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  • 1.
    • Future Industrial Prospect and Opportunities in China, and Green Manufacturing Challenge
    Professor K.B. Chan Chairman and Managing Director, Surface Mount Technology Ltd . Chairman, Hong Kong Green Manufacturing Alliance 7 March 2006
  • 2. Content
    • Major Economic Zones in China
    • Electronics Industry & Automotive Industry – Major Industrial Driving Forces
    • Southern China & Hong Kong’s Advantages
    • Green Challenge
    • Hong Kong Green Manufacturing Alliance
  • 3. Major Economic Zones & Surrounding Areas Bohai Economic Zone Yangtze River Delta (YRD) Pan-Pearl River Delta (PPRD) CHINA China’s 2005 GDP = US$2.3 trillion (9.9% Growth) World GDP Ranking 1. USA 2. Japan 3. Germany 4. China 5. Britain Source: Gov’t news, Commercial news
  • 4. Major Economic Zones 7 Provinces: Hebei ( 河北 ), Shanxi ( 山西 ), Inner Mongolia ( 內蒙古 ), Liaoning ( 遼寧 ), Shandong ( 山東 ), Jilin ( 吉林 ), Heilongjiang ( 黑龍江 ) 2 Cities: Beijing ( 北京 ), Tianjin ( 天津 ) Bohai Economic Zone 7+2 9 Provinces: Fujian ( 福建 ), Guangdong ( 廣東 ), Guizhou ( 貴州 ), Hainan ( 海南 ), Hunan ( 湖南 ), Jiangxi ( 江西 ), Sichuan ( 四川 ), Yunnan ( 雲南 ), Guangxi ( 廣西 ) 2 Cities: Hong Kong ( 香港 ), Macau ( 澳門 ) Pan-Pearl River Delta ( PPRD ) 9+2 6 Provinces: Zhejiang ( 浙江 ), Jiangsu ( 江蘇 ), Anhui ( 安徽 ), Henan ( 河南 ), Hubei ( 湖北 ) Shaanxi ( 陝西 ) 1 City: Shanghai ( 上海 ) Yangtse River Dela ( YRD ) 6+1 Covered Area Zone
  • 5. Strength of Economic Zones Source: China Statistics Bureau, Hong Kong Census & Statistics Dept, Macau Statistics and Census Service 1 Includes eastern China, *Includes China, Hong Kong and Macao Total 2,054 95% 1,207 93% 1 Preliminary Figures Only (may not be 100% accurate) 350 394 463 Populat-ion - million 29% 32% 34% % of the Greater China* 27% 16% 632 Bohai Economic Zone 16% 13% Annual GDP growth 30% 687 Yangtze River Delta (YRD) 36% 735 Pan-Pearl River Delta (PPRD) % of the Greater China* 2004 GDP (US$Billion) Economic Zone
  • 6. Characteristics of Pan-Pearl River Delta
    • Export-oriented:
    • external trade of Guangdong accounts for over 30% of China’s total
    • large numbers of foreign-invested manufacturers especially in Guangdong, with high concentration of Hong Kong-invested companies > 60,000
    • Major industries:
    • consumer goods, light Industries, heavy industries , petrochemical
    • > 40% are electronic related
  • 7.
    • Industry and investment-oriented:
    • Shanghai as the regional leader – finance and banking, automotive manufacturing, tourism
    • becoming more internationalized
    • Major industries:
    • automotive & auto parts manufacturing, electronics equipment and parts, textile, chemical fiber
    Characteristics of Yangtze River Delta
  • 8.
    • Diversified economy:
    • cultural, political, R&D center - Beijing
    • electronics manufacturing base - Tianjin
    • local consumption recently attracted lots of investors from Japan, Korea
    • Major industries:
    • machinery, steel, transport equipment, electronics equipment
    Characteristics of Bohai Economic Zone
  • 9.
