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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 most populous province (95.4 million inhabitants, i.e. around the size of Mexico and Japan) and the richest economy of China (equal to 12% of the national GDP and almost equivalent to the total GDP of Australia and Turkey)
- One of the highest output growth in China over the last thirty years, thanks to an externally oriented economic model developed around its pilot position in the Open Door Policy
- The main receiver of FDI in the country (25% of China’s total) and the largest exporter of goods (32% of China's total over 1998-2008), i.e. Guangdong is a larger exporter than Russia, Spain, Mexico, Brazil, India, Indonesia
- Industrial mix based on low value added manufacturing and export processing increasingly challenged by new competitors from China and abroad
- An economic development model that has generated strong internal regional disparities (i.e. the highest in China with 83% provincial GDP concentrated in the Pearl River Delta (PRD) region)
- Deep environmental concerns: high energy consumption (3rd highest in China, tripled over 1997-2007), extensive urban sprawl (300% increase over 1990-2000), 35.1% of river segments are polluted, and high vulnerability to climate change, particularly the low-lying delta areas
Guangdong as compared to OECD Countries: GDP, PPP, 2008
Source: OECD (2009), National Accounts of OECD Countries, OECD Publishing, Paris; World Development Indicators database, http://data.worldbank.org.
Guangdong as compared to OECD Countries: Export of Goods, 1990-2007
Source: OECD (2009), OECD Factbook 2009, OECD Publishing, Paris; National Bureau of Statistics of China database, www.stats.gov.cn/english/statisticaldata/yearlydata; CEIC database, www.ceicdata.com.
Guangdong as compared to OECD Countries: FDI inflow, 2005-2008
Source: OECD International Direct Investment (database); CEIC database, www.ceicdata.com, adopted from Chinese Ministry of Commerce.
- Slow productivity growth, lack of advanced human capital and weak innovation. How to move up quickly in the value chain?
- The Yangtze River Delta region has become a serious internal competitor with stronger specialisation in higher value added activities: How to address regional disparities without constraining the PRD as a motor of growth?
- How to overcome implementation obstacles, and address environmental challenges more systematically?
- How to adapt governance and planning in a mega-city region of 52 million inhabitants that has witnessed an unprecedented urbanisation and industrial process?
- Capitalise on soft assets (innovation and skills), develop regional innovation systems, and deepen partnerships with Hong Kong, China
- Focus first on the outer area of the PRD in the Double Relocation Programme
- Further strengthen endogenous assets in non PRD region, including human capital (education and higher public services), and develop a regional approach to industrial development (focussing on existing local specialisation)
- Improve coordination and financing for environmental quality in PRD cities and across Guangdong; develop a green growth strategy for the PRD
- Introduce fine-tuned planning instruments to deal with spatial development issues (e.g. urban growth boundaries, and density targets), foster equity and stimulate the transition to a high value added economy
Chapter 1. Socio-economic trends in Guangdong
This chapter provides an overview of demographic and economic trends of the province within its national context and as compared with OECD member countries. The first section highlights the rapid and deep urbanisation process of the last three decades which is unprecedented in human history. The second part of this chapter highlights the position of Guangdong as the largest economy of China.
Chapter 2. 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. 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.
Chapter 3. Strategies and policies for regional competitiveness in Guangdong
This chapter first reviews the policy instruments implemented since the introduction of the “Open Door” policy, as well as the new strategy from central and the provincial governments. The implementation of this strategy is based on two main pillars, upgrading the industrial base and the “Double Relocation” policy. Although it represents an ambitious to both “excellence” and “harmony”, some of the instruments used for implementing this strategy have demonstrated their limits in OECD member countries. The last section discusses how the current policy framework in Guangdong could be adapted to foster a regional development approach.
Chapter 4. Environmental and climate change challenges in Guangdong
This chapter analyses Guangdong's main environmental and climate change challenges, as well as existing and potential policy responses. The first section of this chapter analyses the links between economic growth and environmental degradation in the Greater Pearl River Delta, with particular focus on energy consumption and shortages, water and air pollution, and greenhouse gas emissions. The second section explores the potential impacts of climate change on Guangdong and the economic losses associated with inaction. The third section discusses existing policy responses, as well as implementation challenges, and areas in which action on environmental priorities could be expanded.
Chapter 5. Governance in Guangdong
This chapter provides an overview of the main institutions in Guangdong and their responsibilities in the first section. In order to make a strong transition to a high value-added economy, Guangdong will have to find a new balance between inter-city competition and co-operation, as is argued in the second section, with more attention to stimulating co-operation mechanisms, including cross-border co-operation. The effectiveness of planning, assessed in the third section, is currently constrained by the limited extent to which it reflects market developments, weak co-ordination between levels of governments and monitoring mechanisms that could be improved.
Readers can access the full version of OECD Territorial Reviews: Guangdong China by choosing from the following options:
For further information you can contact Xiao.Wang@oecd.org or Lamia.KAMAL-CHAOUI@oecd.org, or visit the urban policy webpage at www.oecd.org/gov/cities.
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