Manufacturing News

Processing industry told to upgrade technology

Industrial processors in Guangdong province generated sales of 1.4 trillion yuan ($220.56 billion) in the domestic market last year - a 72.7 percent increase over 2008 - which accounted for a 41 percent of total revenues.

That's welcome news at a time when the world economic slowdown has meant considerably tougher times for companies in a region historically dominated by exports.

Disclosing the figures at a provincial conference for the local processing industry on Thursday, Guangdong Governor Zhu Xiaodan said a focus for the industrial processing sector will continue to be building domestic business, but he also emphasized the need to develop further expertise in high-tech and capital-intensive production.

He added that he expects high-technology, particularly, to make up half of total exports by processors, with processing firms designing their own brands accounting for 70 percent of exports, up from the current 45 per cent.

Guangdong remains a hub for export-oriented original equipment manufacturing, also known as OEM.

But times have been tough in the Pearl River Delta, as international orders have dried up.

In 2008, the region was designated as a demonstration zone for the transformation of the processing industry by the central government, and Dongguan was listed as a pilot city for the purpose in 2010.

The provincial authorities have since enhanced their local economic policies, focusing on the promotion of innovation and better regulation, and improving public services to facilitate the task of attracting investment to the area, Zhu said.

Processing companies in the province have fared better in their sales on the domestic market as result, Zhu said - evidenced by the impressive 72.7 percent rise.

More than 90 percent of the investment into the local processing sector comes from Hong Kong, Macao and Taiwan, Zhu said.

Dongguan Lite Array Co, a Hong Kong-backed home appliance processing firm, makes photoelectric products and medical equipment under its own brand.

General Manager Shu Weiping said that having moved from OEM to ODM (original design manufacturing) to OBM (original brand manufacturing), the company has returned to the black, recording profits of more than 20 million yuan last year.

Now generating 85 percent of its revenue from the domestic market, the company is applying for more than 20 new patents a year.

Another example of a company which has benefited from a technology and design upgrade is the Hong Kong-financed Guangzhou Jetta Group, one of the largest toy makers in the world, which recorded a 5 percent profit margin when it was engaged only in OEM. But it has managed to increase that to 10 percent in the past few years as it evolved into ODM and OBM, according to figures it provided to China Daily.

However, the processing sector in Guangdong still remains at the middle to low end of the global industrial chain, said Zhu.

Core competitiveness by processors remains weak, with too much of their business still reliant on imports, Zhu said, adding that processors still have a considerable way to go to improve overall levels of innovation and brand awareness.

Zhu pledged to work to improve the local government's assistance of the sector, and introduce measures, including the building of specific demonstration zones, which will specialize in providing innovative management processes, he said.

As a step in that direction, a new platform for managing the processing trade in Dongguan was launched on Thursday, to help companies in the sector by linking up relevant information on issues such as customs procedures, foreign trade regulations, entry-exit inspections and quarantine procedures.

Zhu said he would also relax government approval procedures and reduce charges on processors, which should help to ease their cashflow.

Zhu pledged to continue fostering the development of strategic emerging industries and upgrading the processing sector.

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