    • Electronics Industry & Automotive Industry
    • Major Industrial Driving Forces
  • 10. Electronics Production in China
    • China is Factory of the World
    • Advantage – Low cost & huge domestic market
    • By 2007, electronics production:
      • Nearly US$300 Billion ( > 20% of world output)
      • Growth rate 12%, double of world’s
    • Largest market: handset , DVD, TV
    • Top 5: PC, home appliance
    Source: isuppli, 03/2004 21.1% 1,280 270.1 2007 -- 19.8% 18.1% 17.2% 16.7% China’s % 1,205.8 238.8 2006 6.3% 12.7% CAGR 1,146.8 207.5 2005 1,081.4 185.8 2004 1,001.5 167.2 2003 World China US$Billion
  • 11. Electronics Manufacturing Services (EMS) Industry Source: Technology Forecasters, supplied by Market Manufacturing Insider 10/2005
  • 12. EMS in China to Increase Source: iSuppli, June 2003
  • 13. Automotive Sales in China Source: VDA, Wards.com, International Herald Tribune, China’s Association of Automobile Manufacturers CAGR = 24.2% 2006 Forecast: 6.4 Million Units (12% growth)
  • 14. Top 10 Sedan Manufacturing Bases in China
    • China’s Sedan Output = 2.26 Million Units (Year 2004)
    * PPRD figure includes Chongqing, YRD figures includes eastern China Source: Rounded Figures, National Bureau of Statistics of China Jilin 336,800 (15%) Henan 53,500 (2 %) Shanghai 549,900 (24%) Hubei 99,900 (4%) Chongqing 157,300 ( 7 %)  Jiangsu 89,900 ( 4 %) Guangdong 266,500 ( 12 %) Tianjin 219,800 ( 10 %) Anhui 87,000 (4%) Beijing 182,200 (8%) Bohai = 738,800, YRD = 880,200, PPRD = 423,800
  • 15. China’s Automotive Components Industry
    • Exports
    • 2005 Jan – Nov’s : US$ 7.7 B* , 53.4% growth
    • 2004 : US$5.6 B (5 fold over 5 years ago)
    • Sales
    • 2004 : US$53 B (46.5% growth)
    * Including Components, Accessories & Body Source: Gov’t, KPMG
  • 16. Automotive Electronics in China Source: FOURIN China Auto Weekly 2000 - 2010 CAGR >30%
  • 17. Trend in China’s Automotive Components Industry
    • Automotive Output – could exceed 10 Million vehicles by 2010
    • Automotive Components – over 30% growth
    • Automotive Electronics – share of automotive component value increase from 10% to 30%
    • Foreign/ Joint venture auto makers to procure local low-cost and high quality parts and components
    • Domestic brands increase from 25% to over 50%
    Source: China’s Association of Automobile Manufacturers, KPMG
  • 18.
    • Development of Southern China
    • & Hong Kong’s Advantages
  • 19. Pan-Pearl River Delta
    • 9 Provinces :
    • Fujian 福建 Guangdong 廣東
    • Guizhou 貴州 Hainan 海南
    • Hunan 湖南 Jiangxi 江西
    • Sichuan 四川 Yunnan 雲南
    • Guangxi 廣西
    • 2 SARs :
    • Hong Kong 香港 Macau 澳門
    (Growth in real terms) Preliminary figures only, may not be 100% accurate Source: China Statistics Bureau, Hong Kong Census & Statistics Dept, Macau Statistics and Census Service 462.8 12.6% 734.7 Pan-Pearl River Delta 16.9% 8.2% 14.2% GDP growth 372.9 376.0 Other 8 provinces + Macau 6.9 165.5 Hong Kong 83.0 193.2 Guangdong Population (M) 2004 GDP (US$B)  
  • 20. Top 9 Industries in Guangdong Source: Guangdong Industry Yearbook 2004 & Internal Source 3 Major Potential Industries 3 Major Traditional Industries 3 New Rising Industries 25% 5.4% 43.4 3.7% 9.0 Automotive 18% 1.2% 9.6 1.5% 3.0 Pharmaceutical 8% 4.2% 33.7 6.8% 19.2 Textile 15% 2.1% 16.9 2.4% 6.5 Paper 8% 2.3% 18.1 4.0% 10.3 Construction Materials 12% 3.9% 31.3 6.5% 14.0 Food & Beverage 20% 11.0% 88.0 10.5% 24.6 Petrochem 17% 13.7% 109.6 13.0% 36.5 Electric Machinery 21% 33.8% 271.1 23.5% 71.5 Electronic Information CAGR Share 2010 Output (US$ B) Share 2003 Output (US$ B)
  • 21. Next Wave for Guangdong – New & Hi-Tech Industries and Heavy Industries
    • In 2004 added industrial output value of top 9 industries: > US$60 billion, contribute to 75.8% of provincial industrial growth
    • Fastest growing industries
      • Electronics
      • Petrochemical
      • Automotive
    Source: Hong Kong Trade Development Council
  • 22. Electronics and Information Industry in Guangdong
