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Early signs of recovery in heartland
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Less than a year after being in the eye of an economic storm, China's manufacturing heartland might at last be showing some signs of recovery.

Guangdong province - labeled one of the key "workshops of the world" - was on the firing line at the end of 2008 when North American and European consumers stopped buying their goods.

Exports collapsed by 18.6 percent in the first half of this year, according to Customs statistics, as vital markets for the province's electronics, clothing and household goods manufacturers dried up.

Only six months ago it was reported that 600,000 migrant workers, who make up a substantial proportion of the labor force, had decided to go home.

Many businesses, which had until recently been thriving, were left questioning their survival.

Yet after months of the sustained impact of the government's 4 trillion yuan economic stimulus package, as well as indications of a steady recovery in some export markets, there seems to be evidence that at last things might be turning around.

The fall in the province's exports has certainly slowed, down 15.1 percent year-on-year in July, compared to 18 percent in June, according to the National Bureau of Statistics.

Frankie Yi, marketing director of Huizhou Unihero LED Lighting Technology in Huizhou, one of the province's major cities, said the stimulus package is having a positive effect on his business.

It is part of the Shenzhen-based consumer electronics group Unihero, whose exports of appliances slumped by 30 percent in the first half, compared with last year.

The focus is now on the low-energy LED lighting subsidiary, which is based at a business incubator in the HZZK National Hi-Tech Industry Development Zone, a Chinese national industry park.

The subsidiary's work has been boosted by the government's huge building and infrastructure spending program, in which low-energy LED lighting is often specified.

"Because the government is specifying the use of LED lighting in a lot of new infrastructure projects, it has benefited the company," Yi said.

The growth of the LED business, whose sales largely go to the domestic market, is gradually moving the group away from a dependency on exports.

"Before the economic crisis, one of our main strategies was to concentrate more on the domestic market, and this we are continuing to do," he said.

High technology

The LED company is one of a large number of hi-tech businesses that make up the Guangdong economy.

Often set in green landscaped parks, they contrast with the province's image of factories belching out smoke.

Despite the crisis, the province still looks relatively prosperous with few obvious signs of unemployment or poverty.

It has been hit hard, however, after suffering its biggest economic trauma since it set out on the road to becoming one of the industrial powerhouses of modern China more than two decades ago.

There have been a number of initiatives at both provincial and municipal levels to get the province back on its feet.

These include subsidies for employing people, tax reductions and other stimulus measures.

One of the main strategies of government authorities has been to lessen its dependence on foreign-owned companies - some 2,542 of which deserted the province last year as a result of the financial crisis.

Xie Zhongfan, executive vice mayor of Zhongshan, said it is important that the economy not be dependent on one or two companies that might suddenly leave, and focus instead on developing homegrown small businesses.

"If you develop a solid base of SME (small and medium-sized enterprise) businesses, the money is in the pockets of the business owners who then reinvest it in the local economy," Xie said.

One of the big debates among economic planners is whether Guangdong should give up its dependence on low-technology, but labor-intensive industry - making such items as simple household goods and toys - and move up the industrial chain to make more value-added technology products.

This is one of the goals of the Torch Industrial Development Zone in eastern Zhongshan, stretching across 70 sq km and one of 57 hi-tech zones in China.

About three quarters of the 500 businesses on the site are in hi-tech sectors, and the combined annual turnover of all the businesses is about 90 billion yuan.

Feng Shusheng, director of the administrative committee for the zone, said there is no reason why the development of a high-tech business sector should lead to fewer people being employed.

"State-of-the-art electronics businesses can be labor-intensive, as well. We want to develop businesses that are both technologically-intensive and labor-intensive," Feng said.

"It is not good to move all the lower-tech, labor-intensive businesses to less developed areas of China, since it doesn't help those areas with their development," he added.

Lian Hoon Him is a partner and head of the operations practice that covers manufacturing at the management consulting firm AT Kearney in Hong Kong.

Lim said the challenge for Guangdong's manufacturers is not necessarily to move into more advanced sectors, but to develop more efficient manufacturing processes.

"They need to redesign their end-to-end supply chain and manufacturing processes so they can produce items more cheaply and efficiently. This improves their manufacturing position, and could go some way to help in weathering a fall in export sales," Lim said.

LCD televisions

The production lines at the manufacturing plant in Huizhou of TCL Corp, China's third-largest TV maker, are still going at full tilt.

The plant is producing 5,000 46-inch and 8,000 32-inch LCD TV modules a day.

(China Daily August 31, 2009)

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