The Delta, one of the economic powerhouse of mainland China, is undergoing rapid integration: the capital of Guangdong province is re-emerging as the heart of this region

In the 1980s and 1990s, the focus on the Pearl River Delta region (PRD) was mostly on Shenzhen and Dongguan, not Guangzhou or the westerly cities of Foshan, Zhongshan and Zhuhai, the latter being a special economic zone like Shenzhen. The reason for the neglect of the western cities of the PRD has likely been a result of the phenomenal growth of the economies of Shenzhen and Dongguan and the eager attention awarded them by foreign investors, in particular those from Hong Kong.

The rapid foreign direct investment-led industrialization has transformed the farming villages of Shenzhen and Dongguan into a booming city and a world factory respectively, each with a population of over 10 million in recent years. In contrast, the Zhuhai special economic zone has been lagging well behind with little fanfare paid to it in the media. The outside world has even less knowledge of developments in Foshan and Zhongshan, the traditional wealthy local economies of the PRD. Meanwhile, Guangzhou is remembered most for its pre-1949 prosperity.

Since the year 2000, things have begun to change. This has been particularly the case in the last few years.

Shrinking distance in the PRD

China is no longer satisfied to serve as the world’s factory of cheap quality goods to the US and other advanced economies; it now also wants a slice of the huge profits from industrial processing and export trade. Since the beginning of the new century, China has been accumulating massive trade surpluses and foreign exchange reserves and the country’s various levels of government have become more confident of their economic development. This has unleashed two new processes. One is that the central government has started to promote more indigenous industrialisation and domestic market growth. Ambitious investment programmes have been established all over the country, especially since 2005 when China’s trade surplus and foreign exchange reserves saw a quantum leap and under external pressure China had to reduce its reliance on export growth. The other process is the gradual implementation of measures that curtail the further expansion of the foreign sector in industrial processing that has given China less value added than ecological burdens.

In the PRD, Dongguan and Shenzhen had started to feel the pressure even before the financial crisis erupted in 2008. On the contrary, Guangzhou has begun to reassert its leadership role in the PRD with massive investment in heavy industries (with Japanese automakers as well as Chinese national giants in the oil and gas industries), and infrastructure.

This has reversed regional trends in the PRD. The slump in export demand in the aftermath of the financial crisis in 2008 has intensified the shifts. And the promulgation in early 2009 of the Outline of the Development and Reform Plan of the PRD region, which is backed by the central government, has added further momentum to the shifting regional pattern, leading to even more ambitious investment programmes initiated at the provincial level.

The Outline has put Guangzhou at the centre of the PRD, flanked by Shenzhen in the east and Zhuhai in the west. In addition, an extensive railway network, including fast-speed train services, will integrate the entire PRD with the central hub in Guangzhou.

With the speeding up of infrastructure investment under the economic stimulus programme of the central government in 2009, the two major inter-city railways (the fast-speed train services between Guangzhou and Shenzhen, and the express train from Guangzhou to Zhuhai) will be completed in 2011 with most of the other regional railway network coming into operation by 2015. The entire PRD will then be integrated into an economic zone within a one-hour travelling distance.

In 2009, the eastern area of the PRD lags behind both Guangzhou and the western cities.

The current economic slowdown occurs in the external sector, first in exports and indirectly in export-related industrial production and FDI-related investments. It would therefore be expected that the export-oriented cities of Dongguan and Zhuhai would suffer most. However, Shenzhen performs better. The difference may be due to the concentration of industrial processing for exports in Dongguan and Zhuhai while Shenzhen has been supported by the exports of large Chinese firms (e.g. telecommunications).

In terms of GDP or size of economy, Guangzhou and Foshan have overtaken Shenzhen and Dongguan since 2000 and lately the gap between the two sets of cities has widened even further with the surprising contrast in the first quarter of 2009 of Foshan achieving 11% growth against negative growth in Dongguan. Foshan should be considered to belong to the western area of the PRD. Both Zhuhai and Zhongshan are smaller economies; combined together they are still smaller than the economy of Dongguan. Their respective performance in the current financial crisis varies, with Zhuhai suffering most amongst all PRD cities.

