Last modified 8 January 2002
Both Hong Kong and overseas firms have relocated manufacturing activities to the SEZ. The region enjoys a tenfold advantage in labour cost over Hong Kong.
Following the 1987 agreement over the return of Hong Kong to Chinese sovereignty, the adjacent Shenzhen Special Economic Zone developed rapidly.
The twentieth anniversary of the Shenzhen SEZ was celebrated in August 2000. The region achieved a per capita annual disposable income of 20,240 yuan (about 2,440 U.S. dollars) in 1999, more than 26.6 times the 1979 figure according to the Shenzhen Statistics Information Bureau.
The change is encapsulated in this Shanghai-built Buick sedan, produced for the Chinese market, with gold-plate wheel arches and airconditioning controlled from the rear seats.
Shenzhen became an SEZ on August 26, 1980, together with three other coastal cities: Zhuhai, Shantou and Xiamen. Hainan Island became the largest SEZ in April 1988. Background information on the SEZs can be found at the China People's Daily site.
|Details of Shenzhen can be found at
The Hong Kong government is also concerned with the coordination of cross-border infrastructure development between the Hong Kong Special Administrative Region and the SEZ.
New apartments for sale at the border, new retail and commercial property in Shenzhen City.
|While road and rail links from the SAR to the SEZ continue to improve, the border still closes overnight. This is seen as a move to protect relative land values. The proceeds from auction of government land remain a key resource for the Hong Kong government. consequently auctions both sides of the border are seen as a key economic indicator.|
Egana Goldpfeil manufactures jewellery and watches under a range of brands. The jewellery factory is located at Nan Ao on Depeng Bay in the South China Sea. It was relocated from Germany, with the machinery arriving in forty shipping containers in 1996. The watch factory is located in Longgang to the north east of Shenzhen City. It assembles watches from components manufactured by subcontractors around Longgang.
The range of brands manufactured under licence can be seen at http://www.irasia.com/listco/hk/eganajp/products/index.htm for the jewellery factory and at http://www.irasia.com/listco/hk/egana/products/index.htmfor the watch factory.
The brand licences allow a high margin on labour intensive products. Egana Goldpfeil also operates factories in India through their Indian arm, Egana India (Pvt.) Limited.
While labour cost is a major driver, quality assurance and the reproduction of key skills is also critical. However, what really adds value is the set of agreements permitting the legal use of key brands for these products.
For watches there are only three principal sources of electronic watch movements. Sub-contractors provide everything but the approved logos which are inscribed on-site, it is documentation which determines authenticity.
The jewellery is produced with the original German machinary supplemented with additional local plant run on a two-shift (almost) twentyfour hour cycle. While there is greater craft content, the attribution of high value brands is also central to this operation.
Naomi Klein's book "No Logo" contains detailed analysis of condition in free trade zones and a critical account of the cultural and financial dimensions of brand management. Conditions, particularly in the clothing and footwear sector, have been widely criticised.
Discussion of these issues continues at the No Logo site.
An impression of conditions in the Egana factories can be gained from the photo-galleries.
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Head, Centre for Innovation, Knowledge and Enterprise
Open University Business School
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