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New Bridge and Pearl River Delta West (3): Industrial Relocation

After the opening of the Hong Kong-Zhuhai-Macau Bridge (HZMB), Hong Kong will not only have direct land transport link with Zhuhai, but will find its land distance with Zhongshan and Jiangmen in the vicinity of Zhuhai greatly shortened. The HZMB will contribute to Hong Kong's economic and people-to-people links with western PRD. In order to assist Hong Kong companies in making early plans for development, HKTDC Research conducted preliminary studies in Zhuhai, Zhongshan and Jiangmen as well as Yangjiang which lies further west but is still within the HZMB's three-hour economic circle to explore business opportunities worthy of attention in western PRD thanks to easier accessibility.

Most Hong Kong companies opt to relocate or expand nearby

The manufacturing activities of most Hong Kong companies concentrate in the PRD region, especially in areas on the east bank of the Pearl River such as Shenzhen and Dongguan. According to findings of the questionnaire survey conducted by the Hong Kong Trade Development Council Research Department in early 2013, among the surveyed Hong Kong companies which had set up factories on the mainland, 67.6% of them had their factories in the PRD. Meanwhile, 25.4% of the surveyed companies had set up factories in areas in Guangdong province other than the PRD. Among surveyed companies which planned to set up new factories in the next three years, the PRD was still the production base favoured by the largest number of respondents (36.2%), followed by other areas in Guangdong outside the PRD (19.8%).

Many Hong Kong companies are concerned about the issue of supporting facilities for production and the fact that management could be more difficult if they relocated to places farther away from Hong Kong. However, in the more developed areas in the PRD, land utilisation rate is already quite high, which has made it difficult to further increase land development. Reportedly, currently it is quite difficult to find land for factory expansion in the more developed areas in the PRD, where some areas have changed their land-use from secondary industry to tertiary industry. Therefore, in the PRD region, not only labour cost has risen, land cost and supply have also become the bottlenecks in industrial development.

According to a survey report released by the Chinese Manufacturers’ Association of Hong Kong in June 2014, 32% of production enterprises have considered relocating their production activities to other areas. Among them, many (about 44%) opt for more remote areas in Guangdong province. This shows that Hong Kong companies are becoming more willing to consider more remote areas in Guangdong province as the location for expanding or relocating their factories. After the opening of the HZMB, connections between Hong Kong and western PRD will be even closer and more flexible, which will make management of production bases in western PRD more efficient. This will include the commuting of management staff, as well as supply and replenishment of imported parts and components required for production. In future, when Hong Kong companies look for locations within Guangdong province for their factory expansion or relocation, they may turn their eyes to areas on the west bank of the Pearl River that are relatively close to the HZMB.

Western PRD cities promote industrial relocation

As a matter of fact, in recent years, some cities in western PRD have been actively promoting industrial relocation in a move to take over some of the factories expanded or relocated from the more developed PRD areas. For example, in Yangjiang, four provincial-level industrial relocation parks and two city-level industrial relocation parks have been set up (including the takeover of the electroplating and leather industries by the Yangjiang Eco Industrial Transfer Park). Up to 2013, the four provincial-level industrial transfer parks had attracted more than 440 enterprises to move in. Total output of the larger enterprises during that year reached Rmb61.6 billion, with an annual growth of 34.5%. Meanwhile, Jiangmen has also established industrial transfer parks under the “three parks” model, namely in Kaiping, Enping and Taishan. In 2013, there were a total of 95 enterprises which were being established or newly established in the Jiangmen industrial transfer parks. Their industrial value-added for the year amounted to Rmb2.6 billion, and although they were at a nascent stage, their growth reached 50.9%. It is projected that when all the parks are completed and have commissioned production fully, total industrial output can reach Rmb36 billion.

Photo: A factory in Cuishanhu Industrial Transfer Park in Kaiping, Jiangmen undergoing extension.
A factory in Cuishanhu Industrial Transfer Park in Kaiping, Jiangmen undergoing extension.
Photo: A factory in Cuishanhu Industrial Transfer Park in Kaiping, Jiangmen undergoing extension.
A factory in Cuishanhu Industrial Transfer Park in Kaiping, Jiangmen undergoing extension.
Photo: Jiangmen New and High-Tech Industrial Park.
Jiangmen New and High-Tech Industrial Park.
Photo: Jiangmen New and High-Tech Industrial Park.
Jiangmen New and High-Tech Industrial Park.

