May 2009
8
Manufacturing for the domestic market: constraints
and policy suggestions
Obstacles barring the Chinese export-oriented enterprises to
develop the domestic market
Currently, the Chinese consumers do not have access to many of the high quality yet
price competitive Chinese made export-oriented products due to the following
institutional and regulatory constraints:
Government policies and taxation design. Although the government has
reiterated the importance of both foreign and domestic trade, the former has
long received more government support. For instance, enterprises can enjoy
tax rebates for exports but no tax relief in domestic sales. Selling to foreign
markets often grants enterprises more stable returns and involves fewer
risks. Many manufacturers thus have little incentives to engage in selling
domestically.
Different requirements in domestic and foreign trades. The key for
success in domestic sales lies in strong distribution channels, marketing and
sales strategies and after-sale services. On the other hand, export-oriented
enterprises mostly engage in original equipment manufacturing (OEM) and
usually do not develop their own brands; effective cost control, good
product quality and on-time delivery are key. It is difficult for
export-oriented enterprises to enter domestic market if there is no change in
business mindsets.
Different industry practices home and abroad. The credit system in
export markets is more developed. Settlement of export is facilitated by
letter of credit and credit insurance of international standards; financial
conditions of buyers could also be evaluated easily by credit rating reports.
It is therefore easier for enterprises to control their transaction and financial
risks. The situation is different in domestic market, where deferred payment
is common and different types of entrance fees and levies are popular. Lack
of transparency worries many manufacturers to tap the domestic potential.
Brand building and IPR protection. Many export enterprises do not have
their own brands and are weak in design capability, making them difficult to
secure a place in domestic market. Also, since consumption preferences in
domestic and foreign markets are different, selling made-to-export products
9
domestically may not be easy. On the other hand, for enterprises that have
developed their own brands, intellectual property right (IPR) infringement is
a concern.
Regional protectionism and underdeveloped logistic infrastructure.
Both are obstacles for product distribution in China and will add to overall
cost.
Complicated formalities. For the factories that are engaging in processing
trade to enter the domestic market, they have to turn to foreign-invested
enterprises. This would involve complicated application procedures and
substantial amount of tax repayments.
Different product certification standard for domestic and foreign goods.
Products selling domestically have to obtain safety and quality certifications
granted by Chinese authorities. Although products made in processing trade
factories have already met the international standard, those products have to
be re-examined before entering the Chinese market. It is due to the absence
of mutually recognized standards.
Policy suggestions
To help the Chinese export-oriented enterprises develop the domestic market, we
could consider:
Promoting the integration of domestic and foreign trades and
development of distribution sector: The Chinese government has adopted
different policies on domestic and foreign trades while the later often enjoys
more favorable treatments including export tax rebates. The Government
may have to adjust the current trade policy so as to encourage enterprises to
engage in domestic sales and rebalance the export-dependent economic
structure. The Government should also nurture a number of wholesale
distributors with international competitiveness in order to facilitate the
integrated development of domestic and foreign markets. Wholesale
distributors should play a more active role in helping export-oriented
enterprises tap the domestic market, resolving bottlenecks and capital
problems in a bid to facilitate efficient allocation of internal and external
resources.
Clarifying the processing trade policy direction as soon as possible: The
financial crisis sweeping through the globe in 2008 has exerted impacts on
foreign trades. The Chinese government has therefore unveiled a series of
10
initiatives to help processing trade enterprises. Whether or not such
measures will continue after the foreign market bottoms out remains
uncertain. It is therefore hoped that the government will clarify the policies
on processing trade as soon as possible in order to eliminate uncertainties so
that enterprises can plan ahead for long-term investment.
Using the PRD as a pilot area for policy experimentation and
implementation: To address the problems of complicated formalities and
application procedures for export-oriented enterprise selling domestically,
the central government can use PRD as testing ground of new policies.
When the policies are mature, they can be extended to other provinces and
then nationwide. For example, to standardize the products testing standards,
Hong Kong and Guangdong governments can put in place mutual
recognition mechanisms and information sharing systems in testing and
certification services. The proposal will improve overall efficiency of
commodities import and export and reduce administrative costs.
Furthermore, on the basis of past successes of domestic trade fairs, it is
recommended that HK and major cities of the Mainland should set up
long-term wholesale and sales centers where SMEs can operate at
reasonable costs and tap the domestic market.
Distribution challenges
The following challenges which hinder distribution efficiency in China are
identified:
Logistics
Poor infrastructure
The imbalanced development of transport infrastructure in China is a
major problem. The infrastructural development in important coastal
regions is much more mature than that in central and western regions, which
leads to transport bottlenecks.
