Guangzhou and Pearl River Delta must move towards more sophisticated industries, China Economic Review reports

8 May 2006

Guangzhou, China, 08 May – The long term development of the Pearl River Delta (PRD) region requires that its industry become increasingly sophisticated, the latest edition of English-language publication China Economic Review (CER) reported.

Under the title, “Healthy as Ever” the CER said recent news that the PRD and Guangzhou were losing their competitive edge with the context of China’s economy had been “greatly exaggerated.”

The magazine said that Guangzhou had been a center of trade since the 10th century, first via the Arabs and later the Portuguese and other foreign powers.

“In the last 27 years (Guangzhou) has been the controlling center of the Pearl River Delta (PRD), one of the busiest and most productive regions on earth,” the CER said.

competition with Shanghai and the Yangtze River Delta and the Bohai Sea Economic Zone, which includes the cities of Beijing, Tianjin and Qingdao, according to the CEr has worried the Chinese authorities of Guangdong province where the PRD is located.

The governor of Guangdong, Huang Huahua, said recently that, “opening up and reform (…) economic power and experience of success (…) are advantageous to our future growth,” but admitted that the economic strength of the province, “are weakening and some profound problems have not been resolved.”

The CER said that the governor was referring to social problems given that Guangdong, which is China’s richest province, continued to have some of the country’s poorest areas.

“Among the weakening strengths is the perceived decline of the PRD’s competitiveness ( …) New foreign direct investment in Guangdong fell last year, prompting concerns that labor costs have become too high,” the CER reported..

“After about 20 years’ rapid development, every sector (in Guangdong) is now relatively saturated in terms of attracting foreign investment,” the CER reported citing a Chinese academic.

In the long term the PRD must move its manufacturing industry to less developed areas and nurture economic growth through more sophisticated industrial sectors.

New foreign investments in Guangdong in 2005 continued to be the majority of FDIs, but investment in industry fell 17.5 percent against 2004 while investment in the services sector increased by 35.5 percent.

Marketing, logistics, legal and financial companies are increasingly setting up in Guangzhou in the center of the city where the provincial government has invested US$6.2 million on transforming the city’s financial center.

Guangdong is investing in the science and technology sectors more than any other Chinese province but, along with Shenzhen, next to Hong Kong, the PRD remains unknown for its high technology capabilities.

However, according to the president of the American Chamber of Commerce in Guangdong, Harley Seyedin, the future of the PRD, “has never looked so bright.”

A survey by the Chamber of 151 Us businesses in the showed “overwhelmingly” positive responses about the future of the region.

Seyedin told the CER that 76 percent of companies contacted were already making profits and 88 percent expected to be profitable within a year.

Seyedin said that most companies had been set up in the PRD for less than three years and that he believed that investments made by those companies over the next three to five years would total around US$50 million.

He added that around half of all new foreign investments would be made in southern China while between 15 and 20 percent would be channeled into Shanghai and the Yangtze River Delta.

Seyedin told the CER that changes were apparent in the type of company setting up in Guangdong, as prices of land were increasing and because companies with intensive workforce requirements were increasingly being set up further away from the cities.

The CER reported that Guangdong wants to develop its future role as a global logistics hub and said that the government had just announced a US$25 million investment for improving transport infrastructures, namely the second phase of the Baiyun airport in Guangzhou which, when its is concluded in 2010, will make Guangzhou and important international hub.

The CER reminded its readers that by 2013 a rail link between Guangzhou and Hong Kong would be finished and that the authorities were preparing to finish a new convention and exhibition center in Guangzhou which will be the second largest in the world after Frankfurt.

The magazine also said that the Guangdong authorities planned to take advantage of the hosting of the Asia Games in 2010 to boost the international visibility of Southern China.

The creation of the Pan-Pearl River Delta which includes 8 provinces, an autonomous region and two special administrative regions (Hong Kong and Macau) and which aims to eliminate obstacles to trade and allow free movement of workers will be a profound restructuring of Southern China’s economy, the CER also said.

“For all the competitive fire between the two deltas, their respective buildups do not seem to amount to a fight to the death between east and south. China has grown to the point where it can accommodate multiple centers of enormous growth,” the magazine concludes. (macauhub)