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November 16, 1998 01:00 AM

TAIWAN, HONG KONG MACHINES TARGET CHINA

Bill Bregar
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    DUSSELDORF, GERMANY — Machinery makers from Taiwan and Hong Kong are flocking to manufacture in China.

    One trend, said machinery officials at K'98 in Dusseldorf: Building relatively simple components, such as machine bases, screws and barrels, in China, then shipping them back home for final assembly.

    China dominates the Asian machine-buying scene right now, given its size and the economic doldrums in most other Asian nations. How big is the market? Exact numbers are hard to come by. A report earlier this year in China Chemical Reporter placed the market at about $1.3 billion.

    Leading the charge is Hong Kong-based Chen Hsong Holdings Ltd., a longtime player in China, where it runs 10 plastics equipment factories. Chen Hsong, which makes thousands of injection presses a year, plans to move part of its component operation from Hong Kong to China, into a new, 500,000-square-foot factory in Shenzhen, according to Chiang Lai Yuen, executive director of the Hong Kong plant. Chen Hsong has spent more than $70 million to build the complex.

    Meanwhile, Hong Kong, is facing economic challenges. Hong Kong's economy got a reality check last year after England handed Hong Kong back over to China. Then the Asian financial crisis smashed important Chen Hsong markets such as Malaysia and Indonesia.

    Now the territory is experiencing its first recession in more than a decade.

    New rules from China have not helped. Traditionally, Chen Hsong's core market had been Hong Kong investors who bought Hong Kong-made machines then shipped them into China, under special permits, Chiang said at the K show, held Oct. 22-29. But the Chinese government has clamped down and now severely limits machine imports, she said.

    Chen Hsong on Sept. 30 laid off 80 workers in Hong Kong — or about 12 percent of its work force there. Interviewed at K'98, Chiang defended the layoffs, which covered unskilled labor and office support staff.

    ``It's a healthy restructuring. All the companies are going in that direction,'' she said.

    Chen Hsong's operations in Hong Kong and Taiwan will focus on research and development and new technologies, such as all-electric injection presses and two-platen machines. The company also has started building metalworking machines.

    Several executives interviewed at K'98 said China's low wages are attractive, but Chiang said that did not influence Chen Hsong.

    ``We are not moving into China because of the low-cost labor. We've moving into China because we believe the skills, even engineers, are available and we can train people,'' she said. In contrast, talented young people in Hong Kong got into land speculation instead of manufacturing careers, she said.

    Another Hong Kong injection press maker, L.K. Machinery Co. Ltd., also is expanding its 8-year-old operation in Shenzhen. L.K. officials were not available to give further details at K'98.

    Although bullish, Taiwanese executives at the Dusseldorf trade show sounded a bit more cautious, given the tense political situation between China and Taiwan.

    ``We cannot put all our concentration in China,'' said Michael Guo of Chuan Lih Fa Machinery Works Co. Ltd. in Tainan, Taiwan. Guo's company, like many Taiwanese equipment makers, wants to spread business around to other parts of the world.

    China gobbles up nearly half Taiwan's exports of plastics and rubber machinery, according to the China External Trade Development Council (CETRA). Even though China's potential is vast, that's simply too much concentration on a single country, said Foster Lin, market development manager for CETRA's capital goods section.

    ``We want to change our focus,'' Lin said. ``We want more diversified markets. We want to sell to emerging markets such as India, Turkey, South America and Eastern Europe.''

    Chuan Lih Fa Machinery already makes 200 injection molding machines a year at two factories in China, where the company employs about 115 people. Chuan Lih Fa opened a plant in Zhongshan in 1992 and one in Nanjing last year.

    ``In the future we might use China to make some components and ship them back to Taiwan,'' Guo said.

    One of Taiwan's largest makers of injection molding machines, Victor Taichung Machinery Works Co. Ltd. of Taichung, is building its first Chinese injection press plant near Hong Kong in Guangzhou, the capital of Guangdong Province. Export manager Martin Li said production should begin in early 1999.

    Victor Taichung already makes valves and other components in China, but it does not use them in injection presses, Li said.

    Low wages were a key factor in setting up shop in Guangzhou. Li said Victor Taichung can hire nine Chinese workers for the wages it pays a single person in Taiwan.

    Meanwhile, a few Taiwanese companies sell presses in the United States. Victor Taichung sells through Fortune International Inc. in Somerset, N.J. In January, Chuan Lih Fa set up a sales, service and spare parts center in Azusa, Calif., near Los Angeles.

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