Stay in the loop.

X

China’s Economic Geography: Moving outside the Pearl River Delta

Article by Dr Tim Summers

June 29, 2012

The underlying reason for this assertion is the gaps in development within Guangdong province, China’s largest provincial economy by aggregate GDP. Since the instigation of ‘reform and opening up’ policies at the end of the 1970s, Guangdong’s economy has boomed as it has been at the forefront of China’s integration into global production networks and supply chains, earning it the sobriquet of the ‘world’s factory’. The value of the province’s total trade regularly comes in at a figure greater than its GDP (107% in 2009 for example), compared to something closer to two thirds for China as a whole.

However Guangdong’s development has not been evenly spread within the province, and in reality its integration with the global economy – and hence the most rapid development – has been limited to the PRD, an area made up of nine administrative cities around the provincial capital of Guangzhou and the bustling city of Shenzhen just over the border from Hong Kong.

The city of Qingyuan epitomizes many of the disparities within Guangdong. Qingyuan’s average per capita GDP is around half of Guangdong’s. The minimum wage of RMB850 per month (for 2011, up from RMB580 in 2008) is about two thirds of that in Shenzhen or Guangzhou. Property prices are one third of Guangzhou’s. Qingyuan’s total trade equates to less than 30% of GDP, and net exports only contribute a small proportion of GDP growth. These indicators place Qingyuan closer to many inland provinces than to Guangdong’s bustling Pearl River Delta (PRD).

These disparities are even more marked given the proximity of Qingyuan’s urban centre to Guangzhou. Not all of Qingyuan is so close, though, and the city’s administrative area spreads north to the border with neighbouring Hunan province. Qingyuan is the largest administrative city within the province, though this includes hilly and afforested non-urban areas covering 70-80% of the city, and its four million population are relatively sparsely distributed.

This means that even within Qingyuan there are substantial social and economic disparities, with developmental gaps between the hilly northern areas of the city and the south. This is reflected in the demographic profile. Whereas Guangdong is a substantial net recipient of migrant labour, the net inflows of migrants in southern Qingyuan are small, and migrants flow out of Qingyuan’s northern areas to the other parts of the province or elsewhere. Social issues therefore feature high on the city leadership’s agenda, including a target of 72,600 households to have their annual income raised to RMB 2,500 per person or about £250.

Economic and industrial trends
The primary policy aim, however, is still one of economic development. Qingyuan’s GDP growth over recent years has been the fastest of Guangdong’s cities, rising around 15% in 2011, and there are signs of new investment coming into the city. So far, this is mainly from within China, for example, from Anhui Conch, the country’s largest cement manufacturer, or Guangzhou Automobile.

The city’s strategy is also firmly part of the provincial policy agenda of rebalancing the economy and moving industry out of the PRD, especially in labour-intensive manufacturing: for this, Qingyuan is to play the role of a ‘bridgehead’. With this focus on industrial transfer, the city is now home to three provincial-level industrial zones, with a focus on attracting manufacturers from the PRD, environmental industries, and hi-tech projects. The provincial government has also decided to locate a cluster of technical and vocational training facilities and colleges in the city.

These trends are supported by investment in infrastructure, as is typical in today’s PRC. The city is building its fourth and fifth expressways. The high-speed rail line between Guangzhou and Wuhan (which will eventually go on north to Beijing and south from Guangzhou to Hong Kong) stops at Qingyuan. Guangzhou’s Baiyun airport is less than one hour’s drive away.

The city’s terrain also has rich mineral resources, including rare earths. Non-ferrous metals processing is the largest ‘pillar industry’ in the city, and there are numerous investments by copper companies. But environmental consciousness appears to be reasonably strong among the leadership, not least to avoid damaging the tourist industry which accounts for some 5% of the city’s GDP. There is also plenty of work needed to improve resource efficiency: Qingyuan’s energy use per capita is the second highest in Guangdong.

These developments provide a foundation for growth in trade and investment, and in the local economy. Indeed, perhaps reflecting these opportunities, HSBC have just opened a sub-branch in Qingyuan.

Moving outside the PRD

Places such as Qingyuan create another alternative for moving production outside the PRD. They could offer lower labour and land costs than in the PRD, while retaining proximity to familiar export routes in Guangdong, and to Hong Kong, from where many of these operations are still managed.

The wider implications could be twofold. Firstly, the disparities within Guangdong mean that it is a mistake to think about the province as saturated as a destination for investment or manufacturing, even if the PRD itself is becoming saturated. Secondly, therefore, there is plenty of space still for Guangdong to provide a relatively low-cost location for global production, one which is well integrated into established global production and logistics networks. Even as the PRD becomes more expensive, Guangdong’s global comparative advantage may be far from exhausted.

June 2012

Topics
Footnotes
    Related Articles

     Join our mailing list 

    Keep informed about events, articles & latest publications from Foreign Policy Centre

    JOIN