OECD Territorial Reviews: Guangdong, China 2010

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Located on the southern coast of China, Guangdong is the country’s most populous and rich province. It has 95.4 million inhabitants and provides one-eighth of the national GDP. A key development feature of Guangdong has been “processing trade”, which has allowed companies to profit from importing materials, assembling goods and exporting them via Hong Kong, China.

The recent economic crisis has had a strong impact on the province, although Guangdong also faces in-depth structural problems. Growing labour costs and strain on land availability have increasingly challenged the province’s traditional model of development, as have new competitors in China and abroad. Meanwhile, regional disparities within the province have increased, with a high concentration of economic activities and foreign direct investment in the Pearl River Delta area, an agglomeration of nine prefectures of 47.7 million inhabitants that represents 79.4% of the province’s total GDP.

This review assesses Guangdong’s current approach to economic development. The province is focusing on industrial policies primarily aimed at heavy manufacturing industries (e.g. automobile, shipbuilding, petrochemicals) and supported by investment in hard infrastructure transport projects and energy supply, along with the implementation of the “Double Relocation” policies intended to move lower value-added factories to lagging regions through incentive mechanisms like industrial parks.

The review discusses how some principles of the OECD regional paradigm could help Guangdong. It also addresses the huge environmental challenges that the province is facing and explores the opportunity for developing a green growth strategy. Strategies to improve Guangdong’s governance are analysed as well, with particular attention paid to co-ordination issues within the Pearl River Delta.

The Territorial Review of Guangdong is integrated into a series of thematic reviews on regions undertaken by the OECD Territorial Development Policy Committee. The overall aim of these case studies is to draw and disseminate horizontal policy recommendations for regional and national governments.





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.


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