LCD televisions

The production lines at the manufacturing plant in Huizhou of TCL Corp, China's third-largest TV maker, are still going at full tilt.

The plant is producing 5,000 46-inch and 8,000 32-inch LCD TV modules a day.

Although exports are down 20 percent year-on-year, the company has been helped by a massive 248.9 percent increase in domestic sales of LCD televisions.

The company has been given a major boost by the government's "new for old" policy, which subsidizes consumers buying new TVs, cars and other products.

Bo Lianming, the company's chief operating officer, said this proved a major lifeline in avoiding any layoffs of its 50,000-strong work force.

"The domestic market is now very good, especially in the second quarter of this year. We have benefited from the stimulus package," he said.

Lim at AT Kearney, however, said it is not always easy for companies to make up for a sudden shortfall in exports and sell to domestic consumers.

"Companies which focus on exports often have higher cost bases because they have systems in place to manage the needs of overseas customers who in turn are prepared to pay higher prices for reliability. The domestic market might not wear those higher prices," Lim said.

Huang Jingbo, a professor of international trade at Sun Yat-sen University in Guangzhou, said there is evidence that lower technology industries are moving to more remote areas of Guangdong and other provinces.

"Guangdong is now moving low-tech industries from the Pearl River Delta to the eastern and western parts of Guangdong and even other inland provinces," Huang said.

"This increases job opportunities in regions and provinces not as developed as the Pearl River Delta and also makes the industries there more profitable because the labor there is relatively cheap," he said.

He believes the effect of this will be to attract more hi-tech industries to Guangdong's key manufacturing centers.

"There is a phrase, 'Empty the bird's nest and attract new birds.' When the bird's nest is empty, hopefully, we can attract hi-tech birds," Huang said.

Hybrid cars

One of Guangdong's exciting new industries is hybrid car maker BYD, in which billionaire investor Warren Buffett recently purchased a US$232 million stake.

BYD employs more than half of its 130,000 employees in the province, also making other lines such as batteries for mobile phones.

It introduced the world's first mass produced plug-in hybrid vehicle, the F3, in December 2008 in the first months of the economic crisis.

While car sales slumped across the world, the company's sales in the first half of this year were up 176 percent, exceeding total sales for the whole of 2008.

Huang Juan, a spokesperson for BYD's auto export division, said the company has benefited from the stimulus package and the government's focus on developing a new energy car industry.

"The State Council approved the revitalization plan of 10 industries, and the car industry was one of them. As a result, the car industry in China was prosperous," he said.

Huang Juan said companies like BYD will now drive the future of the Guangdong economy.

"The province is now at a stage of economic transition. Its inefficient traditional industries are now moving to innovative, energy-saving and environmentally friendly ones," he said.

"The upgrading of enterprises is a driving force for the industrial transition of the province," he said.

Another new energy company blazing a trail in Guangdong is Mingyang Electric Co, based at the Torch Hi-Tech Industrial Development Zone in Zhongshan.

Alternative energy

Once just a small iron plate factory, Mingyang Electric makes wind turbines and is at the forefront of China's new energy sector.

Four years ago, it had just three people working on turbines. Now it employs 1,700, and its turnover is set to double this year to 5 billion yuan from 2.1 billion yuan last year. A flotation on NASDAQ has been postponed from late this year to next year.

Mingyang Electric has had to switch some of the production of its turbines nearer to its main markets in the north of China. It costs 300,000 yuan to transport just one unit by road from Zhongshan.

Zhang Zhonghai, vice director of the company, is confident the company can play a major role in developing the wind power industry in China.

Wind is set to make up 1.5 percent of China's energy next year and 15 percent in 2020.

"We aim to concentrate on innovation and technological research. We can be the wind power and technological base of China," Zhang said.

Huang at Sun Yat-sen University cautioned that moving into higher technology sectors does not make an economy immune from the chill winds of recession.

He said that during this latest economic crisis, some of the lowest technology manufacturers have proved the most resilient since what they produce are daily essentials for both the Chinese and export markets.

"Household goods such as sink bowls, bags and suitcases are daily necessities and the downturn in exports hasn't really affected these, even though they are labor-intensive goods. It is areas such as consumer electronics that have fared worse," he said.

It is clear, however, that the stimulus package has saved Guangdong from what might have proved a severe crisis.

"It would be difficult to envisage how an economic stimulus package of this scale could not have a significant impact, " Lim at AT Kearney said.

Industrialists and small business owners throughout Guangdong will be looking for a stronger recovery than the one yet seen, but will be happy there are at least some green shoots already showing.

Li Ruqui, the mayor of Huizhou, believes that continuing to modernize the province's industrial base is the right way forward.

"It is important that Guangdong enterprises upgrade their equipment and their technologies. Without the stimulus package the economy would have fared much worse, and we can now see that the economy is recovering," the mayor said.

(China Daily August 31, 2009)