Manufacturing News

Delta processing firms grapple with slump

Processing trade companies in the Pearl River Delta are opening overseas manufacturing bases and turning to e-commerce to escape a downturn in their traditional business.

The slump in the region, one of the world's workshops, is due to the slow recovery in overseas markets and the
authorities' drive to upgrade traditional industries, sources said.

Zhong Feifei, deputy administrative director of Meizhou Guowei Electronics Co, said that the company, which makes and sells telephone sets for Google Inc's Motorola Mobility division, has been struggling to increase business amid a slow overseas recovery.

"Usually, business in overseas markets softens after May. But we didn't see a business rebound at any time during the past five months," Zhong said.

Zhong made the remarks during the China Processing Trade Products Fair, which opened on Wednesday in Dongguan, a city known for its manufacturing and processing trade business.

The annual fair attracted more than 1,200 domestic manufacturers and some 6,300 buyers, mostly from the domestic market.

To diversify channels, the company is selling its products to domestic consumers on e-commerce platforms such as, according to Zhong.

"Sales in the domestic market currently represent a small percentage of our total business. We will make more efforts to promote our products online as the boom in e-commerce will mean more potential business in the domestic market," she said.

He Yu, vice-mayor of Dongguan, urged local processing trade companies to focus more on the domestic market by promoting their products online.

"The domestic market will be one of the most important destinations for the processing trade industry, as there's huge business potential, especially in the e-commerce market," He said.

In recent years, the export value of processing trade products in Dongguan grew only "slowly", according to Cai Kang, deputy director of the Dongguan Bureau of Foreign Trade and Economic Cooperation.

In contrast, the export value of general trade products increased sharply, rising 38.8 percent year-on-year in the first four months of 2014, according to Cai.

Organizers of the fair launched an online application on Wednesday. The app gives users easy access to promote their processing trade products on major Chinese online platforms such as Wechat, Taobao, Tmall and QQ.

Nearly 1,000 manufacturers have become members of the e-commerce platform affiliated with the annual fair, which also includes some 43,200 registered online sellers.

More local processing trade companies have also started shifting their manufacturing overseas to escape rising domestic labor and production costs and tap into overseas markets.

For example, Dongguan-based Huajian Group, one of China's largest producers of shoes for women, has invested in a large manufacturing base in Ethiopia. That facility has greatly helped the company boost sales over the past few years, company sources said.

Wang Jing, sales director of Yimei Shoes Co Ltd, said the company's facilities in Myanmar had helped offset business downturns in the overseas market.

"We opened manufacturing facilities in Myanmar because the labor and production costs are relatively cheaper. Rising domestic costs, combined with falling demand from overseas buyers, have squeezed profits in recent years," Wang said.

Dongguan confident on growth target

Dongguan's economy, reliant largely on manufacturing and processing trade, maintained a healthy uptick during the first five months of the year, a top local government official said.

Zhang Ke, vice-mayor of Dongguan, said the local government's persistent efforts to transform the local economy, after the global economic crisis of 2008, have started to pay off.

"We are confident that the city will meet its economic growth target this year," Zhang told a group of foreign reporters from countries situated along the ancient Maritime Silk Road, who concluded a five-day visit to Guangdong on Monday.

According to Zhang, the uptick in Dongguan's economy has been achieved through the enhanced development of advanced manufacturing and high-tech industries.

Since the second half of 2012, the economic growth rate of Dongguan, which relied heavily on export-oriented business for economic growth in the past, has surpassed the average rate of Guangdong province, Zhang said.

According to Cai Kang, deputy director of Dongguan Bureau of Foreign Trade and Economic Cooperation, Dongguan's import and export value reached $47.4 billion, up 5.2 percent year-on-year in the first four months of this year.

The actual utilized foreign investment of the first four months maintained a steady growth of 15.4 percent, indicating an improved business environment for foreign investors, Cai said.

"We have introduced a number of big projects this year, with planned investment of more than $100 million for each project. Higher investment has helped expand the economy," he said.

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