More industrial land supply in Western PRD cities

Supply of industrial land in some western PRD cities is more abundant compared to the more developed areas in the PRD. According to analyses, the land development intensity in cities like Guangzhou, Shenzhen, Foshan and Dongguan has already exceeded 40%. To seek further expansion, companies have to resort to redevelopment on their original site or relocation of their old factories. Take Cuishanhu Industrial Transfer Park in Kaiping, Jiangmen for example. Some of the enterprises in the park are offshoots of parent companies in Shunde, Guangzhou and Dongguan, while others have relocated here altogether because the land on which their original factories were built has to serve other development purposes, such as commercial purpose, or the land had been subjected to restriction on further development. However, in western PRD, such as Jiangmen, the land development intensity is only about 11%, while the land development intensity in Yangjiang is less than 10%.

According to figures released by Yangjiang, the total area of designated industrial parks in the city is over 75,000 mu (50 sq km), with the constructed area of industrial parks reaching about 30,000 mu (20 sq km). Among these, the planned area of Zhuhai (Yangjiang) Wanxiang Industrial Transfer Park in Yangjiang is 6.8 sq km, with land already developed covering about 3 sq km. In other words, half of the land is still available for development and the area ready for development in the short term is 1.2 sq km. The total planned area of Yangjiang Jiangcheng Yinling Technology Industrial Park is 44 sq km. Of the 11 sq km planned for the first phase, 6 sq km has been developed and there is still space available for further development. Of the industrial transfer parks in Jiangmen, Enping has attracted the entry of more than 30 enterprises in the machinery industry from Foshan. While geographic proximity is one consideration, the availability of large plots of land in Jiangmen is another important factor. According to Jiangmen Kaiping’s Cuishanhu Industrial Transfer Park, the total planned area of the park is 60,000 mu (40 sq km) and by now 9,000 mu (6 sq km) has already been developed. It is planned that development will expand eastward and westward and that 6,000 mu (4 sq km) of land will be requisitioned in the next two years.

Emphasis on environmental protection and industrial upgrade

Although land resources in western PRD are relatively abundant, it does not mean that the extensive development model is adopted in the region. When attracting businesses and investments, the local authorities will only choose the right projects. Apart from placing emphasis on environmental protection and industrial upgrade, the authorities also exercise rather tight control over land development. Against this background, some industrial parks would act flexibly such as treating individual projects as industry cluster projects and allowing them to enjoy the concessions granted by the park. Yangjiang even offers incentives to projects which can effectively utilise land, such as the building of factories up to three storeys high. Different cities have different requirements for projects entering their industrial parks, such as investment intensity and tax revenue generated. For example, in Yangjiang, the general requirements for entering its industrial parks are: investment intensity is on average Rmb1.5 million per mu (1 mu = 667 m2) while tax revenue generated is targeted to reach Rmb150,000 per mu. The minimum price of land assignment in Yangjiang’s industrial parks is Rmb120,000-192,000 per mu. For the Jiangmen New and High-tech Industrial Park, investment intensity is Rmb2.5 million per mu and revenue generated is targeted at Rmb250,000 per mu. In Jiangmen’s industrial parks, the minimum price of land assignment ranges from Rmb183,000 to Rmb400,000 per mu.

Photo: Yangjiang Yinling Technology Industrial Park.
Yangjiang Yinling Technology Industrial Park.
Photo: Yangjiang Yinling Technology Industrial Park.
Yangjiang Yinling Technology Industrial Park.
Photo: Yangjiang Wanxiang Industrial Park.
Yangjiang Wanxiang Industrial Park.
Photo: Yangjiang Wanxiang Industrial Park.
Yangjiang Wanxiang Industrial Park.

Industrial relocation parks place great emphasis on environmental protection. Although some parks have built sewage treatment plants, individual factories must also meet environmental standards. According to the Jiangmen Industrial Transfer Park, since its establishment up to now, more than 200 projects have been rejected, most of which involved environmental protection issues. In most industrial relocation parks, basic supporting facilities are complete. For instance, in Jiangmen Kaiping’s Cuishanhu Industrial Transfer Park, positioned as a new industrial town, infrastructures and constructions are superior, roads and green belts are also excellent. Some parks also offer standard factories for rent.

