Innovation is the name of the game

Dongguan used to rely heavily on the processing trade to keep up trade growth, because the city has been one of the world's key manufacturing bases over the past 20 years, thanks to a vast number of labor-intensive and processing trade businesses.

The city has now developed more than 4,000 high-tech businesses, with the value of high-tech goods produced worth 340 billion yuan in 2012, sources with the Dongguan Science and Technology Bureau say.

The city still has about 500,000 small and medium-sized manufacturers, mostly engaged in the processing trade, Xian says. "They are facing a tough business situation because of increased production and labor costs and lower demand internationally. But a growing number have realized the importance of increasing investment innovation and upgrading technology."

For example, more than 200 processing trade companies in the city have opened research and development facilities, hoping to successfully transform into ODM and OBM manufacturers, Xian says.

According to a survey of the top 500 export-oriented companies in Dongguan, 31.6 percent plan to boost investment in technology research, and 32.1 percent will introduce and buy more advanced production facilities this year. "Traditional businesses such as those making shoes, garments and toys are particularly urged to upgrade their products by using more innovation," Xian says.

Dongguan still has more than 10,000 processing trade businesses, which contributed about 70 percent of the city's total trade, the local foreign trade and economic cooperation authority says.

Last year the value of imports and exports in the processing trade was worth $112 billion, the authority says.

Dongguan's transformation in foreign trade has been in line with Guangdong province's plan to shift its economic growth model from simply relying on trade to more domestic consumption and investment.

The provincial authority expects its total trade to expand only 1 percent this year, a sign that experts say represents the province's determination to change its economic growth model. "We have made a greater effort to transform and optimize the foreign trade structure in the past few years to ensure that trade grows stably," Zhu Xiaodan, governor of Guangdong, says.