Economic Crisis in Guangdong?

Economic Crisis in Guangdong?

Nearly one year into the global financial crisis, the secret to surviving the storm seems to have surfaced. Perhaps it was the blessing of Typhoon Morakot. Yet even before the typhoon, the quiet town of Huizhou, which lies on the coast of China's Guangdong Province, seemed to be weathering the economic storm quite well.

With its favorable real estate policies and low labor costs, Guangdong has attracted top corporations from all around the world. As a result, local cities such as Huizhou have been transformed into rich, seaside ports with skyscrapers lining the streets.

Then September 2008 came. As American businesses toppled and American consumers became strapped for cash, the toy factories that had come to call Guangdong home for so many years quickly disappeared. As the bleak reality of what might become of the industrial-rich province began to sink in, both the Chinese central government and the local leaders implemented stimulus policies to try to rescue the economy. Although the final lap has yet to be swum, it seems many companies are emerging from the financial crisis...some, perhaps, stronger than they were going into it.

The reason for success is due to a combination of government policies and China's unfaltering national development. TCL, a TV and electronics manufacturing company that also produces brand names such as RCA and Altera, has enjoyed the benefits of China's push to make profits. Like many companies, business since the start of the financial crisis has been low, especially in exports. According to Bo Lianming, TCL's chief operating officer, exports have decreased by about 20 percent. However, instead of drowning in the global market, the company simply switched its focus to the market closest to home—China.

"TCL has yet to fire any employees this year because of the decrease in exports," Bo said proudly. The Chinese TV market has actually been flourishing amid the economic struggle. Bo says TCL currently employs 30,000 people in Huizhou and is producing a whopping 13,000 TV sets a day. Part of this is a result of the government-initiated new-for-old policy, in which villagers can take old electronic products and exchange them for new ones. Add that to a ripe domestic market that is experiencing for the first time what it's like to have cash to spend on luxurious items, and the news for TCL is good...really good. LCD screen sales increased by 248.9 percent in the first six months of this year, as compared to the first half of last year.

Galanz, a Chinese company that focuses on white appliances, such as refrigerators, microwaves and other large items, has also re-proportioned its foreign and domestic market shares. Deputy vice president of Galanz, Yaochang Yu, says that after the Canton Fair last spring, many overseas orders were cancelled. However, Galanz has experienced a 120 percent growth in air conditioner sales and a 40 percent growth in microwave sales in the domestic market.

In addition to upgrading its old electrical products, China is investing money to develop green energy companies, such as by providing subsidies for those that meet stricter environmental standards. As more and more people have found themselves penny-pinching during the crisis, energy-saving and energy-efficient products that last longer and give more bang-for-the-buck are excelling in the global market.

"The Chinese government has put an emphasis on green GDP, the environment and sustainable development," Bo said, noting that TCL is taking, "a very active role in the environmental production industries."

Zhongshan Mayor Li Qihong believes environmentally-friendly companies are crucial for development.

"New energy is the future focus. We've put 300 million yuan aside to develop new energy projects," she said.

Zhongshan municipality is not only encouraging the development of green companies, but is also encouraging the central government's policy of forming clusters. By creating economic industrial clusters, small startup companies are able to cut costs without cutting innovation. Zhongshan's Torch Development Zone, a special region in which enterprises focus on strengthening technological design, is starting to reap the benefits of the stimulus package.

"Almost all industries have almost completely stopped slowing down," said Feng Shusheng, secretary of the Torch Development Zone Committee.

In fact, some businesses have found themselves suddenly ahead of the game. Unihero, an incubator company that lies in a special economic zone in Huizhou, pays only one yuan in rent. It creates lighting equipment displays and provides lighting engineering solutions. By receiving real estate and tax benefits, it has been able to invest the extra cash in new ways. The result is that 30 percent of its appliance sales and R&D employment are now being funneled into the LED market. Frankie Yi, the marketing director of the company, says that by upgrading its investment strategies, infrastructure has boomed and the domestic market is now replacing the loss of exports.

But that's not to say Chinese businesses are not treading any waves in the global economic turmoil. Zhongshan Executive Vice Mayor Xie Zhongfan, notes that while the central government has successfully created policies to boost domestic production, it's hard to shift reliance on exports to domestic sales. Yu agrees. Despite the record sales Galanz has achieved by tapping into the domestic and emerging markets, consumption levels remain highest in Europe and North America.

"We have taken some active measures, entering 139 new markets around the world. Most are new, emerging markets…but they can't replace the European and North American markets," Yu said.

Furthermore, the factories that did shut down at the beginning of the crisis are still creating ripples in the local economies. As employment levels dropped as much as 20 percent in some areas, many of the workers who lost their jobs were forced to move and find jobs elsewhere.

"The government has taken measures to help cut risks for businesses... [but] there's still a long way to go," said Xie.

While Xie is smart to point out that the crisis is not over, the region seems to have found a calm spot in the storm. And while the rest of the world continues to struggle to stay afloat in the current bearish market, the dragon, at least for now, is proving that it runs the lair.

(Source: China.org.cn)