Page 42 - 2015_SpecialReport_web
P. 42
5 Special Report on the State of Business in South China
1. Introduction to South China
Region 2014 Minimum 2014 Minimum
Monthly Wage Hourly Wage
e term “South China” immediately brings to mind
the Pearl River Delta (PRD) - China’s manufacturing center Shenzhen RMB1,808 RMB16.5
and beating “economic heart.” Broadly de ned as including
nine cities in southeast Guangdong province (Guangzhou, Guangzhou RMB1,550 RMB15
Shenzhen, Dongguan, Foshan, Huizhou, Jiangmen,
Zhaoqing, Zhongshan and Zhuhai), the PRD’s true centers Zhuhai * RMB1,380 RMB13.2
are to be found in Guangzhou (the provincial capital) and
Shenzhen (China’s rst and most successful special economic Dongguan RMB1,310 RMB12.5
zone).
Foshan RMB1,310 RMB12.5
To think of the PRD only in terms of these cities, however,
would be to ignore the instrumental role in economic devel- Zhongshan RMB1,310 RMB12.5
opment played by the special administrative regions (SARs)
of Hong Kong and (to a lesser extent) Macau, with which Jiangmen RMB1,130 RMB11.1
the cities of Guangdong have long leveraged their proxim-
ity. e Closer Economic Partnership Arrangements (CEPA) Huizhou RMB1,130 RMB11.1
concluded in 2003 between Mainland China and Hong Kong
and Macau, respectively, have phased out tari s and trade bar- Zhaoqing RMB1,130 RMB11.1
riers, liberalized trade in services and boosted trade and in-
vestment in Guangdong. As such, the term “Greater PRD” *Zhuhai independently sets minimum wages
was coined to refer to the PRD, Hong Kong and Macau as
a group. e city raised its minimum monthly wage by RMB 208 in
February 2014, to RMB 1808, making it the second highest
e more remote, less developed (and often more moun- nationwide (after Shanghai). Many other PRD cities raised
tainous) towns of Guangdong province and neighboring their minimum wages in 2014 as well.
provinces of Fujian, Hainan and the Guangxi Zhuang Auton-
omous Region are the nal pieces of the South China puzzle. Increasing labor costs stand in contrast to the region’s sub-
A series of economic and infrastructure-focused government stantial but nevertheless decreasing productivity growth. is
policies have been designed to better connect the Greater has been a major driver behind the ight of labor-intensive
PRD and to improve its links to these adjoining regions. industries from China in recent years to lower-cost alterna-
tives such as Vietnam. Other factors pulling investment away
The PRD Today from the region include China’s increasing emphasis on the
service sector over manufacturing, as well as decreasing indus-
e PRD has long been considered the heart of high-tech trial land availability in the PRD.
China, with Shenzhen, Guangzhou and Dongguan (as well
as Zhuhai and Huizhou) considered as centers for the manu- Despite this, and spurred by on-going processes of in-
facture of consumer electronics and other high-tech prod- dustrialization, urbanization and marketization, the PRD
ucts. e PRD hosts direct and indirect production arrange- remains home to a vibrant economy, which the government
ments for a wide variety of goods sold worldwide, o ering (at all levels) is doing its best to reshape. To accomplish this,
both original equipment manufacturing (OEM) and branded some local governments are implementing stricter industry
goods. e Shenzhen Stock Exchange is the national leader approval measures, ranging from increased minimum regis-
for high-tech enterprises; China’s leading technology enter- tered capital thresholds (some raised as much as tenfold) to
prises, including Huawei, Tencent and ZTE, were all founded more stringent criteria for total investment or output value
in Shenzhen. per square meter invested. As well, local governments in more
heavily-invested areas are increasingly refusing to approve in-
Yet the PRD is a region in transition. In recent years, low vestment from enterprises in non-capital-intensive, low value-
labor costs (once the major attraction of the region) have been added or environmentally harmful industries, forcing such
increasing rapidly. Minimum labor costs are one measure of enterprises to locate elsewhere in the PRD or further inland.
this, with Shenzhen as a particularly illuminating example. Lastly, research and development, with government support,
is also increasing in the region. Taken together, these trends
can be seen as indicative of a maturing economy.
