1. Industrial Analysis of the Greater Pearl River Delta Region Prepared by: Boon Han, Tabitha and Tyki

2. Agenda Background of PRD Recent Economic Data Governmental Policies Industries –Electronics –Toys –Garment/Textiles Conclusion

3. PRD Background History –Economic Reform in 1978 –Shifting trend of manufacturers to PRD Human capital –General labor costs –Abundant availability in labor –Skill level

4. PRD Background Geography –Strategic location with multiple ports

5. PRD Economic Data Attracting foreign investments after declaring PRD as Special Economic Zone (SEZ) –Special tax and regulations preference –Lower costs of production

6. PRD Economic Data GDP (2004) –$1,357 billion Yuan –$ 164 billion USD Specialized Town –Self-augmented –Export Oriented

7. Regional Specialized Town Shenzhen (High-Tech Industries) –Computer accessories –Electronics –Petrochemical Guangzhou (Heavy Industries) –Automobile Parts –Leather Products –Electronics Foshan –Electronics –Textile –Furniture –Toys

9. Government Involvement From Special Economic Zone to PRD to GPRD to Pan- PRD CEPA –“Closer Economic Partnership Arrangement” –CEPA I & II & III

10. Electronic Industry - Definition Electronic Industry –Telecommunications, Computers and Other Electronic Equipment Manufacturing –Including: Telecommunications Manufacturing Broadcast Equipment Manufacturing Computer Manufacturing Electronic Element and Component Manufacturing Home Audiovisual Manufacturing Other Electronic Manufacturing References: –International Standard Industrial Classification of all Economic Activities- -(ISIC Rev. 3.1) – Section D: ManufacturingSection D: Manufacturing – 中華人民共和國國家統計局行業分類標準 (GB/T 4754-2002) —— C 製造 業C 製造 業

11. Electronic Industry - 2004 Statistical Data Gross Output Value of Electronic Industry in PRD –Total: 734,131million yuan –Percentage of total industry gross output value in PRD: 31.37% Number of Industrial Enterprises of Electronic Industry in PRD –Total: 1725 units –Percentage of total number of industrial enterprises in PRD: 8.45% –Percentage of total number of electronic enterprises in China: 25.99%

12. Electronic Industry - Other Info Famous PRD Electronic Product Chain: “ 珠三角 塞車，全球斷貨 ” Gross computer components manufacturing output value is more than 10% of that total value around world PRD has 24 Top100 Electronic Enterprises of China

13. Electronic Industry Main manufactory location –Shenzhen –Dongguan –Huizhou –Guangzhou

14. Electronic Industry Advantages: –GPRD integration –Convenient and efficient traffic network –Well-developed product chain Drawbacks –Mostly export & processing oriented –Only “manufacture”, no “creation”: lack of key technology –Lack of “green manufacturing” – RoHSRoHS

15. Toy Industry Current Status –Second largest importer of toys in the world –34% of buyers prefer to purchase in PRD region (Survey done at Hong Kong Toys and Games Fair 2005) –Exported $5.5 billion in toys in 2005 (China Customs Statistics) –U.S. market for China exports started from 70.6% in 2000 to 98.4% in 2004 (U.S. International Trade Commission)

16. Toy Industry Benefits –Cost Manufacturing in China with other departments elsewhere Consolidation of buyers for direct purchase rather than through a third-party Lower minimum wage Relatively low value of ‘Yuan’ –Growth Potential Domestic market Increased interest in electronic and educational games

17. Toy Industry Current Practices –Supply directly to retailers Reduce the need for intermediaries –Appoint distributors to establish network Reduce business risk Reduce the need to deal with problematic issues –Provide small quantity frequently –Agree to ample supply of goods, prompt delivery, and mandatory exchange of defects

18. Toy Industry Arising Issues –Shortage of experienced distributors –Poor relationship for each component in value delivery network –Serious monetary issues (i.e. bad debt and overdue payments) –Potential inventory backlog –High transportation costs –Weak forecast for future sales and production –Increased demand of laborers lead to higher labor costs

19. Textile Clusters –Hu Men (Dong Guan) –Xi Qiao (Nan Hai) Industry Performance (2004) –Export USD $95 billion + 21% –Import USD $17 billion +8% Garment and Textile Industry

20. Top 10 Chinese Exporters / Importers

21. Industry Performance

22. Current Problems Istanbul Letter –Request to postpone quota-lifting date by US and EU Rising costs of production Competition –Turkey, Pakistan, and Vietnam