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5 White Paper on the Business Environment in China
3.1 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 Zhongshan RMB1,310 RMB12.5
development played by the special administrative regions
(SARs) of Hong Kong and (to a lesser extent) Macau, with Jiangmen RMB1,130 RMB11.1
which the cities of Guangdong have long leveraged their
proximity. e Closer Economic Partnership Arrangements Huizhou RMB1,130 RMB11.1
(CEPA) concluded in 2003 between Mainland China and
Hong Kong and Macau, respectively, have phased out tari s Zhaoqing RMB1,130 RMB11.1
and trade barriers, liberalized trade in services and boosted
trade and investment in Guangdong. As such, the term *Zhuhai independently sets minimum wages
“Greater PRD” 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 nationwide (after Shanghai). Many other PRD cities raised
mountainous) towns of Guangdong province and their minimum wages in 2014 as well.
neighboring provinces of Fujian, Hainan and the Guangxi
Zhuang Autonomous Region are the nal pieces of the South Increasing labor costs stand in contrast to the region’s
China puzzle. A series of economic and infrastructure-focused substantial but nevertheless decreasing productivity growth.
government policies have been designed to better connect
the Greater PRD and to improve its links to these adjoining is has been a major driver behind the ight of labor-
regions. intensive industries from China in recent years to lower-cost
alternatives such as Vietnam. Other factors pulling investment
The PRD Today away from the region include China’s increasing emphasis on
the service sector over manufacturing, as well as decreasing
e PRD has long been considered the heart of high- industrial land availability in the PRD.
tech China, with Shenzhen, Guangzhou and Dongguan (as
well as Zhuhai and Huizhou) considered as centers for the Despite this, and spurred by on-going processes of
manufacture of consumer electronics and other high-tech industrialization, urbanization and marketization, the PRD
products. e PRD hosts direct and indirect production remains home to a vibrant economy, which the government
arrangements for a wide variety of goods sold worldwide, (at all levels) is doing its best to reshape. To accomplish this,
o ering both original equipment manufacturing (OEM) and some local governments are implementing stricter industry
branded goods. e Shenzhen Stock Exchange is the national approval measures, ranging from increased minimum
leader for high-tech enterprises; China’s leading technology registered capital thresholds (some raised as much as tenfold)
enterprises, including Huawei, Tencent and ZTE, were all to more stringent criteria for total investment or output value
founded in Shenzhen. per square meter invested. As well, local governments in more
heavily-invested areas are increasingly refusing to approve
Yet the PRD is a region in transition. In recent years, low investment from enterprises in non-capital-intensive, low
labor costs (once the major attraction of the region) have been value-added or environmentally harmful industries, forcing
increasing rapidly. Minimum labor costs are one measure of such enterprises to locate elsewhere in the PRD or further
this, with Shenzhen as a particularly illuminating example. inland. 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
National Development and Reform Commission (NDRC),
234
3.1 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 Zhongshan RMB1,310 RMB12.5
development played by the special administrative regions
(SARs) of Hong Kong and (to a lesser extent) Macau, with Jiangmen RMB1,130 RMB11.1
which the cities of Guangdong have long leveraged their
proximity. e Closer Economic Partnership Arrangements Huizhou RMB1,130 RMB11.1
(CEPA) concluded in 2003 between Mainland China and
Hong Kong and Macau, respectively, have phased out tari s Zhaoqing RMB1,130 RMB11.1
and trade barriers, liberalized trade in services and boosted
trade and investment in Guangdong. As such, the term *Zhuhai independently sets minimum wages
“Greater PRD” 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 nationwide (after Shanghai). Many other PRD cities raised
mountainous) towns of Guangdong province and their minimum wages in 2014 as well.
neighboring provinces of Fujian, Hainan and the Guangxi
Zhuang Autonomous Region are the nal pieces of the South Increasing labor costs stand in contrast to the region’s
China puzzle. A series of economic and infrastructure-focused substantial but nevertheless decreasing productivity growth.
government policies have been designed to better connect
the Greater PRD and to improve its links to these adjoining is has been a major driver behind the ight of labor-
regions. intensive industries from China in recent years to lower-cost
alternatives such as Vietnam. Other factors pulling investment
The PRD Today away from the region include China’s increasing emphasis on
the service sector over manufacturing, as well as decreasing
e PRD has long been considered the heart of high- industrial land availability in the PRD.
tech China, with Shenzhen, Guangzhou and Dongguan (as
well as Zhuhai and Huizhou) considered as centers for the Despite this, and spurred by on-going processes of
manufacture of consumer electronics and other high-tech industrialization, urbanization and marketization, the PRD
products. e PRD hosts direct and indirect production remains home to a vibrant economy, which the government
arrangements for a wide variety of goods sold worldwide, (at all levels) is doing its best to reshape. To accomplish this,
o ering both original equipment manufacturing (OEM) and some local governments are implementing stricter industry
branded goods. e Shenzhen Stock Exchange is the national approval measures, ranging from increased minimum
leader for high-tech enterprises; China’s leading technology registered capital thresholds (some raised as much as tenfold)
enterprises, including Huawei, Tencent and ZTE, were all to more stringent criteria for total investment or output value
founded in Shenzhen. per square meter invested. As well, local governments in more
heavily-invested areas are increasingly refusing to approve
Yet the PRD is a region in transition. In recent years, low investment from enterprises in non-capital-intensive, low
labor costs (once the major attraction of the region) have been value-added or environmentally harmful industries, forcing
increasing rapidly. Minimum labor costs are one measure of such enterprises to locate elsewhere in the PRD or further
this, with Shenzhen as a particularly illuminating example. inland. 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
National Development and Reform Commission (NDRC),
234
