TEDA – Leading the Way for China’s Industrial Transformation

TIANJIN, China--()--China faces a historic challenge. It is moving from making large quantities of simple items for export at great cost to the environment to becoming a global leader in innovation, high-end manufacturing and product design.

“At TEDA we have both incumbent industries and newer sectors that are brought to the region. But they are not two separate layers of skin”

It is doing this because the country is no longer cheap enough for low-end manufacturing to keep driving economic growth. China’s leaders also see greater sophistication as a way of achieving their goal of the “great rejuvenation of the Chinese nation.”

The vision is clear, but making it reality requires a profound shift. The challenge is not just to create Silicon Valley equivalents full of promising start-ups but also to apply innovation to traditional manufacturing so it becomes greener, more efficient and competitive.

This is where the Tianjin Economic-Technological Development Area (TEDA) comes in. TEDA was the country’s first dedicated industrial park, set up to pioneer the country’s then new reform and opening up policy, which has brought great wealth and development in just a few decades.

Located in Tianjin, a traditional seat of heavy industry and a major international port, the park has a long experience of developing Chinese industry and introducing it to international best practices. It produces goods worth about $45bn a year and has developed clusters in key areas from petrochemicals to wearable technology.

Now TEDA – consistently ranked China’s top industrial park – is stepping up to lead the way once again.

If it is successful in transforming its companies into clean, efficient and globally competitive outfits, its achievements will in turn become a blueprint for companies in the rest of China.

“New technologies are fuelling a revolution in industrial processes, with lots of disruptive innovations emerging,” says Xu Hongxing, head of TEDA’s CPC Working Committee.

“It is an opportunity similar in scale to the opportunity that presented itself at the beginning of reform and opening up over 30 years ago and whoever makes the most of it will gain an unparalleled edge.”

The key is to upgrade those traditional industries that have a future, such as the petrochemical sector, while also bringing in firms specializing in new technologies and business practices.

The two groups of firms have a symbiotic relationship – big companies in industries ripe for modernization are eager for the kind of solutions new technology firms have to offer.

TEDA’s role is to bring them together and find ways to support their transformation and growth.

“At TEDA we have both incumbent industries and newer sectors that are brought to the region. But they are not two separate layers of skin,” says TEDA official Wang Xuejia.

“We are making great efforts to create cross-pollination opportunities between the two, rather than having one replace the other.”

There are expected to be 10,000 small and medium-sized technology companies in TEDA by 2020. The park has also set up 15 business incubators.

Master Kong shows the way

Founded in TEDA 26 years ago, instant noodle-maker Master Kong is an old-school manufacturer. Yet people are still visiting its facilities to see how the company operates because of the level of automation it has achieved.

Throughout the manufacturing process – from flour mixing, maturation, composite rolling, continuous rolling, wire forming, cutting, cooking, cutting into quantities and drying to finally packaging the product – very few workers can be seen making it all happen.

Whereas before up to 50 workers were needed on each production line, there are just 16 workers on each line today. Meanwhile production has doubled, efficiency has gone up by a quarter and per-capita productivity has tripled, the company says, making the TEDA factory the biggest single instant noodle-producing plant in the world.

Master Kong has benefited from new know-how in the fields of robotics and automation and Ms. Wang says TEDA is now on the lookout for firms that can provide the kind of solutions that have helped Master Kong thrive in today’s ever more competitive world.

“TEDA is searching for the best new innovators in order to help address specific problems presented by longstanding companies as particularly hard nuts to crack,” she says.

“In this way, we connect them with entrepreneurs who can help solve their real world problems.”

Ms. Wang says this shift in thinking means people in the region now see enterprise as the main driver for innovation. This in turn means innovators and entrepreneurs are concentrating on solving the day-to-day business issues and challenges companies face.

“This helps startups focus on the real world and means their ideas are more likely to be tested by the market, by the real world,” says Ms. Wang.

The TEDA branch of Dicastal, a Chinese auto parts maker, has also been able to use high-tech business processes as a way of achieving renewed prosperity.

A deal with longstanding TEDA tenant company Toyota saw Dicastal build a state of the art plant that receives orders in real-time and produces custom-made small-volume parts exactly according to client demand, meaning it does not maintain any inventory stock.

Managing change

Big multinational firms such as Toyota have long provided business for local firms such as Dicastal – but what happens if the big firms disappear?

That is what happened to Jinya, which used to make components in the millions for mobile phone maker Motorola, which was once one of TEDA’s highest-profile tenants and the basis for a wide-ranging industrial chain covering much of the region.

But the mobile phones business has changed, Motorola no longer has anything like the market share it once had and companies such as Jinya have had to rely on their insight into which products will be in demand in the future to survive.

This they have successfully done, expanding into remote control systems, dashboard circuit boards, seat heating and massage systems for cars and LED lighting systems.

TEDA has funded a corporate transformation and upgrade program to help companies such as Jinya adapt to changing realities, according to Sun Qijun, deputy director of TEDA’s trade promotion bureau.

More than 1,700 companies have participated in the program, with about 500 focusing on management capabilities, 450 focusing on technical upgrades and the rest concentrating on research and development, developing emerging industries and mergers, e-commerce and acquisitions.

Using what’s left behind

TEDA is also focusing on managing another aspect of change – the infrastructure left behind by companies that outgrow it or whose time is up.

By renovating old buildings, TEDA can save new companies and start-ups large sums of money and time compared to the investment needed to build new facilities from scratch.

One of TEDA’s big new economy tenant companies is online classified advertising company 58.com, a firm that employs more people than the average internet business. So far more than 2,800 people are working in the 58.com building, which has been repurposed since previous occupier Samsung moved into different premises.

Another building previously occupied by a manufacturing company is now being transformed into a new home for TEDA’s Industrial Park for Intelligent Unmanned System.

The new premises will enable collaboration between robotics research and end users as well as containing an exhibition area, shared laboratory and software platforms and intelligent manufacturing facilities.

Singapore’s GLP group has also signed a deal to transform part of TEDA into a new facility boasting advanced manufacturing and research capabilities to host tech companies relocating out of Beijing under central government plans to integrate the Beijing-Tianjin-Hebei region.

Work on the physical infrastructure is being matched by activity in virtual infrastructure for companies too.

TEDA has relaunched its e-government portal offering back office services such as corporate registration, administration, taxation and legal functions in one integrated online hub.

According to Wang Sheng, chairman of TEDA’s administrative committee, this all means tenant companies are freed up to spend more time on what they do best, be it develop innovative new technologies or manufacture in-demand goods.

“We are creating an ecosystem that matches supply of new technology with demand from established manufacturing firms and we pride ourselves on making things as easy and cost-effective as possible for our companies, whichever side of the equation they are on,” he says.

“This has become vital for our own continued success as a forward-looking industrial park and for the success of the Chinese economy as a whole.”

Contacts

Z. H. STUDIO
Lan Shen, 86-21-3257-2065
lan.shen@zhstudio.net

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Release Summary

Corporate China needs to innovate. The challenge is not just to create Silicon Valley equivalents but to upgrade traditional manufacturing so it becomes greener, more efficient and competitive.