Pearl River Delta Manufacturing Exchange and Reconstruction: Losing Money Every Minute

[In Dongguan, Yin Jianwen found that the order volume this year was stable compared to last year, and some companies even have growth. It is easier to recruit people than in previous years. He introduced that there are more than 230 member companies in the association, and fewer than 10 member companies have been closed since last year. ]
The hardships of manufacturing demand and the decline in orders have passed?
Zeng Ming (pseudonym), a small business owner in Shenzhen, recently wondered: As a business owner of the production and processing of MP4, after the start of the year, he found that the order volume has increased inexplicably. After attending a peer gathering, he found the answer.
At that meeting, he was surprised to find that he had lost some familiar faces. When he asked, he knew that a group of peer companies closed last year.
Zeng Ming’s order volume doubled compared with the same period last year, and now the monthly sales exceeds 3 million yuan. He told the "First Financial Daily" reporter: "I analyzed it, probably because the environment was not good last year, some factories either did not open or switched to other industries, and fewer competitors."
Unfortunately, even if orders increase, it does not mean an increase in profits.
Recently, Wang Xiaolu, deputy director of the National Economic Research Institute of the China Reform Foundation, said in a lecture on "China's economic structure" held by the Shenzhen Institute for Modern Innovation and Development that one problem facing Chinese manufacturing industry is: in high-tech industries due to knowledge When the thresholds for poor property rights protection and excessive government approval have not yet fully developed, the comparative advantages of traditional labor-intensive industries that rely on low value-added and cheap labor have been steadily weakened.
This phenomenon is particularly prominent in the “Pearl River Delta”, a major manufacturing hub in China. Although high-end manufacturing is on the rise, many companies have received orders, but traditional labor-intensive companies are still shrinking and trying to survive the winter.
Due to the sensitivity to cost, some traditional labor-intensive companies continue to move away from the core cities of the Pearl River Delta. At the same time, the integration within the Pearl River Delta has become a trend. Some large-scale and leading-edge technology-based enterprises have accelerated their restructuring and adjustment within the region. For example, the R&D headquarters is located in Shenzhen, and the production bases are moved to relatively low land prices.
Under the wave of structural transformation, regardless of the willingness of business owners, they will inevitably be involved. In this process, the stories of sorrows and joys are constantly being staged.

"Losing money every minute"
The electronics industry is one of the pillar industries in the Pearl River Delta. Zeng Ming has been in the industry for five years, but the business prospects for next year are still very blank.
He can't eat what will happen next year. He is considering whether to move the factory to a lower cost city by following the steps of some business owners and friends around him.
For many SME owners, when they think of “moving out and moving”, they rarely choose Southeast Asian countries with lower costs.
Lin Bo (pseudonym) of Shenzhen Electronics Industry Association told this reporter that “the company moved to Southeast Asian countries, although it will reduce the cost of labor and rent, but it needs to consider the political factors, there are some other problems, such as Workers in some countries in Southeast Asia are not willing to work overtime."
The surrounding cities such as Dongguan and Huizhou are regarded as the ideal place to move in by Shenzhen. The factory rent and labor cost are relatively cheap, and only two or three hours drive from Shenzhen, the logistics will hardly be affected.
But Dongguan is not a panacea. With the overall increase in operating costs in the Pearl River Delta, some business owners in Dongguan are also considering moving their factories to inland cities where rents are cheaper, labor costs are lower, and jobs are more stable.
Chen Ming (a pseudonym), an automation equipment manufacturer in Dongguan, lamented that the operating costs have risen too fast. If he is not a local, he wants to move the factory out.
Chen Ming's factory has two or three hundred employees. Among them, there are more than 30 R&D personnel, each with a monthly salary of more than 10,000 yuan; the general wage is also around 3,000 yuan.
The factory has been losing money for two consecutive years. In 2014, Chen Ming’s company lost more than 3 million yuan, and lost more than 5 million yuan last year. This year, the current monthly loss is about 300,000 yuan.
Surprisingly, the loss occurred with a large number of orders.
Although it has fallen by 30% compared with last year, the amount of orders per month this year is still more than 30 million yuan. However, after eliminating labor costs, raw materials, etc., there is little profit left.
Chen Ming faces the same dilemma as many small and medium-sized enterprises: in terms of income, some old customers have not changed their quotations for many years, and the competition is too fierce. He dare not raise the price; in terms of expenditure, manpower and other costs continue to rise.
“The more orders you receive, the more you lose,” he said.
Our reporter learned from many companies in the Pearl River Delta that many factories have this situation: orders are only to maintain the operation of the factory, not to make money.
Chen Ming said that during the Spring Festival factory holiday, he was the happiest time. Not only can you wake up to sleep naturally, but after waking up, you don’t have to watch the factory lose money every minute.
In order to support the current factory, Chen Ming sold the property in Hong Kong and cashed in 18 million yuan.
When he talked to reporters about this topic, he looked a little embarrassed: "I have seen a lot of reports knowing the current situation. It is a bit silly to open a factory with the money to sell a house, but I am not willing to close it."
Similar to Chen Ming, many business owners who also open factories have a strong industrial complex in addition to realistic considerations. Yin Jianwen, Secretary-General of Dongguan Electronic Industry Association, told this reporter: "As long as there is a single order, even if it loses a little, everyone will stick to it."