    • In 2004, total output of Guangdong’s electronics & information industry: US$90 billion
    Source: Hong Kong Trade Development Council Major Manufacturing Bases Products Guangdong, Shenzhen, Zhuhai Software Shenzhen Electronics components, Home audio/visual equipment Dongguan, Huizhou, Shenzhen Handset, Computer
  • 23. Automotive Industry in Guangdong
    • Production capacity in 2004: 540,000 vehicles
    • Estimated capacity in 2005: 650,000 vehicles
    • 2010’s capacity: 1.6 million ( 1.4 million sedans )
    Source: Hong Kong Trade Development Council, Commercial News Unit Sales in 2005 3 Major Car Makers in Guangzhou, Guangdong Start production by mid-2006, initial 100,000-unit capacity Toyota 230,000 Honda 157,500 Nissan
  • 24. Petrochemical Industry in Guangdong
    • 2005-2010: planned investment US$21.7 billion
    • Output in 2010: US$88 billion ( 11% of Guangdong’s industrial output), 20% annual growth
    • In 2020, oil refinery capacity: 100 million tons
    • Foreign investors: Shell, BP, ExxonMobil
    Source: Hong Kong Trade Development Council, Commercial News
  • 25. Challenges in Guangdong
    • Shortage of energy, land, labors and skill workers
    • Labor intensive enterprises: high costs while low profits
    • Competition from Yangtze River Delta (eastern China) and Bohai Economic Zone (northern China)
    • Environmental issue
    •  Need to foster high value-added industries & upgrade industrial structure & environmental manufacturing
    Source: Hong Kong Trade Development Council
  • 26. “ Front Office - Back Factory” Model Hong Kong Trading and financial center Southern China Manufacturing base Co-operation Logistics Marketing Product Design Administration & Management Land & utilities Labor Natural resources Supporting industries R&D Technologies
  • 27. Position of Hong Kong
    • Major economic engine of the Pan-Pearl River Delta, financial and service center
    • Over 40% of China’s Foreign Direct Investment - FDI is from Hong Kong
    • HK companies operate more than 60,000 factories in Southern China, employing > 10 million workers
    • 40% of HK Manufacturing GDP is electronics
    Source: Hong Kong Trade Development Council
  • 28. Advantages of Hong Kong
    • Excellent infra-structure , transportation, telecom
    • Sound legal and tax system
    • Mature equity market
    • Efficient government with no corruption
    • Center for arbitration
    • Close political, economic and social relationship with China,
      • e.g. Closer Economic Partnership Arrangement (CEPA) - easier access to China markets for Hong Kong-made products, and Hong Kong-based service companies
  • 29. Advantages of Hong Kong
    • Cosmopolitan city – large number of foreign companies, promotion & exhibition
    • Easy communication , English, Chinese
    • Risk Management
    • IP Rights protection
    • Currency management - RMB
  • 30. Hong Kong Companies As Business Partners
    • Understand both international and Chinese cultures, acting as bridge
    • Connections with multinational companies, and foreign countries
    • Substantial business experience in China , know “ what not to do ”
    • Fast response
    • Strong business integrity
  • 31.
    • Finance: IPO, capital raising
    • Skilled Workers: education and training
    • Professional Services: legal, accounting, banking
    • R&D: co-operation with educational institutions
    • Logistics: supply chain management
    Hong Kong as Service Platform for Guangdong’s Industrial Development
  • 32. HK – Boosting Technological Developments
    • Administer under ITC – Innovation & Technology Commission – Funding ~ 4 Billion HK$
    • 8 Universities
    • Establish 5 R&D centers from 2006:
    • Auto parts, logistics, textile, nano tech, IT & telecom
    • ASTRI – Apply Science and Technology Institute
    • HK Science & Technology Park – IC design, photonics
    • Cyber Port – Digital entertainment
    • HK Productivity Council
  • 33.
