To flee cut-throat competition, firms look to China's interior
Thursday, April 5, 2007
MAO ZEDONG and the Red Army once had a major base in the mountains not far from here, but the mission Lin Yebiao and Zhuang Binguang are on has a decidedly capitalist objective.
Whereas Mao and his rebels retreated from the hills to avoid annihilation at the hands of Chiang Kai-shek's forces, Lin and Zhuang are here to flee the cut-throat competition in Guangdong province, the economic powerhouse on the southern Chinese coast.
They and two other business partners used to run a small factory in the boom town of Shenzhen making shirts and other clothing, but with costs there rising, they just couldn't expand their business enough to stay in the game.
So they have come to scout out Ji'an, a small city in the province of Jiangxi, just inland from Guangdong.
"Guangdong is pretty complicated. There are lots of big companies. If you're not big enough, the big ones will eat you up," said Lin, 22, walking along a deserted road in an industrial park in the north of town, as workers in the neighbouring factories laboured over everything from cables to electric bikes.
"If we stayed there, we could probably only work for someone else," he said.
It's hardly just scrappy entrepreneurs like Lin and Zhuang who are looking to Ji'an and places like it as a refuge from the crowded conditions and higher costs on the coast.
In a new industrial park on the other side of town, Hong Kong electronics firm Red Board Ltd is digging into the red earth to build a plant that will be capable of churning out about US$130 million worth of printed circuit boards a year by 2009.
Red Board isn't fleeing Guangdong — it will keep its factory in the manufacturing hub of Dongguan, making the innards of everything from mobile phones to digital cameras.
But when it came time to expand, the company knew it had to look elsewhere, said Maurice Yip, the firm's Chief Executive.
For one, the local government was increasingly frowning upon polluting industries like theirs, Yip said. "The electricity and water supply is also very tight. We've been suffering a lot. Still today, we have to pay a premium for a guaranteed electricity supply," he said.
Yip and his colleagues searched far and wide for a suitable location and settled on Ji'an, which falls about halfway between Guangdong and Shanghai, because it offered the right combination of low costs, convenient location and good transport links.
"The infrastructure that we are being provided is among the best that we saw. Things are ready. They need companies to come and use it," Yip said.
He estimated that both power and water, which a factory like his consumes in vast amounts, cost about a fifth less in Ji'an than Dongguan — and the local government could promise an uninterrupted supply.
Cheap labour attracted Japanese electronics maker Uniden Corp, which in 2002 was one of the first foreign firms to set up shop in Ji'an, said Jun Sakamaki, head of its Jiangxi operations.
Sakamaki estimated that the gap in labour costs between Ji'an and Shenzhen, where Uniden has a big plant making cordless phones, had halved since then to about 25 per cent.
Still, Uniden is giving Ji'an its vote of confidence by moving circuit board production into a new, bigger plant nearby.
The arrival of other high-tech companies brings promise of a broader supplier base, said Sakamaki, and the highways that now criss-cross Jiangxi have made shipping much easier. "Before we had the expressway, it could take two or three days to go one way to Shenzhen during the rainy season," he said. "We don't have this kind of problem any more." Reuters
Whereas Mao and his rebels retreated from the hills to avoid annihilation at the hands of Chiang Kai-shek's forces, Lin and Zhuang are here to flee the cut-throat competition in Guangdong province, the economic powerhouse on the southern Chinese coast.
They and two other business partners used to run a small factory in the boom town of Shenzhen making shirts and other clothing, but with costs there rising, they just couldn't expand their business enough to stay in the game.
So they have come to scout out Ji'an, a small city in the province of Jiangxi, just inland from Guangdong.
"Guangdong is pretty complicated. There are lots of big companies. If you're not big enough, the big ones will eat you up," said Lin, 22, walking along a deserted road in an industrial park in the north of town, as workers in the neighbouring factories laboured over everything from cables to electric bikes.
"If we stayed there, we could probably only work for someone else," he said.
It's hardly just scrappy entrepreneurs like Lin and Zhuang who are looking to Ji'an and places like it as a refuge from the crowded conditions and higher costs on the coast.
In a new industrial park on the other side of town, Hong Kong electronics firm Red Board Ltd is digging into the red earth to build a plant that will be capable of churning out about US$130 million worth of printed circuit boards a year by 2009.
Red Board isn't fleeing Guangdong — it will keep its factory in the manufacturing hub of Dongguan, making the innards of everything from mobile phones to digital cameras.
But when it came time to expand, the company knew it had to look elsewhere, said Maurice Yip, the firm's Chief Executive.
For one, the local government was increasingly frowning upon polluting industries like theirs, Yip said. "The electricity and water supply is also very tight. We've been suffering a lot. Still today, we have to pay a premium for a guaranteed electricity supply," he said.
Yip and his colleagues searched far and wide for a suitable location and settled on Ji'an, which falls about halfway between Guangdong and Shanghai, because it offered the right combination of low costs, convenient location and good transport links.
"The infrastructure that we are being provided is among the best that we saw. Things are ready. They need companies to come and use it," Yip said.
He estimated that both power and water, which a factory like his consumes in vast amounts, cost about a fifth less in Ji'an than Dongguan — and the local government could promise an uninterrupted supply.
Cheap labour attracted Japanese electronics maker Uniden Corp, which in 2002 was one of the first foreign firms to set up shop in Ji'an, said Jun Sakamaki, head of its Jiangxi operations.
Sakamaki estimated that the gap in labour costs between Ji'an and Shenzhen, where Uniden has a big plant making cordless phones, had halved since then to about 25 per cent.
Still, Uniden is giving Ji'an its vote of confidence by moving circuit board production into a new, bigger plant nearby.
The arrival of other high-tech companies brings promise of a broader supplier base, said Sakamaki, and the highways that now criss-cross Jiangxi have made shipping much easier. "Before we had the expressway, it could take two or three days to go one way to Shenzhen during the rainy season," he said. "We don't have this kind of problem any more." Reuters
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