Dongguan, the World’s Factory in Transition (Part II)
Feb. 28 – By transforming Dongguan from a collection of small towns into an international manufacturing giant in less than three decades, the so-called “Dongguan Model” has received worldwide recognition. Even when many manufacturing enterprises in China began suffering from rising production costs brought on by the appreciation of the renminbi in 2006, the manufacturing industry in Dongguan still presented a thriving scene.
However, in the fallout from the Global Financial Crisis, Dongguan’s GDP growth slowed to 5.3 percent – the city’s lowest growth level since the “Reform and Opening Up” began in 1978. As a result, the local government realized that the city’s low-end manufacturing model needed to be upgraded and, in 2010, the city was designated as a pilot city to undergo industrial transformation and upgradation.
Despite this economic transformation and upgradation, Dongguan has failed to regain its former reputation as the factory of the world. However, changes and developments are actually taking place in the city, specifically:
Exports of high-tech products have increased share in processing trade by 11.3 percent
The exportation of high-tech products in the processing industry has increased its share of the total from 38.1 percent in 2008 to 49.4 percent in 2011.
Foreign-invested enterprises more than double domestic sales levels from 2008 to 2011
Domestic sales of foreign-invested enterprises increased from RMB133.9 billion in 2008 to RMB247.9 billion in 2011, taking up 34 percent of the total trade sales in 2011, compared with 26 percent in 2008.
Original brands have doubled during the 2008-2012 period
Since 2008, original brands developed within the city’s processing industry increased from 2,068 to 4,325, while the newly-established research institutions of the processing industry reached 441, forty-nine times the number in 2008.
Labor-intensive industries see factories shrink, values jump
While the number of enterprises and employees involved in the labor-intensive industry are slowly decreasing, the overall export value of labor-intensive products is increasing. Take Houjie for example – the amount of shoe-making factories in the town decreased from more than 600 in 2007 to only 400 in 2011, and the number of employees engaged in the industry dropped from 150,000 to 100,000. However, the value of shoe exports increased from RMB15 billion to RMB30 billion at the same time, while the average export price for a single piece of clothing increased by 61 percent.
More than 1,500 low-end manufacturing projects transferred
As the city seeks to upgrade its manufacturing base, Dongguan has transferred more than 1,500 projects to other parts of Guangdong Province in the last two years, with most of them belonging to low-cost, low value-added, labor-intensive, pollution-intensive industries.
In addition, the city’s industrial fixed assets investment in projects above RMB5 million in the last two years totaled RMB69.5 billion. When this production capacity is finally unleashed, it is expected to generate RMB200 billion in industrial output and RMB40 billion in industrial added-value.
12th Five-Year Plan
In the “12th Five-Year Plan for Dongguan’s Economic and Social Development,” the municipal government aims to turn the city into an important production base for national strategic emerging industries, specifically:
- Advanced information industry
- Electric vehicle industry
- Solar energy industry
- Semiconductor lighting industry
- Biochemical industry
- Civilian nuclear industry
- New material industry
- Energy-saving industry
- Marine industry
This will be part of a wider effort to upgrade the city into an important modern manufacturing center at the international level by 2015. Specifically, the added-value of advanced manufacturing industries in the city will be over 50 percent of the total local industrial added-value by that time.
This is Part II of a two-part series. To read Part I, please click here.
You can stay up to date with the latest business and investment trends across China by subscribing to Asia Briefing’s complimentary update service featuring news, commentary, guides, and multimedia resources.
The Greater Pearl River Delta: Business Guide to South China (Fourth Edition)
In this newly-released edition of our regional business guide to South China, we offer business-minded individuals an up-to-date reference source for all of the key issues concerning setting up and successfully operating a business in South China.
Dezan Shira & Associates' founder Chris Devonshire-Ellis compares the cost of doing business in China, India and ASEAN. He talks about staying compliment in the Chinese and ASEAN markets and discusses recent regulatory changes, including financial and due diligence issues affecting US companies interested in expanding into China and ASEAN.
Dezan Shira & Associates alumni Manuela Reintgen from its Beijing office, divulges the integral information necessary to handle individual income tax in China. Manuela explores three main topics: First she explains who pays, when they pay, and what individual income tax is levied on.
Adam Livermore discusses the HR and Payroll situation in China. In this particular session, he took questions the audience had from the first podcast and provided clarifying, enlightening information.