The statistics on plastics in China's Pearl River Delta are the first thing that stand out: The zone has more than 2.5 million plastics-related jobs and more than 15,000 companies.
Those numbers, from the Hong Kong Productivity Council, are a guesstimate in a place where getting good figures can be challenging.
Compare that with the U.S. plastics industry, which estimates its workforce at about 1.1 million, and you get a sense of scale. The region between Hong Kong and Guangzhou known as PRD rose to prominence in the late 1970s as the first Chinese region to open up to Western economic development. An export-led growth engine for inexpensive plastic products such as toys, it had a combination of cheap labor, and access to foreign technology and management through the former British colony of Hong Kong.
The PRD sits in Guangdong Province, the country's largest territory for making plastic products, according to the China Plastics Processing Industry Association in Beijing.
L.M. Li, general manager of the Hong Kong Productivity Council's manufacturing technology division, said South China's plastics industry benefited from Hong Kong's focus on low-cost plastic items like toys and artificial flowers in the 1950s and 1960s. Since Hong Kong lacks natural resources and has limited space, it focused on its plastics processing industry, in part because the U.S. and other developed countries were looking for low-cost locations, even back then, he said.
When China opened its economy, Hong Kong's rapidly developing industry moved across the border and expanded more than tenfold, Li said. Consequently, Hong Kong began developing its own plastics machinery manufacturing and mold-making industries, he said. Several of China's largest injection press makers are based there, for example.
“We consider the mold-making skill of the Hong Kong mold makers tops in this region, next to Japan,” he said.
Today, PRD continues to show strong growth as a manufacturing hub for consumer products and electronics because of the “cluster effect” of those companies and a supply chain located nearby.
“When you want to get really efficient, you need a really good supply chain,” Li said. “A television manufacturing company in the Pearl River Delta told me that 90 percent of their supply chain is in a 20-kilometer [12.4-mile] radius.”
But there are challenges. China's millions of migrant workers are becoming more and more reluctant to come to the delta's sometimes difficult working conditions. Increased pollution and government policies trying to promote higher-value manufacturing also test the PRD.
“It will mainly be higher-value-added plastic products that will survive in Guangdong, not cheap labor,” said Raymond Li, a director of plastics and rubber machinery maker Cosmos Machinery Ltd. in Hong Kong. “Most of these kinds of small-scale manufacturers, especially the toy makers, they cannot survive in Guangdong.”
Some of the firm's Chinese customers already are establishing operations in less costly places like Vietnam for their more labor-intensive and cost-sensitive products, he said.
To move into more sophisticated manufacturing, the PRD region is starting to develop an automobile manufacturing industry, including joint ventures with Honda Motor Co. and Toyota Motor Corp. Raymond Li said that will require skill and technology upgrades that he believes companies will be able to achieve.
“There is quite a big gap between the domestic plastics processors and the foreign companies, for processing special materials or using processes like microinjection or coinjection. The Chinese want to develop, we want to develop ourselves and innovate technology, but it takes time,” he said.
The PRD was where Clinton, Mass..-based injection molder Nypro Inc. first located in China, with a plant in Hong Kong in 1979. Nypro employs 4,500 at three locations in South China, and about 30 percent of its global sales of US$1.1 billion come from China.
The region's low labor costs and its flexible rules that allow the rapid hiring and firing of workers have been an advantage in market segments with fast product cycles like mobile phones and telecommmunications equipment, said Johnny Wong, Nypro's Hong Kong-based regional vice president.
But the region will need to evolve into more value-added operations like painting, metalizing and design, as Nypro has done, said Gunnar Hagen, business development director. Simple molding accounts for only 25 percent of Nypro's sales in China now, compared with 100 percent when it opened its first plant in Shenzhen in 1993, he said.
“The PRD will continue to be a very strong place for this manufacturing industry, but the players will have to evolve into a different model,” said Wong.