Eurobiz Magazine advises economic restructuring of Pearl River Delta

19 April 2006

Beijing, China, 19 April – The Pearl River Delta Region (PRD) must restructure it economy in order to face competition from other Chinese economic regions and areas, a report in the European Union Chamber of Commerce Magazine in China, Eurobiz, has said.

In the face of competition from the Yangtze River Delta, Shanghai and the Special economic Area of the Bohai Sea, which includes Beijing, Tianjin and Qindao, the PRD, the article said, should position itself in value-added sectors and transfer its manufacturing sector to other, Less-developed regions.

Eurobiz said that the way of the future is the concept of “independent innovation,” proposed by the 11th Five-Year Program, the route for Chinese economic development between 2006 and 2010.

“Independent innovation means an economy with better domestic dynamics, with local companies investing locally and paying local taxes,” the article said.

Part of the proposed restructuring project is to transform the city of Guangzhou, capital of Guangdong province, into a global logistic hub and an international center for cargo and passengers.

The government of Guangdong province has already earmarked over US$25 billion for developing transport infrastructure, especially for building the high-speed rail link between Hong Kong and Guangzhou, which should be finished in 2013 and the second phase of Baiyun International Airport, which, after it is finished in 2010, will be an important International cargo and passenger air hub.

World cargo giant Fedex, world leader in express mail and the second largest delivery company in the United States, has said that in 2008 it will transfer its Asian center from the Philippines to Guangzhou, while air carriers Lufthansa and Air France have already started operating new routes to the city.

Eurobiz said it considers that Guangdong’s biggest problems are the competition it faces from other Chinese regions and social unrest in the province, which is the richest in China and brings in 80 percent of total gross domestic product for the PRD.

“In 27 years of openness and reform, Guangdong has accumulated many industrial assets, economic power and experience of success. All these are advantages for growth in the future but, at the same time, our sister provinces are growing rapidly, our strong points are weakening and some deep problems have not been resolved,” the governor of Guangdong, Huang Huahua, recently warned in a speech to the Provincial Popular Assembly.

The relative decline of competitiveness in the province is one of the problems faced by the PRD region, and Eurobiz, quoting an unnamed academic, said that, “after 20 years of rapid development, all sectors are relatively saturated in terms of attracting foreign investment.”

“Foreign investment in the manufacturing sector is merely a short-term way of sustaining growth,” Eurobiz concluded.

In 2005, foreign investment in the province fell 3.3 percent in relation to 2004 according to the Guangdong Industry and Trade Administration, and the number of companies setting up in the province fell by 4 percent, with analysts from the Chinese Academy of Social Sciences attributing the slowdown to increased labor costs and intense competition from other regions of China.

Foreign trade in the PRD region totaled US$514.3 billion in 2005, or 36.2 percent of the Chinese total, according to official Chinese figures.

According to the Guangzhou statistics department, the GDP of Guangdong province in 2005 was US$63.9 billion, and GDP per capita was US$8,500. (macauhub)