Future Outlook
“ e Outline of the Plan for the Reform and Development
of the Pearl River Delta (2008-2020),” put forward by the
42
1. Introduction to South China
Region 2014 Minimum 2014 Minimum
Monthly Wage Hourly Wage
e term “South China” immediately brings to mind
the Pearl River Delta (PRD) - China’s manufacturing center Shenzhen RMB1,808 RMB16.5
and beating “economic heart.” Broadly de ned as including
nine cities in southeast Guangdong province (Guangzhou, Guangzhou RMB1,550 RMB15
Shenzhen, Dongguan, Foshan, Huizhou, Jiangmen,
Zhaoqing, Zhongshan and Zhuhai), the PRD’s true centers Zhuhai * RMB1,380 RMB13.2
are to be found in Guangzhou (the provincial capital) and
Shenzhen (China’s rst and most successful special economic Dongguan RMB1,310 RMB12.5
zone).
Foshan RMB1,310 RMB12.5
To think of the PRD only in terms of these cities, however,
would be to ignore the instrumental role in economic devel- Zhongshan RMB1,310 RMB12.5
opment played by the special administrative regions (SARs)
of Hong Kong and (to a lesser extent) Macau, with which Jiangmen RMB1,130 RMB11.1
the cities of Guangdong have long leveraged their proxim-
ity. e Closer Economic Partnership Arrangements (CEPA) Huizhou RMB1,130 RMB11.1
concluded in 2003 between Mainland China and Hong Kong
and Macau, respectively, have phased out tari s and trade bar- Zhaoqing RMB1,130 RMB11.1
riers, liberalized trade in services and boosted trade and in-
vestment in Guangdong. As such, the term “Greater PRD” *Zhuhai independently sets minimum wages
was coined to refer to the PRD, Hong Kong and Macau as
a group. e city raised its minimum monthly wage by RMB 208 in
February 2014, to RMB 1808, making it the second highest
e more remote, less developed (and often more moun- nationwide (after Shanghai). Many other PRD cities raised
tainous) towns of Guangdong province and neighboring their minimum wages in 2014 as well.
provinces of Fujian, Hainan and the Guangxi Zhuang Auton-
omous Region are the nal pieces of the South China puzzle. Increasing labor costs stand in contrast to the region’s sub-
A series of economic and infrastructure-focused government stantial but nevertheless decreasing productivity growth. is
policies have been designed to better connect the Greater has been a major driver behind the ight of labor-intensive
PRD and to improve its links to these adjoining regions. industries from China in recent years to lower-cost alterna-
tives such as Vietnam. Other factors pulling investment away
The PRD Today from the region include China’s increasing emphasis on the
service sector over manufacturing, as well as decreasing indus-
e PRD has long been considered the heart of high-tech trial land availability in the PRD.
China, with Shenzhen, Guangzhou and Dongguan (as well
as Zhuhai and Huizhou) considered as centers for the manu- Despite this, and spurred by on-going processes of in-
facture of consumer electronics and other high-tech prod- dustrialization, urbanization and marketization, the PRD
ucts. e PRD hosts direct and indirect production arrange- remains home to a vibrant economy, which the government
ments for a wide variety of goods sold worldwide, o ering (at all levels) is doing its best to reshape. To accomplish this,
both original equipment manufacturing (OEM) and branded some local governments are implementing stricter industry
goods. e Shenzhen Stock Exchange is the national leader approval measures, ranging from increased minimum regis-
for high-tech enterprises; China’s leading technology enter- tered capital thresholds (some raised as much as tenfold) to
prises, including Huawei, Tencent and ZTE, were all founded more stringent criteria for total investment or output value
in Shenzhen. per square meter invested. As well, local governments in more
heavily-invested areas are increasingly refusing to approve in-
Yet the PRD is a region in transition. In recent years, low vestment from enterprises in non-capital-intensive, low value-
labor costs (once the major attraction of the region) have been added or environmentally harmful industries, forcing such
increasing rapidly. Minimum labor costs are one measure of enterprises to locate elsewhere in the PRD or further inland.
this, with Shenzhen as a particularly illuminating example. Lastly, research and development, with government support,
is also increasing in the region. Taken together, these trends
can be seen as indicative of a maturing economy.
Future Outlook
“ e Outline of the Plan for the Reform and Development
of the Pearl River Delta (2008-2020),” put forward by the
42
