Japanese and Korean investments shifting to the south in China
Last Updated(Beijing Time):2004-11-18 16:49
By Meng Hua & Wang Jun
Although China's Rim-Bohai Sea region holds natural affinity for Japanese and Korean enterprises thanks to its geographical advantages, the Yangtze River Delta with Shanghai at the center is showing increasingly stronger appeal to them. As large Japanese and Korean firms like Sony, Sharp, LG and Samsung complete their strategic deployment of high-end product bases in the Yangtze River Delta, Japanese and Korean enterprises, which always focus on the region surrounding tChina's Rim-Bohai Sea, have shifted the pivot to the Yangtze River Delta.
According to statistics, the number of Japanese enterprises registered in the Yangtze River Delta has come to about 9,000, accounting for more than 40 percent in the total number of Japanese enterprises in China. In 2003, Wuxi was home to one-sixth of Japanese enterprises in China, surpassing Dalian, which used to be the number one target place for Japanese investment in this country. Meanwhile, data from the Import & Export Bank of Korea show that of direct investments made by Korea in China, the northeast region took up 8.9 percent in 2002, down from 15.3 percent in 2000, while the proportion accounted for by the Yangtze River Delta rose from 18.2 percent to 29 percent.
In making investment in China, Japanese and Korean enterprises have shifted the focus from export processing to sales in the Chinese market. In multinationals' investment layout, market factors take on growing importance. The economic belt led by Shanghai is home to one-third of China's population, generates more than one-third of the country's GDP, and holds one-third of the nation's consumer market. The huge space for economic development is obviously what the northern regions lack.
Developed areas in the south like the Yangtze River Delta hold evident first-mover advantage. The relatively mature and sound industry chain and industry cluster become the most important factors alluring Japanese and Korean investments. At the same time, the lack of industry chain or a segmented industry chain in the north is formidable for foreign investors. At present, with Shanghai playing a leading role, the Yangtze River Delta has formed complete and distinctive industry clusters, such as automobile, communication, electronics and integrated circuit. There are developed upstream industries that supply raw materials, and service industries that serve manufacturing like logistics, distribution and retail are also developing.
In the Yangtze River Delta, Japanese and Korean enterprises mainly invest in technology-intensive industries with comparative advantages, such as electronics, integrated circuit and precision machinery (auto parts). They started to shift to knowledge-intensive industries with high added value. In the past, they merely took China as a transfer station for manufacturing export products; now they aim to capture a high market share and gain fat profit and high returns in this country.
Sony has set up a production base for Lithium polymer (LiP) battery, which involves state-of-the-art technology in the international battery industry, in Wuxi. Japan's ALPS started production lines of hard disk magnetic head in this region. Only two companies manufacture the products in the world. Sharp, which is a Japanese giant in the field of LCD display, recently approved a project with an investment of nearly US$100 million, gradually moving its LCD production capacity from Japan to Wuxi. Meanwhile, ten LCD vendors and derivatives manufacturers are pooled to Wuxi New Area to build an "LCD valley". Thus, Wuxi and Suzhou have become international new energy bases and important bases for the IC and chip software industries.
Japanese and Korean enterprises' R&D institutions are also moving to the south along with the manufacturing bases. More and more Japanese and Korean multinationals have moved their R&D centers to Shanghai, Suzhou, Wuxi and other areas in the Yangtze River Delta. The inflow of multinationals' R&D units has promoted the update of China's R&D resources. Suzhou Industrial Park has evolved into one of the most important software and IC manufacturing and development bases for Jiangsu Province and even China as a whole.
According to analysts, while giving an enormous impetus to the local economy, the massive shift of Japanese and Korean capital from the Rim-Bohai Sea region southward to the Yangtze River Delta calls for attention in the respects:
For one thing, excessive foreign investment in one region causes stringency and scarcity of local resource and energy, especially land and electric power, resulting in "tight economic operation". The intensity of registered capital in Wuxi's key open parks has increased by one third compared with the same period last year, with the average level exceeding US$ 300/m2.
For the other, some multinationals have stopped increasing investments in projects located in North China, or they are gradually moving their investment to the south. Thus, the northern regions should take precautions against the crisis of hollow manufacturing industries by in the local areas. That will result in widened gap between the regions. Therefore, the north should improve its overall regional competitiveness as soon as possible.
en.ce.cn |
