Page 46 - 2016_SpecialReport_web
P. 46
6 Special Report on the State of Business in South China
1. Introduction to South China
Region 2015 Minimum 2015 Minimum
Monthly Wage Hourly Wage
The term “South China” immediately brings to mind the
Pearl River Delta (PRD) - China’s manufacturing center and Shenzhen RMB2,030 RMB18.5
beating “economic heart.” Broadly defined as including nine cit-
ies in southeast Guangdong province (Guangzhou, Shenzhen, Guangzhou RMB1,895 RMB18.3
Dongguan, Foshan, Huizhou, Jiangmen, Zhaoqing, Zhong-
shan and Zhuhai), the PRD’s true centers are to be found in Zhuhai * RMB1,650 RMB15,8
Guangzhou (the provincial capital) and Shenzhen (China’s first
and most successful special economic zone). Dongguan RMB1,510 RMB14.4
To think of the PRD only in terms of these cities, however, Foshan RMB1,510 RMB14.4
would be to ignore the instrumental role in economic devel-
opment played by the special administrative regions (SARs) Zhongshan RMB1,510 RMB14.4
of Hong Kong and (to a lesser extent) Macau, with which the
cities of Guangdong have long leveraged their proximity. The Jiangmen RMB1,350 RMB13.3
Closer Economic Partnership Arrangements (CEPA) con-
cluded in 2003 between Mainland China and Hong Kong and Huizhou RMB1,350 RMB13.3
Macau, respectively, have phased out tariffs and trade barriers,
liberalized trade in services and boosted trade and investment Zhaoqing RMB1,350 RMB13.3
in Guangdong. As such, the term “Greater PRD” was coined to
refer to the PRD, Hong Kong and Macau as a group. *Zhuhai independently sets minimum wages
The more remote, less developed (and often more mountain- stantial but nevertheless decreasing productivity growth. This
ous) towns of Guangdong province and neighboring provinces has been a major driver behind the flight of labor-intensive in-
of Fujian, Hainan and the Guangxi Zhuang Autonomous Region dustries from China in recent years to lower-cost alternatives
are the final pieces of the South China puzzle. A series of eco- such as Vietnam. Other factors pulling investment away from
nomic and infrastructure-focused government policies have been the region include China’s increasing emphasis on the service
designed to better connect the Greater PRD and to improve its sector over manufacturing, as well as decreasing industrial land
links to these adjoining regions. availability in the PRD.
The PRD Today Despite this, and spurred by on-going processes of indus-
trialization, urbanization and marketization, the PRD remains
The PRD has long been considered the heart of high-tech home to a vibrant economy, which the government (at all lev-
China, with Shenzhen, Guangzhou and Dongguan (as well as els) is doing its best to reshape. To accomplish this, some lo-
Zhuhai and Huizhou) considered as centers for the manufac- cal governments are implementing stricter industry approval
ture of consumer electronics and other high-tech products. The measures, ranging from increased minimum registered capital
PRD hosts direct and indirect production arrangements for a thresholds (some raised as much as tenfold) to more stringent
wide variety of goods sold worldwide, offering both original criteria for total investment or output value per square meter
equipment manufacturing (OEM) and branded goods. The invested. Furthermore, local governments in more heavily-
Shenzhen Stock Exchange is the national leader for high-tech invested areas are increasingly refusing to approve investment
enterprises; China’s leading technology enterprises, including from enterprises in non-capital-intensive, low value-added or
Huawei, Tencent and ZTE, were all founded in Shenzhen. environmentally harmful industries, forcing such enterprises to
locate elsewhere in the PRD or further inland. Lastly, research
Yet the PRD is a region in transition. In recent years, low and development, with government support, is also increasing
labor costs (once the major attraction of the region) have been in the region. Together, these trends can be seen as indicative of
increasing rapidly. Minimum labor costs are one measure of a maturing economy.