Supporting industries

With regard to supporting industries in cities where the industrial parks are located, different types of support are available to different industries. Individual industrial transfer parks may have their key industries. For instance, in Jiangmen Kaiping’s Cuishanhu New Area, electronic information, hardware, machinery, textile and chemical fibre are leading industries. In Yangjiang’s Zhuhai (Yangjiang) Industrial Transfer Park, metal products and machinery equipment are key industries. Also in Yangjiang, since the hardware, knives and scissors industry in Yangjiang is very mature, supplies of supporting materials are abundant in the area. The city even plans to develop upstream steel industry in a move to build a complete industry chain. Nickel alloy is one of its key industries. It is planned that the wharves in Yangjiang can be used to import mineral ores as raw materials and the industry will extend upstream along the industry chain (including cold rolled/hot rolled steel), producing stainless steel for use by downstream industries. Yangjiang also plans to further develop marine products processing.

Actually, the supply of a vast range of different parts and components is also available in Jiangmen, although it may not be able to satisfy all demands completely and some of the parts and components will still have to be imported or purchased from other areas in the PRD. With the opening of the Jiangmen-Shunde Bridge scheduled for June 2015, connections between companies in Shunde and Jiangmen will be greatly strengthened. To some production enterprises which have expanded from other areas in PRD to western PRD, since their main factory is probably still in Shenzhen or Dongguan, currently the materials needed for production are being transported to western PRD from Shenzhen. But various industrial relocation parks have already included amenities such as commercial and residential buildings, parks, as well as medical, shopping and entertainment facilities in their development for enterprises and their workers.

Photo: A factory located in Yangjiang Industrial Transfer Park.
A factory located in Yangjiang Industrial Transfer Park.
Photo: A factory located in Yangjiang Industrial Transfer Park.
A factory located in Yangjiang Industrial Transfer Park.
Photo: A factory located in Yangjiang Yinling Technology Industrial Park.
A factory located in Yangjiang Yinling Technology Industrial Park.
Photo: A factory located in Yangjiang Yinling Technology Industrial Park.
A factory located in Yangjiang Yinling Technology Industrial Park.

Transportation

Where transportation is concerned, enterprises in Yangjiang pointed out that at present goods for export are transported to Yantian by road which takes about four to five hours. The freight charge for each container is around Rmb3,600 and some of the containers are transported to Hong Kong via Shenzhen. As for imported materials, some hardware factories in Yangjiang have them imported to Jiangmen by water. Since business takes the form of processing trade, the imported materials would be stored in Jiangmen’s bonded warehouses and retrieved when needed. Other companies remarked that in the future when the Hong Kong-Zhuhai-Macau Bridge opens to traffic, it will provide one more option for the route import or export can take. For instance, from the Jiangmen New and High-tech Industrial Park to Zhuhai, it only takes about 40 minutes by the Jiangmen-Zhuhai Expressway, in future when this expressway links to the HZMB, even more transportation time can be saved.

Labour supply

With regard to labour supply, according to one factory in Yangjiang, recruitment is smooth, with about 80% of the workers being local Yangjiang people. Although the factory provides staff quarters, the majority of the locals would still live at home while migrant workers prefer to rent their own housing. The average wage of an ordinary worker is around Rmb2,000-3,000 a month, but may reach Rmb4,000 on a piece-wage basis. The competent authority in Yangjiang estimates that about 600,000 local residents have left the city to work elsewhere. In other words, as the investment and working environment of the city improves, a great number of workers may return. According to a tyre factory with high degree of automation in Kaiping, the average wage of its workers is Rmb2,400. The workers, apart from locals in Kaiping, also come from places including Enping and Taishan. Labour supply is rather stable. In 2013, the permanent resident population of Jiangmen and Yangjiang stood at 4.49 million and 2.49 million respectively. According to figures furnished by the local authority, currently the minimum wage in Jiangmen is Rmb1,130 per month, with the monthly wage of an ordinary worker ranging between Rmb1,200 and Rmb2,500. In Yangjiang, the current minimum wage is Rmb1,010 per month, with the monthly wage of an ordinary worker ranging from Rmb1,500 to Rmb2,500.

Content provided by Picture: Billy Wong
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