A growing industry in a growing province

Imported and domestically-made Merries diapers on display at a store in Shanghai. Japanese homecare products maker Kao Corp set up a subsidiary in Hefei in 2011. Provided to China Daily

With about 20 million births in China every year, the baby products market is huge. The world's biggest companies in the field - Procter & Gamble Co, Johnson & Johnson, Pigeon Corp and the like - are all battling to control it.

In April 2011, Kao Corp, the largest manufacture of homecare products in Japan, set up a subsidiary in the Hefei Economic and Technological Development Area of Anhui province's capital, with an initial investment at 490 million yuan ($81 million).

In January last year, Kao (Hefei) Co Ltd produced its first batch of Merries Diaper, a brand that has been around in Japan for 30 years but only on the Chinese market for the past four, at a much lower price.

"Some customers wonder why Chinese-made Merries is lower in price than imported products and if there is a difference in quality," says Wei Cuicui, the company's administration supervisor.

"It may reflect that as more people are getting richer in China, especially in big cities, quality has become their first concern rather than price."

Toshiyuki Baba, vice-president and executive officer of Kao (Hefei) Co, is quick to assure that quality control is universal.

"We brought advanced technology into China," he says. "Quality, safety and comfort are our highest priority. The Hefei plant has adopted the newest technology to make the diaper thinner, more breathable and more absorbent.

"Mothers in China are very conscious about baby health and comfort; to some extent even more conscious than mothers in Japan." Unlike in China, there had been no queries from Japanese mothers about a slight odor from the diaper caused by a gum sealant that was proven safe, he says.

The price gap between imported Merries and domestic Merries is about 30 percent in China's major supermarkets and baby shops, a difference that Baba puts down to freight costs and custom duties.

Kao, founded in Tokyo in 1887, develops its consumer products business in three areas: beauty care, healthcare and fabric and homecare. It also develops a wide range of chemical products that meet the various needs of the homecare industry.

Twenty years ago, Kao came to Shanghai. Its brands, such as Sifone, Biore and Laurier, have gradually become part of the lives of Chinese people. In the 1990s, Sifone shampoo was particularly popular.

But the days of choosing the major centers such as Beijing, Shanghai or Shenzhen as manufacturing bases seem to be over. The increasing cost of land, labor and the attendant problems of traffic congestion and pollution, make these big cities less competitive as production hubs.

Kao Corp made a decision to set up its new plant in Hefei. "It's a good location not far from Shanghai," says Baba. "It's also at the center of a national transportation network, which makes it an ideal city for distributing products all over China.

"There are more than 200 employees in our Hefei plant, most of them recruited locally."

Like many foreigners working in Hefei, Baba has family in Shanghai, three hours away by high-speed train. There are currently 20 trains running every day between the two cities.

"Hefei has a good reputation among many Japanese companies," Baba says.

According to Wu Jianguo, deputy mayor of Hefei, there are more than 120 Japanese enterprises in the city.

"We have the largest Japanese company cluster in East China," says Yao Weidong, Party chief of Hefei Economic & Trade Development Area industrial zone, which hosts more than 30 such companies.

Kao also impressed officials at Hefei Economic & Trade Development Area as "a very rigorous company that requires precise information in every detail".

"I admire their precision in planning and doing jobs, from which we have been learning a lot," Yao of the area says.