Chinese home appliance companies are moving into the fast lane

In recent years, with the continuous investment in product r&d, intelligent manufacturing and brand construction, China's electronic home appliance industry has gradually acquired a strong manufacturing capacity and a complete industrial chain. In the era of globalization, it is necessary for China's home appliance industry to accelerate the global capacity distribution.

At the 7th China electronics and home appliance enterprise internationalization summit held recently, the reporter learned that in 2018, China accounted for nearly 60% of the global output of home appliances, and more than 30% of the global trade. From the perspective of capacity development, in recent years, China and overseas home appliance capacity is in a steady expansion trend.

Take air conditioning as an example, the proportion of air conditioning capacity in China in the world is basically maintained at 84 to 85 percent, the structure is very stable. Preliminary calculations show that even in regions with lower wages and more skilled workers, such as south-east Asia, the cost advantage of local production is as high as 15 percentage points. Therefore, although Chinese enterprises entering the era of globalization have also frequently tried overseas capacity layout in recent years, they have been cautious in going out, mostly for integrated capacity after brand acquisition and investment construction.

There is no doubt that the closer the Chinese home appliance industry is to the target market, the more rapid the response, the more obvious the advantages of independent brand construction. However, since most enterprises' OEM business still accounts for the main share, considering the cost, overseas investment and factory construction is not the first choice for investment, and most enterprises are more inclined to brand merger and acquisition.

This situation has changed with the economic and trade friction between China and the United States. Before the economic and trade friction between China and the United States, Japanese and Korean home appliance enterprises had an earlier global layout, but they did not gain substantial advantages from the investment in southeast Asia. Instead, they were distressed by the rising cost and increased management difficulty. After the economic and trade friction between China and the United States occurred, the cost difference of investment in southeast Asia by enterprises of various countries, especially Chinese enterprises, was offset by the increased tariffs of the United States, making the advantages of overseas investment tend to be obvious.

At present, Thailand has become the first choice of investment of numerous air conditioning manufacturer, on the one hand, the reason is Chinese and Korean manufacturer formed relatively complete industry to support once again, once an enterprise tastes sweet, will drive other enterprise to follow suit investment. On the other hand, the reason is that Chinese household appliance enterprises, especially vacuum cleaners and other enterprises with the us market as the main share, have realized the necessity of diversified production capacity layout for enterprises. Industry personage predicts, the international capacity layout of Chinese home appliance enterprise will enter fast lane from this.

Judging from the current investment trend, India, which has raised tariff barriers, has become a key market for the layout of brand enterprises relying on its huge market potential. Because of its proximity to the United States, Mexico has also become the investment choice for enterprises with large export scale to the United States. Southeast Asia is not only a major target for smes seeking investment, but also increasingly a major capacity distribution destination for enterprises evading trade barriers. Data show that imports from southeast Asia rose rapidly in 2019 for India and the United States.

On the forum, many industry insiders said that in recent years, the "One Belt And One Road" initiative and the construction of free trade zone have brought good guidance to enterprises' overseas investment. At the same time, based on years of investment experience, Chinese home appliance enterprises are more inclined to brand merger and acquisition in the United States, and the option of deploying capacity in emerging markets is more advantageous.

"The djibouti international free trade zone will become a bridgehead for Chinese home appliances entering the east African market." He fei, general manager of djibouti international free trade zone, said at the forum. After a year of development, the djibouti international free trade zone, which officially opened in July 2018, has attracted more than 60 enterprises. China's bonded investment promotion, cimc vehicles and sinotrans have entered the zone.

Aiming at construction becomes the new engine of the development of djibouti, the region's logistics, commercial and financial center of this goal, djibouti international free trade area will develop including logistics, trade and production and processing, such as industry, production processing industry, including household building materials, electrical appliances, automobile and accessories, machinery and equipment, furniture, electrical appliances and other industries.

In order to attract more enterprises, djibouti international free trade zone proposed a 99-year tax exemption policy for enterprises in the zone. Except for the individual income tax of local employees, all other taxes are exempted. Enterprises in the areas may employ no more than 70% foreign workers in the first five years and no more than 30% after that.