Vol 2, 2003

Pearl River Delta Update Dynamic Delta Partnership Development

Pearl River Delta Update

Dynamic Delta Partnership Development

Hong Kong's logistics expertise is helping speed PRD development

One of the world's biggest business, manufacturing and consumer powerhouses is evolving in the Pearl River Delta (PRD) region of the Chinese mainland.

Already one of the mainland's principal economic engines, the PRD achieved impressive GDP of more than US$100bn in 2001.

The PRD easily leads all of China in the manufacture of a wide variety of electronic and communication products and as such has become a major force in the international electronics arena.

This phenomenal achievement is taking place in the low-lying areas of Guangdong Province just north of Hong Kong.

The PRD covers just one-quarter of the total Province yet holds about one-third of its population, produces three-quarters of its total GDP, some 90% of its exports and 70% of retail sales of consumer goods.

This abundant business has demanded enormous employment in the PRD region, giving rise to a burgeoning middle-income and professional class. A permanent resident population of 30 million with a per capita income close to US$3,800 places PRD residents among the mainland's wealthiest consumers, creating a highly viable consumer target themselves.

"The PRD is the wealthiest part of the Chinese mainland, the fastest-growing area of China as well as one of the fastest growing in the world, and the largest manufacturing basin in the world," confirms Hong Kong Trade Development Council (HKTDC) chairman Peter Woo.

The rise of the PRD can be traced back to 1978 when the Chinese Government began a reform process that would open this region to foreign trade and investment ahead of the rest of China.

This historic decision gave the PRD first-mover advantage vis-a-vis the rest of the mainland in developing private enterprise, manufacturing capabilities and foreign trade.

Hong Kong, conveniently located at the doorstep of the PRD, has capitalised on its idyllic location by becoming an indispensable business and service centre.

Hong Kong enables businesses to centralise their high-value activities for China in a world-class business city, while decentralising into the PRD to take advantage of the mainland's leading cost-competitive export processing base.

Indeed, companies from around the world have already organised themselves around what is termed the "Hong Kong-Plus" business model in order to source, produce and sell in China with maximum profitability and minimum risk.

"With over 20 years' experience and first-mover advantage of building successful business ventures in China, Hong Kong is a successful China risk manager," says Woo.

Hong Kong is currently responsible for 47% of all investment on the mainland, with around 80% of Hong Kong traders already sourcing from the delta region and handling approximately 80% of its imports and exports.

Some 90% of Hong Kong manufacturers have 65,000 production facilities in the region. These employ six million workers and are among the world's largest exporters of electronics, plastics, soft goods, household items, gifts and premium wares, toys, watches and clocks, garments and accessories. So much so that the region sets cost and price standards for these products worldwide.

"Geographically situated near the mainland's largest manufacturing basin, Hong Kong enjoys a unique advantage of transporting goods originating in or destined for the PRD," says HKTDC director, services promotion, Alan Wong.

Hong Kong, with its well-established international network, excellent infrastructure, extensive experience in logistics services and advanced application of information technology, is ideally positioned to offer one-stop logistics services for mainland enterprises.

These services help not only enhance the efficiency of exporting goods to overseas markets but also the distribution of freight across the mainland to China's increasingly affluent home market.

Enterprises need high quality logistics services to deliver their goods in the shortest possible time as well as to control operational costs. Speedy delivery with no delay is a critical factor in strengthening competitive edge and keeping intense competition at bay.

The symbiotic Hong Kong/PRD relationship is set to strengthen even further in coming years, following China's accession to the World Trade Organization. Trading opportunities are predicted to increase dramatically and with this the demand from companies for professional logistics and transportation services to support and strengthen this trade.

Together, Hong Kong and the PRD are destined to continue to offer a cost-effective, highly efficient and safe environment to pursue the benefits of doing business in China.

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