Main challenges faced by Guangdong's economic development model

This chapter analyses the main competitiveness challenges for Guangdong. It starts with an analysis of trends in production capacity in the different sub-regions of the province highlighting an important industrial restructuring process, especially in the inner Pearl River Delta, with new drivers of productivity concentrated in some parts of the province. While the recent period signals recovery, these past trends have pointed out the need to climb the value chain and to reduce the strong reliance on exports by focusing more on the domestic demand. These challenges need to be addressed in the context of intensive internal competition in the higher value chain segment especially the Yangtze River Delta (YRD) where Shanghai is re-emerging as China’s principal metropolis. They also need to take into account the strong regional disparities that the Guangdong economic model has generated with 79% of the GDP produced by the PRD and 64% by the three largest metropolitan regions (GuangFo, Shenzhen and Dongguan). The second part of the chapter discusses the main structural weaknesses that should be addressed to move up the value chain and reduce territorial imbalances, including a lack of advanced human capital, insufficient innovation capacity, trade obstacles and limited accessibility in some parts of the province.