Guangdong Wonderful Ceramics Co, a leading ceramic tiles producer in China, has become the first Chinese company in this sector to invest abroad, with a 172 million U.S. dollar project under way in Tennessee in the United States.
The first of the four production lines is scheduled to go into operation in April, with the building of the rest subject to the sales from the first line, according to He Jiye, a top executive of the company based in Dongguan, Guangdong province.
The investment is made to better tap the US ceramic tiles market－the world's second-largest after China－with the Chinese market standing at 400 billion yuan (58.08 billion U.S. dollars) a year. About 70 percent of the US demand is met by imports, he said.
Local production helps address the lengthy and costly transport from US sea ports, where China-made tiles are unloaded, to various destinations.
The operation cost advantages in Lebanon, Tennessee, also make the investment worthy, he said.
The price for buying land in the US state is lower than in the Pearl River Delta area in Guangdong province.
Natural gas and power costs, which account for a large part of the production cost, are 3.3 times and 1.8 times cheaper in Tennessee.
Cheaper truck fuel and the absence of road tolls reduce the cost of transporting raw materials by road.
The savings in these aspects help offset the more expensive construction cost in Tennessee, which comes at three times that in Dongguan and include certifications, environmental compliance and labor.
Labor in Tennessee, which is in short supply, is 6 times more costly than in Dongguan.
However, with highly automated equipment imported from Italy and higher efficiency, a production line in Tennessee requires 20 supervisory and workers, compared with 40 workers in China at best. A line is capable of producing 9,000 square meters of tiles a day.
He Jiye said: "The US facility can serve as a bridgehead for integrating advanced technologies from the US and Europe and upgrading the domestic facility to promote technological progress."
In its 10 new lines on the newly acquired land in Xiegang town, Dongguan, the company is installing the most advanced equipment in China to produce large tiles, including those of 1.8 meters in length.
Guangdong Wonderful also runs facilities in Qingyuan in Guangdong province, Chongqing municipality and Jiangxi province.
The US is competitive in costs of raw materials, water, electricity and rental, with highly efficient logistics, said Cao Xiaping, a finance professor with Lingnan College, Sun Yatsen University in Guangzhou.
(Source: China Daily)
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