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Impacts of business environment changes on global manufacturing in the Chinese Greater Pearl River Delta: a supply chain perspective

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Business operating conditions have changed substantially in the Chinese Greater Pearl River Delta (GPRD) due to the Chinese currency appreciation, rising labour costs, highly volatile oil prices and new processing trade policies. Such changes have triggered manufacturers to rethink their global operations. This article studies potential global manufacturing trends from a supply chain perspective. A mixed integer programming model suggests that these changes have negatively affected the region's competitive advantages as its labour-intensive production mainly targets at the mass market and competes on low costs. Three production relocation trends are affirmed, i.e. the relocation to lower-cost areas within China, lower-cost Asian countries and areas near end markets. However, it is also discovered that the GPRD region still attracts businesses with its formation of industrial clusters, the enhanced comparative advantage against competing regions in inland China or Asian lower-cost countries under high oil prices, and Hong Kong's being a robust location choice to host trade operations.
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Keywords: C61; L67; Pearl River Delta; R30; facility location; global manufacturing; mixed integer programming; supply chain management

Document Type: Research Article

Affiliations: 1: Department of Industrial and Manufacturing Systems Engineering, Haking Wong Building, The University of Hong Kong, Pokfulam Road, Hong Kong 2: Department of Management, School of Business, Economics and Informatics, Birkbeck College, University of London, Malet Street Bloomsbury, London WC1E 7HX, UK

Publication date: 01 December 2012

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