this, with Shenzhen as a particularly illuminating example. The
city raised its minimum monthly wage by RMB 222 in March Future Outlook
2015, to RMB 2030, making it the highest nationwide . Many
other PRD cities raised their minimum wages in 2015 as well. “The Outline of the Plan for the Reform and Development of
the Pearl River Delta (2008-2020),” put forward by the National
Increasing labor costs stand in contrast to the region’s sub- Development and Reform Commission (NDRC), describes the
PRD region as an experimental area for scientific development
and calls for the creation of three super-metropolitan areas, re-
spectively, Guangzhou and Foshan, Hong Kong and Shenzhen,
and Macao and Zhuhai. Provided with greater autonomy, the
PRD is expected to be at the forefront of new economic pat-
46
1. Introduction to South China
Region 2015 Minimum 2015 Minimum
Monthly Wage Hourly Wage
The term “South China” immediately brings to mind the
Pearl River Delta (PRD) - China’s manufacturing center and Shenzhen RMB2,030 RMB18.5
beating “economic heart.” Broadly defined as including nine cit-
ies in southeast Guangdong province (Guangzhou, Shenzhen, Guangzhou RMB1,895 RMB18.3
Dongguan, Foshan, Huizhou, Jiangmen, Zhaoqing, Zhong-
shan and Zhuhai), the PRD’s true centers are to be found in Zhuhai * RMB1,650 RMB15,8
Guangzhou (the provincial capital) and Shenzhen (China’s first
and most successful special economic zone). Dongguan RMB1,510 RMB14.4
To think of the PRD only in terms of these cities, however, Foshan RMB1,510 RMB14.4
would be to ignore the instrumental role in economic devel-
opment played by the special administrative regions (SARs) Zhongshan RMB1,510 RMB14.4
of Hong Kong and (to a lesser extent) Macau, with which the
cities of Guangdong have long leveraged their proximity. The Jiangmen RMB1,350 RMB13.3
Closer Economic Partnership Arrangements (CEPA) con-
cluded in 2003 between Mainland China and Hong Kong and Huizhou RMB1,350 RMB13.3
Macau, respectively, have phased out tariffs and trade barriers,
liberalized trade in services and boosted trade and investment Zhaoqing RMB1,350 RMB13.3
in Guangdong. As such, the term “Greater PRD” was coined to
refer to the PRD, Hong Kong and Macau as a group. *Zhuhai independently sets minimum wages
The more remote, less developed (and often more mountain- stantial but nevertheless decreasing productivity growth. This
ous) towns of Guangdong province and neighboring provinces has been a major driver behind the flight of labor-intensive in-
of Fujian, Hainan and the Guangxi Zhuang Autonomous Region dustries from China in recent years to lower-cost alternatives
are the final pieces of the South China puzzle. A series of eco- such as Vietnam. Other factors pulling investment away from
nomic and infrastructure-focused government policies have been the region include China’s increasing emphasis on the service
designed to better connect the Greater PRD and to improve its sector over manufacturing, as well as decreasing industrial land
links to these adjoining regions. availability in the PRD.
The PRD Today Despite this, and spurred by on-going processes of indus-
trialization, urbanization and marketization, the PRD remains
The PRD has long been considered the heart of high-tech home to a vibrant economy, which the government (at all lev-
China, with Shenzhen, Guangzhou and Dongguan (as well as els) is doing its best to reshape. To accomplish this, some lo-
Zhuhai and Huizhou) considered as centers for the manufac- cal governments are implementing stricter industry approval
ture of consumer electronics and other high-tech products. The measures, ranging from increased minimum registered capital
PRD hosts direct and indirect production arrangements for a thresholds (some raised as much as tenfold) to more stringent
wide variety of goods sold worldwide, offering both original criteria for total investment or output value per square meter
equipment manufacturing (OEM) and branded goods. The invested. Furthermore, local governments in more heavily-
Shenzhen Stock Exchange is the national leader for high-tech invested areas are increasingly refusing to approve investment
enterprises; China’s leading technology enterprises, including from enterprises in non-capital-intensive, low value-added or
Huawei, Tencent and ZTE, were all founded in Shenzhen. environmentally harmful industries, forcing such enterprises to
locate elsewhere in the PRD or further inland. Lastly, research
Yet the PRD is a region in transition. In recent years, low and development, with government support, is also increasing
labor costs (once the major attraction of the region) have been in the region. Together, these trends can be seen as indicative of
increasing rapidly. Minimum labor costs are one measure of a maturing economy.
this, with Shenzhen as a particularly illuminating example. The
city raised its minimum monthly wage by RMB 222 in March Future Outlook
2015, to RMB 2030, making it the highest nationwide . Many
other PRD cities raised their minimum wages in 2015 as well. “The Outline of the Plan for the Reform and Development of
the Pearl River Delta (2008-2020),” put forward by the National
Increasing labor costs stand in contrast to the region’s sub- Development and Reform Commission (NDRC), describes the
PRD region as an experimental area for scientific development
and calls for the creation of three super-metropolitan areas, re-
spectively, Guangzhou and Foshan, Hong Kong and Shenzhen,
and Macao and Zhuhai. Provided with greater autonomy, the
PRD is expected to be at the forefront of new economic pat-
46
