20 Aug 2014
Hong Kong Companies Operating in Meizhou: An Update
Researchers from the Hong Kong Trade Development Council's Guangzhou Office recently visited local government departments and Hong Kong-invested companies in Meizhou, a city to the northeast of Guangdong. The interviews largely focused on the city's distribution sector, e-commerce development, as well as the current state of operations of Hong Kong-invested companies in the area. The findings of the study are summarised below.
1. Meizhou's distribution sector
In recent years, driven by central government policies designed to boost domestic demand, stimulate consumption and ensure growth, Meizhou has introduced a number of initiatives intended to develop its distribution sector. To date, the results have proved largely encouraging. In 2013, retail sales of consumer goods in the city were up by 11.7% year-on-year, reaching Rmb45.02 billion. In particular, sales attributable to the wholesale and retail trade were up by 12.1% on the year (Rmb41.73 billion), while sales attributable to the hospitality and catering sectors were up 5.4% to Rmb3.29 billion. This has been taken to show that the distribution sector is playing an important role in the city's economic development.
As Meizhou's distribution sector continues to expand and its logistics sector is poised for rapid development, the municipal government is actively encouraging the establishment of logistics parks. This is in a bid to help consolidate the logistics sector and to facilitate the development of related businesses.
A number of projects are now underway, including the following:
(1) The Meizhou Railway Integrated Logistics Park
The estimated investment for this project is Rmb600 million. Some 450 mu (30 hectares) of land has already been acquired for the first phase. The plan is to provide multiple services, including transportation, warehousing, cold storage, loading and unloading, hauling, packaging, delivering, e-commerce and information processing. A dedicated rail track has already been laid. This connects the Zhangping-Longchuan line at the Meizhou East railway station to the rail freight yard in the city's Xiyang township.
(2) The Haijixing Agricultural Produce Commerce and Trade Logistics Park
This is a joint development by Shenzhen Agricultural Products Co Ltd and Shenzhen Agricultural Funds Management Co Ltd. With a planned investment of Rmb1.3 billion and a site area of 510 mu (34 hectares), this park will serve as a hub for the Pearl River Delta and Chaozhou-Shantou areas. It will focus on the wholesaling, transhipment and food inspection of agricultural produce coming from Fujian, Guangdong and Jiangxi.
(3) Xingning Hydoo Commerce & Trade Logistics Park
A development initiated by Hong Kong's Hydoo Group, the project involves a planned investment of Rmb6 billion and a site area of 2,000 mu (133.33 hectares). The park will consist of a main functional area (for integrated merchandise transactions, logistics and delivery, information platform and warehousing purposes), an ancillary area (including a star-grade hotel and commercial supporting services) and a living area (residential housing and livelihood supporting facilities). The first phase is scheduled for completion in mid-2015, with second phase due in 2018.
By continuously speeding up its pace of urbanisation and creating an excellent environment for living and investment, Meizhou has attracted the investment of a large number of major corporations and large companies. During the course of this study, the following major commercial projects (either underway or newly completed) were identified:
(1) Easco City
A large-scale commercial project developed by the Fugland Group with an investment of Rmb1.5 billion, this complex will comprise a shopping centre, offices, apartments and a five-star hotel.
(2) Land of Splendor
A commercial complex jointly invested by the Hongyi Group and Zheng Xing Estate, with a site area of 250,000 m2. The project will comprise residential units, office buildings, a hotel, branded supermarkets, department stores, cinemas, karaoke bars and a gourmet dining street.
A mega-shopping mall project backed by Zhonghengji, a local developer, the complex will offer shops and restaurants, as well as leisure and entertainment outlets.
(4) Xingning Auchan Shopping Centre
An Rmb1.3 billion project developed by Auchan (China) Investment Co Ltd, with a site area of 200 mu (13.33 hectares). The complex offers shopping, dining, leisure and entertainment facilities. The first phase was completed and opened for business as of 30 December 2013.
