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Hi-tech success to usher in a new dawn

(China Daily)
Updated: 2008-12-18 07:53

Designers from Guangdong South China's Institute of Industrial Design based in Dongguan display their projects. Jiang Dong

This manufacturing hub is not merely honeycombed with low-end factories: It is also engaged in new, painstaking efforts to build a different image by fostering hi-tech industry and innovation.

Dongguan began with garments, footwear, toys and Christmas trees, then moved into consumer electronics. Now it also assembles communications equipment, telecom switches, routers and automobiles.

That transformation can be seen in Songshan Lake Sci-Tech Industry Park, an hour's drive from the airports in Shenzhen or Guangzhou, South China's booming economic powerhouses.

Apart from being so close to the "world's factory", the park embodies that new image Dongguan is building. From the beginning of the new century, Dongguan has started to remodel itself by deciding to move up the manufacturing chain.

"We have laid solid foundation to do so," said He Yuepei, director of Dongguan Sci-Tech Bureau.

He said fewer than 400 nation-level hi-tech companies and 1,500 private hi-tech companies of various scales have been set up in the city. In 1978, the city had only one registered engineer; now, that number has already surpassed 1.2 million.

The government has invested more than 10 billion yuan during the past five years to improve the infrastructure of the fledging hi-tech park, which will eventually expand to the size of Hong Kong Island.

Located in the industrial and commercial corridor of Guangzhou-Shenzhen-Hong Kong, the park has already finished its road network and other infrastructure facilities.

Distinguishing the venue from other bustling industrial zones, the Songshan Lake, larger than West Lake in Hangzhou, is at the center of the picturesque park, and industrial, education, administrative and tourism zones have been planned while vast spaces are still undeveloped.

It is here in Songshan Lake Park that China's biggest patent-transfer to the US could occur soon - if the US stock market becomes more bullish.

Tan Wen, CEO of Key-Pharma Biomedical Inc, told China Daily that his company has tentatively achieved a deal with a US investor, who agreed to buy the patent of his team's new cure for asthma at a transfer fee of $70 million.

"The US investor is longing to do clinical tests and produce the asthma medicine," said Tan. "Apart from transfer fee, the investor also agrees to deduct 12 percent from the total sale revenues once the medicine is on the market."

Countries such as China, Russia and the US have already approved Tan's application for patent protection for the new cure since last year. And China's drug regulator has already approved clinical trials with the new drug.

Tan said his US partner does not want to be named right now.

However, the global financial crisis has made Tan and his team hesitant to finalize the deal. "As the stock market is still slumping, we should keep alert (about) whether the US investor can attract investment or not," said Tan.

Tan said his company can wait until the business climate returns to normal. "The US law has allowed me 27-year patent protection," he said.

Swift response

Due to their strength in research and development, the approximately 150 companies scattered in the Songshan Lake hi-tech park have responded swiftly to shrinking demand overseas.

"As far as I know, no factory inside the park has decided to close," said Zeng Li, a senior official with the park's administrative committee. "Instead, some have decided to expand production."

She forecasted that tax revenue in the park could reach 15 billion yuan in 2008; it stood at 12 billion yuan for the first 10 months of the year.

Though some enterprises don't feel so optimistic, many managers have started to feel the signs of recovery brought by the government's 4-trillion-yuan stimulus plans approved one month ago.

Among them were Sun Bangbin, factory director of Honny Power, which produces diesel generators mainly used in highway construction and real estate development.

"Magically, about 10 tentative orders are put on my desk these days after several months of sluggishness," said Sun, 38, who is also responsible for assessing contract risk for the company's sales team.

In the first half of this year, Sun had to preview risks of an average of 70 orders a day. "But from July, our overseas orders started to decline sharply and on some days, I saw no orders," said Sun, whose company started in 1992 and has three production bases nationwide.

But his instincts tell him that business can gradually return to normal, as more investors of construction and infrastructure projects at home have started to buy small-scale generators from his company.

Like many factories and enterprises in Dongguan, Sun's company mainly relied on overseas sales in the past. At the beginning of 2008, when the US subprime crisis was unfolding, his company sensed the risk and started to explore the domestic market.

"We shifted 70 percent of our sales team to focus on business at home and this is a wise change of marketing strategy," said Sun. "If not next year, the year after the next can see robust business across China."

Sun's confidence resulted from the technological strength of his company, which owns many patents for fuel-saving and noise-proof technologies.

To save costs, Sun and others on the management team voluntarily offered to cut their pay by 20 percent but the factory owners didn't agree. "We were also encouraged by the optimistic signals given by our boss," Sun said.

Dongguan's progression from a site for low-end factories to a hi-tech economic powerhouse with an advanced services sector is one that Japanese companies went through from the 1950s to the 1970s. It was also seen in South Korean companies during the 1970s and 1980s.

And confronted with resource and energy constraints, the entire Chinese economy is being faced with the transitional pains that Dongguan must tackle today.

But compared with Shenzhen and Guangzhou, Dongguan is not entirely confident that it can leap from assembling basic products with low-paid, unskilled labor to nurturing lavishly paid talent.

Some in the city fear that problems may appear as low-end factories disappear while the hi-tech investment is still far away.

A new highway network to the coast is making it possible to move factories inland, where officials are eager for the investment. And most of the low-wage laborers who fill the Pearl River Delta's factories are migrants from rural areas inland. These workers are mobile, quickly moving on if the basic jobs they do disappear.

"Dongguan is at an important strategic turning point," said deputy mayor Leng Xiaoming. "We should waste no time to turn Dongguan into an innovative city and upgrade its manufacturing strength."

Editor's note: China's export-led coastal cities have borne the brunt of the unfolding financial crisis and looming global recession. China Daily reporter Fu Jing spent several days this month in Dongguan of Guangdong province, investigating the impact the financial turmoil has brought to the migrants, markets and enterprises in this world-famous manufacturing center.

(China Daily 12/18/2008 page15)