    • Joint funding efforts between the 2 Government to support R&D projects
    • 2004 > US$ 40 million in 6 areas:
    • RFID , Auto-parts, electronics & IT, energy tech, new materials, precision equipments
    • 2005 > US$ 67 million in 6 areas:
    • communication, medical & bio tech, new materials green manufacturing, agriculture
    Guangdong/HK Technology Co-operation Funding Scheme
  • 34.
    • Green Challenge
  • 35. Electronic Waste Source: Wen Wei Po
  • 36. Electronics Industry
    • One of the world’s largest manufacturing industry with over US$1 trillion output
    • Produced 21 million tons of electronics globally:
    Source: National Electronics Manufacturing Initiative, Inc.
  • 37. Revolution: Product Life-Cycle “ Cradle to Cradle” Remanufacture & Reuse Obsolescence/ Return Customer Use Manufacturing Packaging/Distribution Eco- Product Design Parts, Materials
  • 38.
    • Energy-using Product (EuP) Directive :
    • Aims at product design to be energy optimized
    • Waste Electrical and Electronic Equipment (WEEE)
    • Directive :
    • Responsibility for collection, recovery and recycling of waste electrical and electronic equipment now rests with producers
    • Restrictions of Hazardous Substances (RoHS)
    • Directive :
    • Upper limit on 6 hazardous materials in electronics products
    European Legislation on Green Electronics Products
  • 39. The Total Picture of EU Regulations Product Design Procurement Manufacturing Field Application End of life EuP RoHS Collect , Reduce , Reuse, Recycle WEEE (2007/8/11) (2006/7/1) (2005/8/13)
  • 40. China’s Legislations
    • “ RoHS-equivalent” law, “Administration on the Control of Pollution Caused by Electronic Information Products” 《電子信息產品污染控制管理辦法》 :
      • Announced on 1 March 2006
      • Effective 1 March 2007
      • Manufacturers, importers, and retailers must comply
      • Apply to products manufactured in, sold in or imported into China
  • 41.
    • Electronics Radar
    • Broadcast & Television
    • Household Electronic
    • Special Electronic Apparatus
    • Electronic Applications Equipment
    • Electronic Telecommunications
    • Computer
    • Electronic Measuring
    • Electronic Components
    • Electronic Material
    China’s Legislations China-RoHS covers following categories:
  • 42. China’s Legislations
    • Major requirements of China-RoHS:
      • Producers should choose materials, technique and craftwork suitable for reuse and recovery
      • Other materials in addition to 6 stated in EU’s RoHS
      • Labeling: name & content of hazardous substances , “safe-use period” , packing materials
    • Can be reviewed every year (vs. 3 years for EU’s law)
    • Punishable
  • 43.
    • Waste control measures and systems
    • Monitoring on materials and components suppliers
    • Testing of components
    • New production process technologies and equipments, e.g. lead-free soldering
    • Quality and reliability enhancement
    • Management practice
    • IT system upgrade, e.g. ERP
    •  Issues of cost sharing, pressure from customers
    Legislations Increase Costs of Manufacturers
  • 44.
    • Recall of all goods sold in the markets since the enforcement date for the law
    • Fine on such goods, e.g. First WEEE prosecution - Boots Retail (Ireland), fined €1,200, and costs of €6,865 awarded to Environmental Protection Agency (Jan 06)
    • Impounding of goods
    • Banned from entering Europe
    Possible Penalties for Violating EU Regulations
  • 45.
    • Policy Framework for the Management of Municipal Solid Waste (MSW)
      • Producer responsibility schemes to be introduced:
    Hong Kong’s Initiatives 2009 Rechargeable Batteries 2008 Packaging Materials, Beverage Containers 2007 Electrical & Electronic Equipment, Vehicle Tyres, Plastic Shopping Bags Target Date Products
  • 46.
    • Policy Framework for the Management of Municipal Solid Waste (MSW) – Targets:
      • Reduce MSW by 1% per annum up to the year 2014
      • Increase recovery rate to 45% by 2009 and 50% by 2014
      • Reduce total MSW dumped in landfills to < 25% by 2014
    Hong Kong’s Initiatives
  • 47. Hong Kong Green Manufacturing Alliance
  • 48.