In addition to these large commercial projects, the municipal government has made considerable efforts to develop the retail sector. Consequently, a number of contemporary business formats - such as chain supermarkets, specialty shops, neighbourhood convenience stores, self-service restaurants and resort hotels - have undergone rapid development. Several well-known chain store brands - including HNA Group's Lewanjia supermarket, Lotus supermarket, Mannings, Watsons, KFC, Pizza Hut and 7 Days Inn - have now established a presence in the city. In addition, a number of retailers in the imported food sector are now also operating in Meizhou. This has enhanced its shopping environment while creating a more diverse consumer goods market. In total, the city now has 82,379 retail outlets, with the sector employing more than 190,000 staff.
The municipal government is also planning to construct a large convention and exhibition centre. Upon the completion of these major commercial real estate and service industry projects, it is expected that Meizhou will enjoy even more rapid economic development, while offering enhanced business opportunities to Hong Kong companies.
2. Meizhou's e-commerce development
The Meizhou Municipal Government has set a high priority on developing the region's e-commerce industry. It is promoting the application and development of e-commerce through the proposed construction of a number of e-commerce industrial parks, establishing e-commerce platforms and improving the e-commerce support services system.
In 2013, there were 806 Meizhou sellers on Taobao.com. At the same time, some 7,222 (or 56.4%) of the 12,800 private enterprises in Meizhou had registered with Alibaba.com with regard to engaging in e-commerce business. During that 12-month period, the transaction volume in the local e-commerce market was Rmb8 million. At present, Meizhou has three online malls, eight online shops and one e-commerce model service company listed on the website Guanghuo Wangshangxing (www.ghwsx.gov.cn), which means "shopping online for Guangdong-manufactured products". The website is run by the Guangdong Provincial Commission of Economy and Information Technology.
There are three main e-commerce industrial parks in Meizhou:
(1) Meizhou Jiale E-commerce Industrial Park
This has an area of 6,000 m2 and houses 27 companies.
(2) Meixian District E-commerce Industrial Park
With an area of 10,300 m2, this already houses more than 30 e-commerce companies, including Huachangfeng (industrial), Ganbo (technology), Muzi Golden Pomelo (agricultural cooperative) and Guangdong Yinling (IT).
(3) Xingning E-commerce Base
This is a start-up incubator that has been established in collaboration with the Shenzhen Chamber of E-Commerce.
The Municipal Government of Meizhou is now actively establishing e-commerce platforms. With the backing of the Guowei Electronics Group, it has invested in the establishment of an internet industry base in the city. In an additional move, in support of the second phase of Meizhou Jiale E-commerce Industrial Park, it is looking to establish an e-commerce photography base, an e-commerce call centre and an e-commerce public service platform.
Approval has also been obtained to collaborate with Yonyou Software Co Ltd in setting up Guangdong Feixiang, a cloud data centre base, while Qihoo 360 Technology's eastern Guangdong headquarters was set up in Meizhou's Meixian District in April 2014. The municipal government is also cooperating with tertiary education institutions in arranging intern posts related to B2B and B2C training. It is also guiding the setting up of the city's chamber of e-commerce. In addition, the government is coordinating the development of a modern logistics and distribution system. It is seeking to nurture this via the introduction of systems that will support the development of e-commerce, including modern courier logistics, cold-chain logistics, aviation logistics, smart warehousing and enterprise logistics information.
3. Hong Kong-invested companies: an update
As of the end of 2013, there were 544 Hong Kong-invested companies in Meizhou. An aggregate total of 2,566 Hong Kong-invested projects have been approved, involving a cumulative total investment of US$5.21 billion. In terms of the contracted and utilised investment amount, the figures stood at US$3.6 billion and US$1.82 billion respectively. Manufacturing, agriculture, wholesale and retail represent the major investment sectors.