Train capacity gives priority to coal, crude oil and food, while other
products are difficult to secure capacity from rail.
Besides transport infrastructure, the development of logistics facilities is
also unsatisfactory. For instance, it is common that the practitioners
complain about the shortage of quality warehouse providing modern and
high value-added services.
11
Lack of unified standards. In terms of challenges regarding ‘soft’
infrastructure, lack of unified industry standards always tops the list.
Various segments within the logistics industry including transportation,
warehousing, information and etc., using different or even contradictory
industry standards increases difficulty of communication of parties along
the supply chain. Container transportation is a case in point. Practitioners
find that containers and wooden pallets, etc. used by different Chinese
logistics operators are not of unified standards when compared to those of
foreign operators. So it is highly recommended that China’s logistics sector
should apply international standards.
Skills shortage. China’s logistics industry is growing fast; yet, the demand
for talent has outstripped supply in the logistics industry. Many practitioners
lack modern management knowledge and skill sets to cope with
ever-changing needs of the industry. Shortage of professionals can hinder
the further growth of the industry and also push up management costs.
Local protectionism
The tendency of China’s myriad jurisdictions to protect their local interests
is a key obstacle to the development of a single national market. For
example, some local governments impose discriminatory standards of
charges on outside products or services. Local protectionism hampers a
rational nationwide movement of commodities and factors, weakens the
effectiveness of an optimal resource distribution in the market mechanism,
increases transaction costs and reduces the overall effects of resource
distribution.
Availability of information
Availability of information is also a major problem for China’s logistics
industry. Practitioners in general find it hard to obtain updated and useful
information. The Ministry of Transport website is a case in point. There is
no convenient way to obtain latest information on road in operation in a
particular area/for a particular route. As for the Ministry of Railway, it is
difficult to find recently announced plans on high-speed rail network.
Therefore, information platform is urgently needed and relevant
departments should make useful information available in their websites in a
user-friendly manner.
12
Retail
Compared with many retailers in developed economies, which pay huge
attention to differentiation and brand building, retailers in China are often said to
operate a landlord model - renting their floor space to concessionaires or tenants
and paying little attention to differentiation. Indeed, many consider
differentiation, say nurturing their own store brands, costly and would not wish
to take the risks such as bearing inventories. Besides, heavy initial capital outlays,
lack of experience in sourcing, long nurturing period for own store brands are
also common concerns.
In recent years, many retailers in China have frequently reviewed and reshuffled
their merchandise portfolio to improve their income. Some shopping malls and
department stores operators have upgraded their shop floors to attract more
established brands. However, the problem of having highly similar brand and
tenant mix is still very common. Many retailers have miscalculated the long-term
customer traffic generated by renowned brands.
The fact that the market is crowded with a large number of undifferentiated
players has made many resorted to price competition to boost sales, especially
during more difficult times. Discount-driven promotions are hurting retailers’
same-store-sales growth and eroding their margins.
We hope that there will be incentive measures to encourage retailers changing
their operating mindsets and experimenting with new merchandising practices so
as to build demand-driven supply chains. Leading retail operators in China, also,
can designate some shop floors areas to try new operating models. A success
story may greatly encourage others to adopt more advanced merchandising
practices.
13
Appendix 1: Government
industry relocation
policies
on
The Chinese government sees industry relocation and upgrade as a strategic step to
push forward economic restructuring and achieve balanced growth of different
regions. Many government policies have been launched by both central and local
governments to promote industrial upgrade and relocation.
1.
Central government’s policy initiatives
According to the Chinese development plan, the large coastal cities are positioned to
develop high value-added industries and modern services such as producer services
and commercial services. Therefore, the government wishes to move out the
edge-losing labor intensive and low value-added industries from the coastal regions so
that space and resources can be released to develop higher value-added industry,
while at the same time boost the economic development of central and western China.
The Ministry of Commerce (MOFCOM) plans to set up 50 designated areas by 2010
in central and western China for enterprises moving out from coastal regions.
Measures such as loans from State Development Bank, tax incentives, and building
supporting facilities (e. g. water supply, electricity supply, waste management, sewage
management, education, warehousing and transportation) will be implemented to
encourage relocation. So far, the MOFCOM has announced two batches of designated
areas, i.e. a total of 31 sites (See Map 1 and Exhibits 3 & 4).
14
Map 1: Designated areas for industry relocation by the Ministry of Commerce
as of end-2008
Source: Ministry of Commerce (MOFCOM), Li & Fung Research Centre
Exhibit 3: The first batch of designated relocation areas, MOFCOM, 2007
The first batch of nine key relocation destinations was selected by the MOFCOM in
April 2007. All of them are located in central China.
