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Industry Giants Enter into Anhui with Eagerness
Published: 2010/4/13 13:48:16 Source: Huizhou Merchants Visits: 4500

Under high pressure of of domestic economic environment changing, a new round of industry shift has begun. The industry shift is speeded up from the eastern coastal areas to the central and western regions. With the approval of “Wanjiang city cluster” plan, it is gradually obvious that Anhui becomes the centre to undertake the industry shift from the eastern coastal areas.

In fact, many enterprises both home and abroad had already settled in Anhui, striding a firm step of their industry shift. Among them are Unilever, one of Fortune 500 companies, RongAn Power, the first approved private enterprises manufacturing marine low speed diesel engine by National Development and Reform Committee, Zhengwei International Group of China Top 500 enterprises—a giant in copper fabrication, and Genius New Materials Co. Ltd.—the leading enterprises in new materials and so on.

Then, what’s the main factor of their industry shift? Did they reach their expectation? And will they add their additional investment? With these doubts, reporter of 《Huizhou Merchants》 interviewed responsible persons of these four enterprises.

Costs Backflush

Due to the increase of environment cost and labor costs, enterprises migrated successively from developed areas such as Pearl River Delta and Yangtze River Delta, which were once praised as “China’s factories”. Unilever’s integral migration from Shanghai to Hefei is the most classic example.

Early in 1930s, Unilever had come to China and established China Soap Co. Ltd. When Unilever re-entered into China in 1986, like many other multinational enterprises, it chose Shanghai of eastern area as the factory base.

However, along with the rapid development and large scale of foreign investments’ entering into the eastern areas, there has been a dramatic increase in both production costs and business operation costs.  

Zeng Xiwen, deputy president of Unilever China, introduced to 《Huizhou Merchants》that Unilever established 7 factories in Shanghai at that time but all of them were scattered in the city centre. High land costs, high labor cost and the lack of expansion space made it difficult for Unilever China to compete with domestic colleague companies, and Unilever factories in Shanghai became less competitive comparing with other subsidiaries of Unilever in Asian Pacific regions.

They faced a grim and perilous situation at that time: from 1999 to 2000, costs of products such as detergent products, toothpaste and skin care products produced in Unilever China were all higher than the costs of products produced in Southeast Asia factories. Had the trend continued, Unilever would have closed all its factories in China and migrate to Southeast Asia.

With regard to this, Unilever decided to remove its production base in 2000, carrying out its industry shift to the low costs areas. Zeng Xiwen told 《Huizhou Merchants》that, “In fact, the primary plan of Unilever is to settle in Huzhou of Zhejiang and Taichang of Jiangshu.” However, when he arrived Huzhou, he found that most of the workers were from anhui province. He also found that in power shortage areas of Yangtze region, a lot of industrial electricity was supplied by Anhui province. Under this circumstance, Zeng Xiwen wondered, “why didn’t we establish our factory in Anhui directly?”

Finally, Unilever chose Hefei. Zengxiwen said the reason is simple that we think highly of Hefei’s comparative advantages on market, costs, and human resources. Costs of Products manufactured in Unilever Hefei totally declined by 46% comparing with that of Shanghai.

After 8 months’ investigation, Unilever (China) successively closed 7 factories in Shanghai and carried out the integral migration to Hefei. Zeng Xiwen was proud to tell 《Huizhou Merchants》 that Unilever’s integral industry shift was an unprecedented event, creating a successful sample.

Talents Reserve Pool

It is admittedly that cost backflush is an important factor of the industry shift; however, as Zeng Xiwen said, it is not the only reason for Unilever to choose Hefei.  There were another two alternatives for Unilever Wuhu and Bengbu at that time. Production cost was also very low in the two places, and they had advantage on logistic for that Yangtze River flows through Wuhu, while the Beijing-Guangzhou railway crosses Bengbu.

Finally Hefei was chosen due to the unique advantage of abundant talents reserve over Wuhu and Bengbu to a great extent. Many famous colleges and universities as University of Science and Technology of China is located in Hefei, and there are many third-line enterprises, having good industrial base, educational base and scientific research base.

Science&Technology and talents are very important for high-tech enterprises. Genius New Materials Co. Ltd., The leading enterprise in China engineering plastics was located in hefei in 2006. Accepting a special interview by the 《huizhou merchants》, President Yang Guisheng said, being a enterprise in the field of new materials, when we make our decision of industry shift, we considered more in Science&Technology and talents resources of the target region. Hefei is the only pilot city of sci-tech innovation, having abundant scientific and technological resources, especially the obvious advantage on low cost of upper middle technicians. 

It is true that Shanghai has abundant reserve of talents; however, there are so many multinational enterprises and the competition is very fierce and thus causes the high costs of high-end talents, poor stability of a team and talents are easily poached by multinational enterprises.

Compared to Shanghai, Hefei is rich in middle and low end talents resources, especially low cost of human resources, although it is lack in high end talents. A doctor at a same level only has half salary of that in Shanghai. For there is less multinational enterprises in Hefei, its talents rarely move from one to another.

Deng Hui, President of RongAn Power has a lot of sympathy for the opinion. Being a enterprise of heavy equipment manufacturing, it has high need for talents. when accepting a special interview by 《HuiZhou Merchants》, Deng Hui told the reporter, in RongAn, 60% of the employees had received college education at present. Many colleges and universities like University of Science and Technology of China and Hefei University of Technology are located in Hefei, therefore, abundant talents resources can satisfy the need of the enterprises settled in Hefei. And every enterprise can save 20% to 30% of labor costs compared with coastal advanced areas. For example, monthly payment is 3,000 to 5,000 for employing a graduate in shanghai while in hefei, even a key university graduate’s monthly salary is only 2,500 to 3,000.

Furthermore, the outstanding scientific and technological atmosphere makes Hefei more attractive for high end talents. Deng Hui told the reporter, more than 40 high end talents has come to Hefei from

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