Dongguan, the World’s Factory in Transition (Part I)

Posted by Reading Time: 3 minutes

By Yao Lu

Feb. 27 – Dongguan, the city known as the “world’s factory” even within China, is home to more than 10,000 foreign-invested enterprises and one of the largest global manufacturing bases. However, 30 years ago the city was just a collection of villages and towns spread out over 2,500 square kilometers on the Pearl River Delta.

Thanks to the “reform and opening-up” introduced in 1978, generous fiscal support from both the central and local government has transformed the former farm town into one of today’s leading global manufacturing centers. In 2012, the city’s GDP alone exceeded the RMB500 billion benchmark for the first time; registering at RMB501 billion (US$80 billion).

Geographical overview

The city’s initial economic growth spurt can be largely attributed to its strategic location. Lying in the central-southern part of Guangdong Province and east of the Pearl River, Dongguan adjoins Guangzhou to the northwest, Shenzhen to the south, and is positioned ideally at the center of the Guangzhou-Hong Kong economic corridor.

Beginning in the late 1970s, manufacturing enterprises from Hong Kong and Taiwan were attracted to Dongguan by its proximity to Guangzhou, Shenzhen and Hong Kong, and also by its abundant supply of cheap labor and land. Along with the relocation wave, massive capital flows, advanced manufacturing techniques, cutting-edge equipment and leading industrial designs have been brought in, presenting the city with incredible development opportunities.

Manufacturing base

After two decades of development, “Made in Dongguan” is now well-known in and out of China. The city has formed an advanced and comprehensive manufacturing system that covers more than 60,000 types of products across 30 different industries, and almost every one of Dongguan’s individual towns has its own unique and well-known industrial expertise.

Southern China’s Clothing Kingdom

Humen, a town which lies to the southeast of Dongguan, started its apparel manufacturing in 1993. The region now has more than 1,200 clothing manufacturing enterprises, with more than 300,000 employees engaged in the industry. Named as “Southern China’s Clothing Kingdom,” Humen is famous for its production of female jeans and fashion garments. In 2011, the town sold 250 million pieces of garments worldwide with total sales reaching RMB20 billion.

Oriental Furniture Empire

Dalingshan, known as the “No.1 furniture export town” in China, is also the largest furniture manufacturing base in the Asia-Pacific region. There are now over 500 factories in the town involved in the production of furniture and relevant accessories.

Besides, the region boasts a complete production chain for the furniture industry – ranging from raw materials supply to processing, manufacturing, packaging and exporting – and its furniture exports have topped the country for 14 year in a row.

Shoe-making base

Houjie is one of the largest shoe making bases in China. There are more than 400 factories in the town involved in shoe-making, and over 800 engaged in the supply of raw materials, machinery and leather for the industry. In 2010, 600 million pairs of shoes were made in the town, with sales revenues rising to RMB20.9 billion, and it is expected that, by 2015, 900 million pairs will be produced with sales revenues amounting to RMB28.5 billion.

The World Shoe Center, located in the Houjie Ecology Industrial Park, started construction in 2011. Total investment into the project is estimated at roughly RMB1.6 billion, and after its completion, the center will serve as the international center for shoe material procurement, shoe exhibitions and trade fairs, and a hub for new material and technique R&D.

This is Part I of a two-part series. To read Part II, please click here.

Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia.

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