Continuous migration
During his visit, Yin Jianwen also found that although some electronic enterprises in Dongguan did not close their local factories for the time being, they were attracted by the policy of attracting investment from the mainland government and added factories to the mainland cities.
When the outside world is worried that this former "world factory" status is not guaranteed, some regional economic observers believe that this is the only way to go through the pain of industrial restructuring: there will definitely be a batch of factories that do not meet the transformation conditions. These factories, especially small electronics industries, incoming processing plants, etc., or go further to the mainland, or move to Southeast Asia, Africa, or close the door.
The voice from the local authorities also stressed that it is normal for the industry to come and go.
At the end of last year, Wu Baian, deputy director of the Human Resources Bureau of Dongguan, told this reporter that if a factory is closed, the Human Resources and Social Security Bureau will soon coordinate the follow-up issues, and 70% of the labor force released will soon solve the employment. Moreover, the corporate data processed by their departments is relatively stable, with no major changes. He added: "Some of the manufacturing-oriented factories and some foreign-invested companies have closed or moved, but some high-tech, big-brand companies are also emerging."
Tan Gang, deputy president of the Party Committee of the Shenzhen Municipal Party Committee, said that traditional manufacturing industries with low added value are at the bottom of the industrial chain and are sensitive to cost. Their profit margins are not enough to support high costs, so the removal path is taken from high cost. The city goes to low-cost cities.

Each magical power
It is not the way to withdraw. Their other way is to go upstream of the industrial chain, from the cost-sensitive, simple manufacturing process to the technology research and development upgrade.
However, the funds have made many of the traditional manufacturing SMEs' dreams of upgrading have not yet taken off, and they have already fallen. When Zeng Ming and his business friends chatted and chatted, they found that 80% of the participants believed that if the company wanted to make a breakthrough, the capital was the biggest problem.
Vote, afraid to fight. Don't vote, it will close in the morning and evening. This is a dilemma.
Some people have invested huge sums of money in the quasi-industry and let go.
Xu Mingxu had previously opened a factory in Jieyang for seven or eight years to produce cables. In 2012, an occasional opportunity, he touched the touch screen industry, judging its broad application prospects, began to produce mobile phones and computer touch screens, and invested 100 million. The funds are mainly used to purchase advanced equipment from Taiwan and introduce more than 20 R&D personnel, including two PhDs who work at Taiwan's point of sale.
Looking back now, Xu Mingxu was fortunate to have taken the correct move. He told the "First Financial Daily" reporter: "At that time, we re-started our business. We have advanced equipment, high degree of automation, and good production technology. Currently, there are few opponents in South China."
Today, he has successfully turned to the high-tech industry, and his new company, Guangdong Taitong Technology Co., Ltd., has become one of the key publicity companies of the Jieyang government.
More SME owners are only cautiously investing, carefully testing the market's acceptance of new products, or taking a different approach: holding the "thighs" of high-tech companies and looking for opportunities for cooperation.
Huang Yuanhao, the head of Shenzhen High-tech Enterprise, which produces 3D sensors, told reporters that many friends in the manufacturing industry are envious of the attractive prospects of his industry, but the technical threshold is high and the investment funds are huge. I want to be their foundry, or an accessory provider.
Huang Yuanhao, who came back from the United States to start a business, could not feel the chill of the above-mentioned business owners. Now, his biggest worry is how to complete an order that is overwhelming.
It is worth mentioning that the proportion of high-value technology-based industries in the core urban industries of the Pearl River Delta is increasing.
In the first quarter of this year, the added value of Shenzhen's advanced manufacturing industry and the added value of high-tech manufacturing increased by 9.6% and 11.9% respectively, accounting for 75.8% and 67.3% of the added value of industrial enterprises above designated size. The output value of high-tech products in Guangzhou accounted for 45.3% of the industrial enterprises above designated size, up 1 percentage point year-on-year, contributing 71% to the growth of industrial enterprises above designated size. The added value of Dongguan's advanced manufacturing industry and the added value of high-tech manufacturing also increased by 13.3% and 17.0% respectively.

