Guangdong seeks to upgrade its way out of slump

Guangdong, the economic powerhouse of South China, has taken a beating from the global financial crisis, lending all the more urgency to efforts to upgrade the province's industrial structure.

In the reform and development guidelines for the Pearl River Delta for 2008-20, a blueprint unveiled by the National Development and Reform Commission (NDRC) in January, the delta will be a new testing ground for China's economic reforms.

The plan also sets a goal to build the delta into a leading global manufacturing and service industry base.

"The government-initiated plan, in addition to the pressure exerted by the global financial turmoil, has accelerated the tempo of industrial upgradation in the province," said Chen Guanghan, a professor with Guangzhou-based Sun Yat-Sen University.

The ongoing financial turmoil has exacted a heavy toll on the Pearl River Delta, which means that the region's low-end manufacturing-reliant development model has come to an end and it has to recast itself by embracing technological innovation to gain a new competitive edge.

In spite of the global economic slowdown, Guangdong's hi-tech product output increased 15 percent to 2.2 trillion yuan in 2008, accounting for 30 percent of its total industrial output. Exports of hi-tech products posted an annualized growth rate of 11.5 percent, amounting to $148.6 billion last year, accounting for 36.8 percent of its total export value.

"As the delta region's per capita GDP reached $9,000 in 2008, the service industry should play a bigger role in its total output, and the manufacturing sector should also climb up the value chain," Chen was quoted as saying by Shanghai Securities News.

Guangdong province mapped out the "dual transfer" strategy last year to help the delta region focus on hi-tech industries and achieve more balanced economic growth throughout the province. The strategy involves transferring labor-intensive manufacturing industries from the delta to the province's less-developed eastern, western and northern regions, and encouraging the workforce to move there.

The provincial government has pledged to spend 6 billion yuan between 2009 and 2012 to help establish a number of industrial parks in less-developed regions to accommodate enterprises moving from the Pearl River Delta, which are expected to provide employment to 379,000 rural workers.

On the other hand, the delta will seek closer cooperation with neighboring Hong Kong and Macao, as the NDRC plan aims to build the three regions into "a globally competitive" and "vigorous area in the Asia-Pacific" by 2020.

According to the plan, the economies of the three regions will be integrated by focusing on infrastructure construction, industrial development, technological innovation and improving living standards.

The construction of a bridge linking Hong Kong, Macao and Zhuhai in Guangdong will begin later this year, with the central government shelling out 5 billion yuan for the project.

Besides, the Pearl River Delta will also further open its market to Hong Kong-based businesses, especially from the financial and service sectors. A financial and hi-tech service development zone, which is under construction in Foshan, will serve as an important hub to strengthen Guangdong and Hong Kong's cooperation in the financial sector.

In addition, the State Council approved a trial program late last year allowing the renminbi to be used in trade deals between Guangdong and Hong Kong, Macao late last year, which will reduce traders' foreign exchange risks and strengthen the economic integration of the three regions.

Supporting exports

Due to sluggish demand in the European and US markets, Guangdong province's export growth slowed to 9.4 percent in 2008, down 12.8 percentage points year-on-year and 7.8 percentage points lower than the national average in 2008.

Most export-oriented enterprises' orders for 2009 shrank by 30 to 40 percent, while their operational costs surged 35 percent and overall profits fell 25 percent, according to the latest survey conducted by the province's department of foreign trade and economic cooperation.

Given the gloomy outlook for this year, the province has set the bottom line of its economic work as "to at least secure growth in both trade and foreign investment", said Wan Qingliang, vice-governor of Guangdong.

"We must make more efforts to explore emerging markets, such as ASEAN and Russia, to cushion the impact of weak demand in Europe and the US," Wan said.

In face of the global economic slowdown, the central and local governments announced a number of favorable policies for the export sector, which have given exporters a shot in the arm, Liang Yaowen, the province's director for foreign trade and economic cooperation was quoted as saying by China Business News.

The nation raised export tax rebates four times in 2008, which provided exporters in Guangdong with more than 20 billion yuan in new funds.

Besides, the provincial government also unveiled eight favorable tax policies at the beginning of this year, which are expected to reduce local exporters' tax burden to the tune of 3 billion yuan this year. It also plans to earmark 1.9 billion yuan to support the industrial upgradation of the manufacturing sector and restructure the export and import portfolios.

(China Daily 02/16/2009 page10)