Guangdong's township and village enterprises are expected to post strong gains this year, in spite of increasing competition at home and slackening demand for their products throughout Asia. The total output value for the province's rural industry should increase 12 per cent this year, to 681.3 billion yuan (about HK$637.35 billion), Guangdong provincial township enterprise administration bureau official Lin Jianrong said. Although such growth appears modest compared with annual gains of more than 30 per cent in the mid-1990s, Mr Lin said rural industry had entered a new phase of what he characterised as 'stable and sustained' development. Guangdong had 1.34 million township and village enterprises employing 11.34 million workers at the end of last year - the fourth-largest concentration of such industry in the mainland, behind Jiangsu, Shandong and Zhejiang provinces. Mr Lin said much of the recent success of Guangdong's rural enterprise was attributable to development of privately owned companies, which now accounted for about 40 per cent of countryside production. Privately held township and village companies are expected to produce 199.3 billion yuan worth of goods this year, representing year-on-year growth of 21.3 per cent. 'Many were once mis-managed collectively-owned and unprofitable enterprises,' Mr Lin said. However, since the 15th Party Congress last year gave the green light for development of the private sector, many factories had changed their shareholding structure, often with managers and workers buying significant stakes. At the same time, rural industry in the Pearl River Delta and the province's eastern seaboard had responded quickly to fallout created by the regional economic crisis, shifting export manufacturing away from crisis-hit Southeast Asian countries and Korea towards markets in the United States, South America, the Middle East and Africa. In Shantou, for example, exports in the first nine months this year had reached 6.73 billion yuan, representing year-on-year growth of 46.78 per cent. Rural-enterprise exports this year were expected to grow 14 per cent - more than double the performance of the province as a whole. Despite such success, Mr Lin admitted that Guangdong's township and village sector faced significant challenges, particularly factories located in poor and mountainous areas, where manufacturing equipment was outdated, management skills were poor, and returns were low. Such regions included Shaoyuan, Qingyuan, Yufu, Meizhou, Zhaoqing and Heyuan where more than 71,000 rural enterprises produced about 6.2 billion yuan worth of goods. By comparison Shunde-based household appliance manufacturer Kelon Group - Guangdong's largest rural conglomerate - last year reported output of 5.5 billion yuan. 'The government has not invested much in these areas and it is difficult to attract foreign direct investment,' Mr Lin said. A substantial number of the province's rural industries had not adequately adjusted their scale to address issues of over-capacity that now dogged many of the mainland's industrial sectors, he said. That was true particularly of Guangdong building materials manufacturers. Of about 360 rural factories producing cement, for example, about one-third had stopped production due to losses, one-third were operating at a loss, and one-third were without substantial profits.