    • Southern China - hub for electrical & electronic manufacturing: > 40% of Guangdong’s industrial output
    • Hong Kong companies operate > 60,000 factories in Southern China (> 10 million workers)
    • > 40% of HK manufacturing companies are related to:
      • electronics, electrical appliance, watch, toy
    • Electronics products shared 45% of HK’s exports (2004) and 14% exported to EU (USD 16.3Billion)
    • Not many factories are ready for the directives
    Why We are Highly Concerned
  • 49. Hong Kong’s Electronics Exports Source: Hong Kong Trade Development Council 2004 Total Electronics Exports = US$116 B 23% 5% Japan 22% 3% Singapore 20% 7% ASEAN 11% 12% US 28% 14% EU 28% 48% Chinese Mainland Growth Share Major Markets
  • 50.
    • A non profit making organization supported by manufacturing and trade associations
    • Alliance officially formed on February 1, 2005
    • Chairman: Prof. KB Chan
    • Secretariat: Federation of Hong Kong Industries
    • Steering committee – holds regular meeting
    • Government support
    Establishment of Hong Kong Green Manufacturing Alliance (HKGMA)
  • 51.
    • Members
    • Federation of Hong Kong Industries
    • Hong Kong Electronic Industries Association
    • Hong Kong Electrical Appliances Manufacturers Association
    • Hong Kong Toys Council
    • Hong Kong Watch and Clock Council
    • Toy Manufacturers’ Association of Hong Kong
    • Hong Kong Watch Manufacturers Associations
    • Federation of Hong Kong Machinery and Metal Industries
    Background
  • 52.
    • Advisors:
    • Hong Kong Productivity Council
    • Hong Kong Trade Development Council
    • 6 universities in Hong Kong such as City University of Hong Kong and Hong Kong Polytechnic University
    • Observer:
    • Innovation and Technology Commission, Government of Hong Kong Special Administrative Region
    Background
  • 53.
    • Mission
    • To facilitate transformation of HK manufacturing industry into “Green” & enhance its competitiveness
    • Activities
    • Raise awareness
      • Seminar, promotions, Green campaigns
    • Provide guidelines for compliance
      • Workshops, factory visits
    • Technology advancement
      • Coordinates R&D, data base, global watch
    Activities of HKGMA
  • 54.
    • Green Standard
      • Set standards
      • Recognition of consultants, labs, factories
    • Industry representation
      • As spokesman
      • Liase and advice Government
    • Platform for Networking
      • Domestic & international
    Activities of HKGMA
  • 55.
    • Purpose
      • Start a dialogue channel with relevant European institutions
      • Gain understanding of and 1st hand information on related regulations
      • Liaise with other countries (member states)
    • Meeting with
      • European Parliament
      • European Commission
      • Trade and Commerce Associations
    HKGMA Delegation to Brussels (5 – 9 March 2006)
  • 56. Past GMA Events (over 3,000 participants) Organized/Coordinated > 20 events in 2005, e.g. seminars, workshops, conferences, study missions: > 100, 20 Seminar in Protec Japan, Study Mission to Japan Oct 05 > 150 World Electronics Forum (UK) Sep 05 > 600 Seminar on Restricted Substances Directive in China Feb 06 > 300 Asia Electronics Forum & CEF China Jul 05 Attendance Examples of Event Month
  • 57. Coming Events HKGMA Introduction to and Discussion on WEEE & RoHS Hong Kong Seminar: Latest Development of WEEE & RoHS 3/2006 HKGMA Lecture on Green Manufacturing Compliance Hong Kong GMA Workshop 4/2006 HKEIA Seminar on Electronics Industry and Environmental Development Hong Kong World Electronics Forum (WEF) 9/2006 Organizer Agenda Venue Major Event Date
  • 58. Summary
    • The 3 major economics zones will be China’s industrial growth engine > 90%
    • Successful co-operative model of HK/ Guangdong helps boost the economy of Pan-Pearl River Delta
    • Electronics, automotive, petrochemical industries are major economic driving forces
    • HK’s technological development play an important role
    • Up & coming issue – to comply with green manufacturing

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