Posted: June 1, 2012 |  AUTHOR: KEN FOX | CONTACT ME

 

The Pearl River Delta (PRD) has been the most economically dynamic region of the People’s Republic of China since the launch of China’s reform program. It has been a key destination for foreign investment and a place for the country’s growing integration into the global economy. The PRD is often defined as including the Cities of Guangzhou, Shenzhen and Zhuhai. Future growth plans include facilitating transportation links between the PRD with Hong Kong and Macao, which will serve as additional growth engines for the area.

The river delta is formed by three major rivers, the Xi Jiang, Bei Jiang and Dong Jiang that converge and flow into the South China Sea. The areas around these rivers include densely populated cities that cover nine prefectures of the Guandong Province. Some quick facts on the delta and its major cities:
1. The PRD is often referred to as the world’s workshop, with about 5% of the worlds goods produced in the greater PRD
2. Over 70,000 Hong Kong companies have manufacturing plants on the Pearl River Delta.
3. Guangzhou (formerly known as Canton) is a port on the Pearl River, the capital city of Guangdong Province, has a population of 7.8 million with an annual growth rate of 12.3%, and governs ten districts or smaller areas.
4. Shenzhen is the busiest port in China after Shanghai, and is adjacent to Hong Kong. It has a population of 8.9 million and an annual growth rate of 10.7%.
5. Zhuhai borders Macau and has a population of 1.6 million (2010).

The Chinese government has designated the major cities in the Delta into special Economic Zones, which give their local authorities autonomy in making decisions to attract foreign investments and to carry out their own economic development. As a result, the PRD region has been able to attract large amounts of foreign capital and promote export production. Future plans call for the integration of Hong Kong and Macao into three “metropolitan” areas:
1. Central Metro Area-Guangzhou and its governing sub-cities: the emphasis is on attracting and developing the automobile and electronic industries.
2. East Metro Area, with Shenzhen and Hong Kong as the core cities: This area will eventually link up Guangzhou with Hong Kong. The focus will be to attract R&D facilities, manufacturing and IT based businesses.
3. West Metro Area-This area will consist of Macau, Zhuhai, Zhongshan and parts of Jiangmen. The focus will be the port, energy, and high tech industries.

Future Commercial Expansion-
The building of the Hong-Kong-Zhuhai-Macau Bridge
When completed, this structure will represent a series of bridges and tunnels to connect Hong Kong, Macau and Zhuhai. The proposed 31 mile link is expected to cost $10.7 billion U.S. dollars. The longest bridge section will be 14.2 miles long and include three cable-stayed spans between 920 and 1,510 feet. Construction began in 2009 and is expected to be completed in 2016. Some expected benefits of this effort include:

a. Enhancing the flow of labor, goods and capital to and from Hong Kong to mainland China and the rest of the world.
b. Reducing travel time between Hong Kong and Zhuhai or Macau to approximately 40 minutes, down from about 4.5 hours by road, at present.
c. Alleviating congestion at existing cross-border checkpoints, especially between Hong Kong and Shenzhen.
d. Encouraging deeper economic integration between Hong Kong and the Pearl River Delta Region (PRD).
e. Facilitating tourism in the PRD, encouraging more Macau and PRD residents to visit (and shop) in Hong Kong.
f. Strengthening Hong Kong’s position as a logistics center
g. Optimizing a regional transportation network.

With closer economic ties between Hong Kong and its neighboring PDA, Hong Kong can assume a leading role in driving the economic development in South China. When the bridge is completed, Hong Kong can participate more in the Central Government’s “Go West Development Plan,” turning itself into a transportation hub to the western region of China.

Expansion to the U.S-
Major Global Manufacturers based in the Pearl River Delta

One example is a company called Gree Electric Appliances, Inc., based in Zhuhai. Gree is the world’s largest manufacturer of residential and commercial air conditioners. The company was founded in 1989, and had global sales of 80 billion Yuan in 2011 (approx. $12.7 billion). It’s a multi-national company with about 80,000 employees worldwide. Its appliances are sold in over 100 countries. The company owns manufacturing facilities in five China locations; Brazil (2000), Pakistan (2001) and Viet Nam (2008). In total, the company is capable of producing 10 million units a year. The president of Gree is a woman, Dong Mingszhu, who Fortune Magazine lists as one of the 50 most influential business women in the world.

Gree set up a U.S. headquarters in metro Los Angels in June 2010. The company sells 1.5 million air conditioner units annually in the U.S, and is considering building a factory there. It’s seeking to expand in the U.S. by distributing its products in retailers such as: Wal-Mart, Target, Lowe’s and Home Depot. Only about 25% of Gree’s exports include the Gree brand name. The rest carry the names of well known companies in the sector, such as: GE, Electrolux, Daikin and Sanyo. Gree’s global marketing manager, Peng Hong says: “We must improve our name and reputation (outside of China).” Gree also manufactures: electric fans, water dispensers, rice cookers and other household appliances.

The company has set up three R&D centers, each employing 5,000 people to develop new components and systems unique to Gree. They formed a joint venture (JV) with Daikin Industries of Japan. The rationale for this JV included “fusing Daikin’s expertise in energy-efficiency technology with Gree’s expertise in production and procurement of raw materials and parts to manufacture economical, high performance inverter type air conditioners.” Air conditioners remain the company’s major business. Of the 200 million air conditioners in the world, estimates are that China accounts for 110 million.

Bottom line, watch for the increasing global presence and influence of the Pearl River Delta entities and assets. Also, as we have seen with the Chinese manufacturer Haier successfully enter the U.S. selling small refrigerators, watch for the Gree brand air conditioners to appear in the same way.

Several sources: 1. “Beating the Heat,” Macao Magazine, January 2012
2. UnicView, December 2011
3. Clement Miu, A Stronger Pearl River Delta-Government Initiatives
(no date available)

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©2017, The Global Galaxy blog is produced by The Soundings Group, LLC, Charleston, South Carolina, USA, www.thesoundingsgroup.com. The company is an international business consulting firm, specializing in new market assessments, market entry strategies and marketing guidance. The scope of Global Galaxy is to cover timely international trends, issues and business building ideas. Its purpose is to educate, inform and stimulate thinking for business opportunity analyses.

 

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