More factories in Shenzhen closed?
In the new round of structural adjustment, the Pearl River Delta is showing a distinct feature: the integration within the Pearl River Delta has become a trend, and high-tech enterprises play a leading role in restructuring and adjustment in this region.
Lin Bo, a person from the above-mentioned Shenzhen Electronics Industry Association, has been dealing with small and medium-sized enterprises all the year round. He feels that the business situation has not improved this year, and the company is not optimistic about the short-term. Many export-oriented companies hold the hope to participate in the exhibition. If they can receive the order, they will have the capital to continue their lives, but even if they continue to die, they are worried that they will not last long.
In Dongguan, Yin Jianwen found that the order volume this year was stable compared to last year, and some companies even had growth. It is easier to recruit people than in previous years. He introduced that there are more than 230 member companies in the association, and fewer than 10 member companies have been closed since last year.
In response to the above two different feelings, Song Ding, director of the Tourism and Real Estate Research Center of Shenzhen Comprehensive Development Research Institute, analyzed the reporter: “In recent years, Huawei’s terminal company has moved from Shenzhen to Dongguan, and the Dongguan government has also introduced it from other places. Some large-scale high-tech companies. These huge enterprises have invigorated the surrounding small and medium-sized enterprises in the past. For these enterprises, the main upgrade is to upgrade from low-end processing and manufacturing to spare parts for high-end industries. ."
He said that for the enterprises that moved out of Shenzhen, more is a transformation, either to the tertiary industry, or to move the factory out of Shenzhen, so the factory closes more looks, but in fact, deep Guan two The land is moving in the right direction, and it is all in the development trend.
In 2012, Huawei registered Huawei Terminal (Dongguan) Co., Ltd. in Songshan Lake, Dongguan. In September 2014, ZTE spent 10 billion to build a research and development production base in Heyuan, Guangdong. In November 2015, BYD and Guangdong Shanwei signed a cooperation framework agreement, which will invest in six projects including the new energy automobile industry base in Shanwei.
In May of this year, after the news that Huawei Terminal (Dongguan) Co., Ltd. became the largest revenue and taxpayer in Dongguan in 2015, it caused concern about Shenzhen manufacturing industry. “Huawei ran” and “Zhongxing ran” The speech is very rampant.
Subsequently, Shenzhen Mayor Xu Qin publicly clarified. According to media reports, on May 29, Xu Qin said that ZTE, Huawei and other enterprises not only contributed to Shenzhen's economic development, but also part of Shenzhen's counterpart support for the development of eastern Guangdong, but Huawei and ZTE will not leave Shenzhen.
Song Ding also believes that the relocation of manufacturing sectors from Shenzhen by large enterprises is the result of re-strategizing and industrial adjustment, and is also conducive to the overall development of the Pearl River Delta region. "The biggest advantage of the internal integration of the Pearl River Delta is that the full use of the original industrial platform, the cost of enterprises to change birds, the implementation of government policies is also very fast," he said.

Urban positioning
In 2008, Guangdong began to implement the “cage-for-bird” strategy, which is to change the extensive growth mode and free up space for industrial adjustment and upgrading.
As a result, the local government’s strategic positioning of Dongguan has also changed.
In 2015, Dongguan City clearly put forward the urban development goal - "Building an international manufacturing city and a modern ecological city." Luo Yongfeng, deputy director of the Political and Research Office of Dongguan Municipal Committee, said that the transition from “world factory” to “manufacturing famous city” means that it has changed from processing type to production workshop to innovation-driven and brand production. It is more focused on branding and technology. Transformation and upgrading of the industrial chain with the reputation and reputation.
In Shenzhen, in the context of the shortage of land resources and the overflow of industrial “fertilizer water”, should it insist on industry-led or should it turn to the service industry?
A few years ago, Liu Guohong, deputy director of the Regional Development Planning Institute of the Shenzhen Comprehensive Development Research Institute, conducted a survey on the trend of Shenzhen enterprises' emergence. "The government still believes that the advantages of manufacturing should be firmly grasped."
Despite the lack of vigorous support, the development of the tertiary industry in Shenzhen is still growing rapidly.
There is a local opinion in Shenzhen that in 2020, the proportion of the secondary industry in Shenzhen may fall below 35%. If the proportion of the secondary industry falls below 35%, it means that the industrial development in Shenzhen has become uneven.
Liu Guohong believes that economic incubation is a natural process, and the proportion of Singapore's industry, which is close to the total GDP of Shenzhen, has fallen to 25%. “It is unrealistic to keep the industrial land and industrial volume blindly. However, from the perspective of the healthy development of the city, the Shenzhen Municipal Government still has to maintain a certain amount of industrial volume, and it will have more inclination to the industry.”

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