A blessing in disguise

Even for Zhuhai, the below average economic performance have designated Zhuhai as a site of aircraft assembling in the coming years, this will not alter the urban scene in Zhuhai since assembling is high technology intensive. Instead it will bring more high skilled labour and engineers to the city, which in turn will lead to a higher demand for good quality of life. Industries in Dongguan may recover, but it will not be able to match Zhuhai or even Zhongshan in terms of the suburban living environment and lifestyle in the foreseeable future.

The economic successes of Foshan and to a lesser extent Zhongshan are owed mostly to the proliferation of industrial towns and clusters of small and medium-sized local firms. They resemble industrial districts in the so-called ‘Third Italy’, and they actually rely mostly on a transfer of equipment, intermediary inputs, production technologies, and even designs from Italy for their consumer industries, including the ceramic and tile industry for which Italy has been famous for decades, if not centuries.

There has been pollution and other problems of industrialisation in Foshan and Zhongshan, but on a more acceptable scale than in Dongguan. Under the pressure of market competition and with more industrial profits ploughed back into local industries, Foshan and Zhongshan have been able to move along the ladder of industrial upgrading much faster than Dongguan, reducing the strains created by initial industrialisation.

More importantly, as Guangzhou reasserts its leadership in the PRD, it does so partly by means of expanding the urban boundary of its metropolis. It has incorporated neighbouring counties like Panyu and others into its urban confines. In a similar fashion, Foshan has also incorporated and integrated surrounding counties like Nanhai, Shunde and others.

The metropolitanisation process has turned these former cities of industrial towns and clusters into suburbs, forcing industries to upgrade under land price inflation and with subsidies from the metropolitan authorities. In 2009 the Guangdong provincial government has gone one step further to integrate the urban areas of Guangzhou and Foshan into a single metropolis with harmonised institutional and infrastructure systems.

As Guangzhou is the largest and currently the most dynamic metropolis in the PRD, the move will represent an aggressive westward expansion of the metropolitanisation process going beyond Foshan to Zhongshan and other western cities off the estuary of the Pearl River. Benefits of urbanisation, network, agglomeration and scale economies will further speed up the growth and development of the economies there.

The eastern area of the PRD has been resisting the expansion of Guangzhou. Most notable has been the isolation of Shenzhen and its often bitter competition with and opposition to Guangzhou. Similarly, Hong Kong has been offered no helping hand in integrating with Shenzhen to form a bigger metropolis. With the less urbanised Dongguan separated from the urban Guangzhou and Shenzhen, it will be a long time before a continuous and reinforcing urban zone will extend from Guangzhou to Shenzhen/Hong Kong or vice versa. As a result, unlike the western cities in the PRD, eastern cities including Hong Kong will not be able to enjoy the multiplying benefits of the metropolitanisation process.

The different paths of development undertaken by the eastern cities of Shenzhen and Dongguan and the western cities led by the delta hub of Guangzhou may lead to a diverse and sometimes competitive relationship in the relationship between the two. However, as the Outline promulgates policies and measures by various levels of governments in the PRD to achieve an initial regional integration by 2012 when railway and road connections will create the physical foundation of a one-hour economic zone and deeper integration by 2020, other cities in the PRD will to varying extents be incorporated in the metropolitanisation process centred in Guangzhou.

The outcome will be a Greater PRD, if not a Greater Guangzhou, which will bear many similarities to the present day Greater Tokyo (rather than Greater London or Greater Paris as the latter two are monocentric metropolises whereas the PRD with Hong Kong co-evolving with Guangzhou will be more polycentric like Greater Tokyo).

By 2020, the western cities of Zhuhai and Zhongshan will be like suburb districts in the greater metropolis of the PRD, just like Panyu, Nanhai and Shunde today in the suburb of Guangzhou-Foshan.