In addition, two trading companies and one electronics components maker from Meizhou have set up operations in Hong Kong. One of these businesses, Chaohua Technology (Hong Kong) Company Limited, is engaged in the import-export of goods and technologies. The company is a subsidiary of mainland-listed Guangdong Chaohua Technology Co Ltd.
Though Hong Kong companies in Meizhou recognise the local government's role in actively improving the investment environment and the implementation of a considerable number of policies and measures to facilitate their development, they still see a number of challenges:
(1) Difficulties in recruitment
As Meizhou has lagged behind in terms of economic development, many young technical workers and managers have opted to seek opportunities in more developed areas, leaving the city with an aging workforce that is slow in learning new skills and work processes. The problem is compounded by the fact that migrant workers are dropping in number every year, creating an overall shortfall of supply in the labour market.
(2) Facilities in industrial parks yet to improve
As a consequence of poor initial planning in the development of a number of the region's industrial parks, support facilities (such as roads within and around the park areas) remain inadequate. As a result, a number of companies have had problems in expanding their production plants.
(3) Low customs efficiency
The low efficiency of the customs declaration and clearance service in Meizhou is another concern. According to several companies interviewed, even when all the formalities are completed, it can still take local customs one week or more to release goods for export, thus adversely affecting goods delivery.
4. Success story: safety, innovation and supply chain
Meizhou Guo Wei Electronics Co Ltd (Meizhou Guo Wei) was established in June 2007. Its parent company is Shenzhen Guo Wei Electronics Co Ltd, a globally-renowned Hong Kong-invested telephone manufacturer, ranking among the top 100 foreign-invested enterprises in Shenzhen. One of the largest enterprises in the city, Meizhou Guo Wei is primarily engaged in the manufacturing of telecoms products, notably GSM mobile phones and digital wireless phones.
The company has an annual output value exceeding Rmb5 billion and employs about 4,000 staff, a level that will increase to 6,000 this year. With a site area of 50,000 m2, it is now undertaking expansion through its second-phase plant construction, adding a new R&D base and a living area. The plan is to increase its headcount to 13,000 and to achieve an annual output value of Rmb15 billion within five years. This will see it become a leading enterprise in hi-tech production, a development considerably encouraged by the municipal government of Meizhou.
Meizhou Guo Wei is run under strict management guidelines and in compliance with all of the relevant laws and regulations with regard to production safety. Its quality and environmental management systems are ISO 9000 and ISO 14001 certified respectively. Its ten assembly lines are running under two shifts and workers are allowed no more than three hours of overtime a day. The company is continually innovating in terms of its production processes and technologies and bringing in advanced foreign production equipment. Currently, it has 24 high-speed surface mounters, sourced variously from Fuji, Yamaha and Sony. It also has 14 binding machines and 55 late-model injection moulding machines. It is mainly involved in the production of telephones/mobiles on an OEM basis for Motorola, Huawei and several Indian telecoms firms. All of its products are exported to the emerging markets in Africa, the Middle East and Southeast Asia.
The company is constantly developing products under its own brands. As well as new products, the company strives to offer new sales and after-sale solutions to its customers in order to stay ahead of the competition and overcome other operational challenges. In addition, the company has taken the initiative in improving its supply chain and, by sourcing raw materials and semi-finished products from electronics companies in its vicinity, it is driving the collective development of many of these companies. This has seen a sizeable industry cluster beginning to take shape. The company is now working with the municipal government in the construction of a bonded warehouse as a way to improve logistics efficiency.
While constantly seeking economic returns at the corporate level, Meizhou Guo Wei is paying increased attention to employee remuneration and benefits. It is also taking a people-centric approach to personnel management and is constantly improving the living and working environment of its staff. To this end, it is now building a large living community that will provide free-of-charge housing facilities, as well as a clinic, a reading room, a basketball court and a dancing hall. This is intended to minimise employee living expenses in the plant area and help retain high-calibre professional staff.
Penny Pan, Guangzhou Office