Province
City
Hubei (湖北)
Wuhan (武漢)
Hunan (湖南)
Chenzhou (郴州)
Henan (河南)
Xinxiang (新鄉),
Jiaozuo(焦作)
Jiangxi (江西)
Nanchang (南昌)
Ganzhou(贛州)
Shanxi (山西)
Taiyuan (太原)
Anhui (安徽)
Hefei (合肥)
Wuhu (蕪湖)
Source: MOFCOM
15
Exhibit 4: The second batch of designated relocation areas, MOFCOM, 2008
The second batch of designated relocation areas was announced in April 2008. Most
of the 22 selected cities are located in central and western parts of China.
Region
Central (中部
中部)
中部
Province/
Municipality
Hubei (湖北)
Hunan (湖南)
Henan (河南)
Jiangxi (江西)
Shanxi (山西)
Western (西部
西部)
西部
Others
City
Yichang (宜昌)
Xiangfan (襄樊)
Yueyang (岳陽)
Yiyang (益陽)
Yongzhou (永州)
Luoyang (洛陽)
Zhengzhou (鄭州)
Yian (宜安)
Shangrao (上饒)
Anhui (安徽)
Houma processing zone
(侯馬加工區)
Anqing (安慶)
Guangxi (廣西)
Nanning (南寧)
Sichuan (四川)
Qinzhou (欽州)
Chengdu (成都)
Mianyang (綿陽)
Chongqing (重慶)
Shaanxi (陝西)
Xi’an (西安)
Ningxia (寧夏)
Yunnan (雲南)
Yinchuan (銀川)
Kunming (昆明)
Hainan (海南)
Heikou (海口)
Inner Mongolia (內蒙古)
Heilongjiang (黑龍江)
Baotou (包頭)
Harbin (哈爾濱)
Source: MOFCOM
2.
Initiatives launched by local governments
The local governments of the central and western region regard the relocation policy
as an opportunity to develop industries and boost economic development. To attract
enterprises seeking to relocate, local governments of these designated regions are
actively improving their business environment and offering various incentives such as
16
tax breaks, subsidies and funding support. Exhibit 5 shows the various incentives
offered by the inland provinces to attract relocating industries.
Exhibit 5: Examples of the incentives provided by some inland provinces/cities to
attract relocating industries
Examples of the incentives
Provinces/cities
Hubei (湖北) Designated funds to support relocation; improving transport infrastructure
Hunan (湖南) Designated funds to support relocation; improving services in logistics centres
and customs; simplifying the approval procedures of relocation projects
Guangxi (廣西) Improving government services; providing financial support; promoting
electronic monitoring systems at customs
Yueyang (岳陽) Tax breaks; simplifying customs procedures
Chenzhou (郴州) Subsidies on construction of production plants; improving transport
infrastructure
Haikou (海口) Waiving administration fees of some of the government services during the
course of relocation
Sources: Compiled by Li & Fung Research Centre from various sources
The traditional manufacturing hubs in the coastal provinces also see the importance of
industry relocation and upgrade. However, aggressive relocation to other provinces
will bring harm to the local economy. Thus, they are actively promoting relocation in
their vicinities. Guangdong province is a case in point. In late May 2008, Guangdong
announced the Decision on Encouraging Industry and Labor Relocation (關於推進產
業轉移和勞動力轉移的決定) (also known as Double Relocation 雙轉移) in which
measures and funds are designated to facilitate industry and labor relocation within
the province. To summarize, Double Relocation refers to:
(1) Industry relocation: relocation of traditional labor-intensive industries,
resources-consuming industries, processing industries from the central PRD to less
developed regions in the province, i.e. the eastern and western PRD and northern
Guangdong;
(2) Labor relocation: relocation of labor engaging in primary industry to secondary
and tertiary industry; and relocation of skilled labor from less developed regions to
developed regions in PRD.
Map 2 illustrates the Double Relocation strategy of the Guangdong province. More
than 40 billion yuan has been earmarked for measures encouraging Double Relocation
17
in the coming five years (2008-2012). Resources will be allocated to improve
transport infrastructure, develop industrial relocation parks, develop pillar industries,
set up an award fund to encourage relocation, provide training to nurture skilled labor,
improve productivity of farmland and increase land supply in less developed regions
in the province.
Map 2: Double Relocation of Guangdong province, 2008.
Source: Guangdong Government, Li & Fung Research Centre
Subsequently, the Guangdong government released the Guidelines on the Layout of
Industry Relocation Regions in Guangdong Province (廣東省產業轉移區域布局指
導意見) (the Guidelines) in June 2008 to guide relocation of industries in central PRD
to the less developed areas within the province in a coordinated manner.
