Guangxi: China’s link to ASEAN free trade opportunities
For example, Beihai, a city along the coast of Beibu Gulf, has in recent years been actively touting investments in its Beihai New and High-tech Industrial Park in the hope of developing emerging industries other than the traditional petrochemical ones. With a total area of 307 hectares, this industrial park will consist of functional zones for industrial production, supporting services and R&D. According to the management committee of the industrial park, about 200 hi-tech companies are currently operating in the park and industrial clusters are now taking shape in software, electronic information, processing production of marine products, photosensitive materials and light-industry machinery.
In Qinzhou, another Beibu Gulf city, the Qinzhou Bonded Port Zone is being developed in earnest. As the only bonded zone in China’s central/western region, Qinzhou Bonded Port Zone has a total planned area of 10 sq km and consists of wharfs, a bonded logistics district, an export processing district and an integrated services district. At present, first-phase development of 2.5 sq km has been completed and services such as warehousing, international procurement, goods distribution, international trans-shipment, merchandise display, R&D services for processing production and port operations are available. Key industries to be developed include car assembly and parts; processing of grains, oils and foodstuffs; garment; storage of commercial crude oil; manufacturing of machinery and equipment, and electronic information.
Selected foreign firms with production facilities in Guangxi
|Name of company/project||Location||Main business|
|Foxconn Nanning Science & Technology Park Hi-tech Park Zone||Nanning||Manufacturing of high-end electronic products including e-books, smartphones, GPS, high-end routers, high-end switch network interface card, etc for sale in mainland and overseas markets|
|Johnson Electric (Beihai) Co Ltd||Beihai||Manufacturing of micro-motors for use in cars and other industrial devices, mainly for export to ASEAN and other overseas markets via Hong Kong|
|Sumida Electric (Guangxi) Co Ltd||Nanning||Manufacturing of micro-motors for use in mobile phones, cars etc mainly for export to markets such as Hong Kong, ASEAN, Japan and the US|
|Beihai Galaxy Switch Devices Co Ltd||Beihai||Design and manufacturing of power switches and devices for power transmission, distribution and control for use in power grids mainly for European, US, ASEAN, Russian and mainland markets|
|Guangxi Qinzhou Tongfang Digital Technology Co Ltd||inzhou||Design and manufacturing of LCD TVs and HD screen systems, mainly for export to Europe, the US and Australia|
In view of these developments, enterprises engaged in processing and production in other provinces are increasingly interested to invest in or relocate to Guangxi. When interviewed by HKTDC, most of the enterprises that are investing in production in Guangxi say that the autonomous region still lacks adequate supplies of raw materials and accessories and needs support from other areas. Nevertheless, because of their proximity to the PRD, places like Beihai and Qinzhou can easily get sufficient support in terms of materials. Though such production arrangements will inevitably lead to rises in logistics and transport costs, the savings in land and labour costs more than compensate the shortfalls in logistics and transport.
Some of the enterprises interviewed say that, after considering factors such as productivity, in places like Nanning and Beibu Gulf, the cost of hiring garment and electronic assembly workers is around 20% to 30% cheaper than in the PRD. According to data provided by Beihai Investment Promotion Bureau, the statutory minimum wage in Beihai’s urban districts was Rmb1,000 per month in 2012. However, the actual monthly salary in a local enterprise was more than Rmb1,200 for general workers, more than Rmb1,500 for technical personnel, more than Rmb1,600 for general management personnel, and more than Rmb2,500 for senior management staff. Such salary levels are lower than those in places such as the PRD. This, coupled with the relatively abundant labour supply, cheaper land and other operating costs, has made Guangxi a popular destination for production expansion and relocation from the coast. The autonomous region looks set to become one of the new production and processing bases on China’s coast.
Riding on CAFTA’s trade facilitation measures and the advantage of geographic proximity to ASEAN countries, Guangxi has been vigorously expanding ASEAN trade and has now become China’s bridgehead to the ASEAN markets. While Guangxi offers Hong Kong companies access to sales channels for expanding into the ASEAN markets, its thriving logistics business in turn provides new-to-market logistics service providers opportunities to tap the local market. The keen demand of Guangxi enterprises for supply chain management and Internet of Things applications has made them potential customers for related service suppliers in Hong Kong. In addition, Guangxi’s improving infrastructure and logistics and transport systems and its lower production costs have made it one of the ideal destinations to which Hong Kong companies can consider relocation or expansion while also tapping into the ASEAN and overseas markets.
|1||Members of the China-ASEAN Free Trade Area (CAFTA) include China and the 10 ASEAN countries, covering a population of some 1.85 billion and an area of 14 million sq km. In 2002, the Framework Agreement on Comprehensive Economic Co-operation between ASEAN and the People’s Republic of China was signed with the intention of establishing CAFTA by 2010. Subsequently, the Framework Agreement on Trade in Goods was signed in 2004 to the effect that reciprocal tariff cuts will be implemented beginning July 2007. In 2007, the Framework Agreement on Trade in Services was signed between the two parties and in July the same year, implementation of the relevant arrangements in liberalising trade in services began. In 2009, the Framework Agreement on Investment was signed, thereby further facilitating investments and gradual liberalisation by both parties. By 2010, the establishment of CAFTA was basically completed. In merchandise trade in particular, for China and the old members of ASEAN (Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand), the tariffs for the majority of goods except sensitive ones were reduced to zero beginning 1 January 2010. For new ASEAN members (Cambodia, Laos, Myanmar and Vietnam), tariffs will be cut every two years beginning 2011 until zero tariffs are achieved by 2015.|
|2||In 2012, Vietnam accounted for 89% of all Guangxi exports to ASEAN and 54% of the source of all Guangxi imports from the ASEAN.|
|3||Regional Economic Outlook: Asia and Pacific, IMF, April 2013|
|4||World Investment Report 2013, UNCTAD|
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