In the Guidelines, the government stipulated that the relocation process is going to be
a "coordinated" one -- a number of selected industries will be encouraged to relocate
to designated areas to achieve a clear division of work and to avoid direct competition
among regions; while an array of industries, especially those causing serious pollution,
will not be allowed to relocate. Also, the government has identified more than 20
industrial relocation parks within Guangdong as shown in Exhibit 6 and Map 3 below.
18
Exhibit 6: Provincial industrial relocation parks identified by the Guangdong
government
Industrial relocation parks*
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
深圳盐田 梅州
深圳福田（和平）
Shenzhen Nanshan (Chaozhou)
深圳南山（潮州）
Shenzhen Longgang (Wuchuan)
深圳龙岗（吴川）
Dongguan Shijie (Xingning)
东莞石碣 (兴宁)
Dongguan Shilong (Shixing)
东莞石龙（始兴）
Dongguan Dongkeng (Lechang)
东莞东坑 （乐昌）
Dongguan Fenggang (Huidong)
东莞凤岗（惠东）
Dongguan Qiaotou (Longmen Jinshan)
东莞桥头 (龙门金山)
Dongguan Dalang (Haifeng)
东莞大朗（海丰）
Dongguan Dalang (Xinyi)
东莞大朗（信宜）
Dongguan Changan (Yangchun)
东莞长安（阳春）
Zhongshan Sanjiao (Zhenjiang)
中山三角（浈江）
Zhongshan Dachong (Huaiji)
中山大涌（怀集）
Zhongshan (Heyuan)
中山（河源）
Zhongshan Torch (Yangxi)
中山火炬 (阳西)
Zhongshan Shiqi (Yangjiang)
中山石岐 (阳江)
Foshan Chancheng (Yuncheng Duyang )
佛山禅城 (云城都杨)
Foshan (Qingyuan)
佛山 （清远）
Shenzhen Yantian (Meizhou)
(
)
Shenzhen Futian (Heping)
Foshan Shunde (Yunfu Xinxing
Xincheng)
(
)
Shunde Longjiang (Deqing)
(
)
Foshan Chancheng (Yangdong Wanxiang)
(
)
Foshan Shunde (Lianjiang)
佛山顺德 云浮新兴新成
顺德龙江 德庆
佛山禅城 阳东万象
佛山顺德 （廉江）
Guangzhou Baiyun Jianggao (Dianbai)
广州白云江高 (电白)
Region
(M-Mountainous
area; E-Eastern
PRD;
W-Western
PRD)
Approved industries to be relocated
M
Electronic information, electrification and
automation
Watches and clocks, electronic and
telecommunications equipment
E
Machinery and new materials
W
Electronics and toys
M
Automobiles and metal machinery
M
Electronics, precision machinery and
equipment
M
Machinery and furniture
M
Shoes and household electronic appliances
M
Apparel and furniture
E
Electronic information and bio-technology
W
Textile and processing of agricultural products
W
Electrical appliances and apparel
M
Electronic information and machinery e.g.
auto parts
M
Furniture and metal products
M
Telecommunications equipment and machine
tools
W
Textile, apparel, food and pharmacy
W
Electronic information and household
electronic appliances
M
Machinery and furniture
M
Machinery and pharmacy
M
Machinery for light industry and
telecommunications
M
Lighter (tobacco tools) and furniture
W
Metal machinery and furniture
W
Manufacturing and processing of small
household appliances
W
Electrical appliances, textile and apparel
M
）
19
（
Source: Guangdong Government
*The place in the bracket of the name of the industrial relocation park is the location of the relocation
park. For example, Shenzhen Yantian (Meizhou) means that enterprises in Shenzhen Yantian are
encouraged to relocate to the relocation park in Meizhou.
Map 3: Industrial Relocation Parks in Guangdong
Source: Guangdong Government, Li & Fung Research Centre
Apart from boosting relocation to its vicinities, the Guangdong government also
regards Southeast Asian countries as partners for industry relocation and upgrade. To
foster closer economic ties, in September 2008, a Guangdong delegation, led by the
Party Secretary-General Wang Yang, paid a visit to the ASEAN Secretariat and some
of its member countries, and signed an agreement aimed at deepening and
widening cooperation and business platform between Guangdong and ASEAN. Trade
contracts worth billions were signed and dialogue mechanism with the ASEAN
Secretariat and some of the member countries was established. Moreover, Guangdong
has successfully presented the business opportunities brought by its relocation plan:
some of Guangdong’s labor intensive industries could relocate to countries such as
Vietnam and Indonesia while enterprises with competitive edges in services and
management from countries such as Singapore are encouraged to invest in
Guangdong.
20