Page 434 - 2018 White Paper on the Business Environment in China
P. 434
8 White Paper on the Business Environment in China
3.1 Introduction to South China
The term “South China” immediately brings equipment manufacturing (OEM) and branded goods.
to mind the Pearl River Delta (PRD) - The Shenzhen Stock Exchange is the national leader
China’s manufacturing center and beating “economic for high-tech enterprises – China’s leading technology
heart.” Broadly defined as including nine cities in enterprises, including Huawei, Tencent and ZTE, were
southeast Guangdong province (Guangzhou, Shenzhen, all founded in Shenzhen.
Dongguan, Foshan, Huizhou, Jiangmen, Zhaoqing,
Zhongshan and Zhuhai), the PRD’s true centers are to Yet the PRD is a region in transition. In recent years,
be found in Guangzhou (the provincial capital) and low labor costs (once the major attraction of the region)
Shenzhen (China’s first and most successful special have been increasing rapidly. Minimum labor costs
economic zone). are one measure of this, with Shenzhen a particularly
illuminating example. The city raised its minimum
To think of the PRD only in terms of these cities, monthly wage by RMB100 in April 2017 to RMB2,130,
however, would be to ignore the instrumental role making it the second highest nationwide at the time.
in economic development played by the special
administrative regions (SARs) of Hong Kong and, to a Increasing labor costs stand in contrast to the region’s
lesser extent, Macao, with which the cities of Guangdong substantial but nevertheless decreasing productivity
and Shenzhen have long leveraged their proximity. growth. This has been a major driver behind the flight of
The Closer Economic Partnership Arrangements (CEPA) labor-intensive industries from China in recent years to
concluded in 2003 between Mainland China and Hong lower-cost alternatives, such as Vietnam. Other factors
Kong and Macau, respectively, have phased out tariffs pushing investment away from the region include
and trade barriers, liberalized trade in services, and China’s increasing emphasis on the service sector over
boosted trade and investment in Guangdong. As such, manufacturing, as well as decreasing industrial land
the term “Greater PRD” was coined to refer to the PRD, availability in the PRD.
Hong Kong and Macau as a group.
Realizing the harm of rapidly rising labor costs to its
The more remote, less developed (and often more economy, in February 2016, the Guangdong provincial
mountainous) towns of Guangdong province, along government announced that it would maintain the same
with the neighboring provinces of Fujian, Hainan and minimum wage level as 2015 for both 2016 and 2017.
the Guangxi Zhuang Autonomous Region, are the final
pieces of the South China puzzle. A series of economic Despite this, and spurred by on-going processes of
and infrastructure-focused government policies have industrialization, urbanization and marketization, the
been designed to better connect the Greater PRD and to PRD remains home to a vibrant economy, which the
improve its links to these adjoining regions. government (at all levels) is doing its best to reshape.
To accomplish this, some local governments are
The PRD Today implementing stricter approval measures for certain
industries, ranging from increased minimum registered
The PRD has long been considered the heart of capital thresholds (some raised as much as tenfold)
high-tech China, with Shenzhen, Guangzhou and to more stringent criteria for total investment or
Dongguan (as well as Zhuhai and Huizhou) considered output value per square meter invested. Furthermore,
centers for the manufacture of consumer electronics local governments in more heavily-invested areas
and other high-tech products. The PRD hosts direct are increasingly refusing to approve investment
and indirect production arrangements for a wide from enterprises in non-capital-intensive, low value-
variety of goods sold worldwide, offering both original added or environmentally harmful industries, forcing
434
3.1 Introduction to South China
The term “South China” immediately brings equipment manufacturing (OEM) and branded goods.
to mind the Pearl River Delta (PRD) - The Shenzhen Stock Exchange is the national leader
China’s manufacturing center and beating “economic for high-tech enterprises – China’s leading technology
heart.” Broadly defined as including nine cities in enterprises, including Huawei, Tencent and ZTE, were
southeast Guangdong province (Guangzhou, Shenzhen, all founded in Shenzhen.
Dongguan, Foshan, Huizhou, Jiangmen, Zhaoqing,
Zhongshan and Zhuhai), the PRD’s true centers are to Yet the PRD is a region in transition. In recent years,
be found in Guangzhou (the provincial capital) and low labor costs (once the major attraction of the region)
Shenzhen (China’s first and most successful special have been increasing rapidly. Minimum labor costs
economic zone). are one measure of this, with Shenzhen a particularly
illuminating example. The city raised its minimum
To think of the PRD only in terms of these cities, monthly wage by RMB100 in April 2017 to RMB2,130,
however, would be to ignore the instrumental role making it the second highest nationwide at the time.
in economic development played by the special
administrative regions (SARs) of Hong Kong and, to a Increasing labor costs stand in contrast to the region’s
lesser extent, Macao, with which the cities of Guangdong substantial but nevertheless decreasing productivity
and Shenzhen have long leveraged their proximity. growth. This has been a major driver behind the flight of
The Closer Economic Partnership Arrangements (CEPA) labor-intensive industries from China in recent years to
concluded in 2003 between Mainland China and Hong lower-cost alternatives, such as Vietnam. Other factors
Kong and Macau, respectively, have phased out tariffs pushing investment away from the region include
and trade barriers, liberalized trade in services, and China’s increasing emphasis on the service sector over
boosted trade and investment in Guangdong. As such, manufacturing, as well as decreasing industrial land
the term “Greater PRD” was coined to refer to the PRD, availability in the PRD.
Hong Kong and Macau as a group.
Realizing the harm of rapidly rising labor costs to its
The more remote, less developed (and often more economy, in February 2016, the Guangdong provincial
mountainous) towns of Guangdong province, along government announced that it would maintain the same
with the neighboring provinces of Fujian, Hainan and minimum wage level as 2015 for both 2016 and 2017.
the Guangxi Zhuang Autonomous Region, are the final
pieces of the South China puzzle. A series of economic Despite this, and spurred by on-going processes of
and infrastructure-focused government policies have industrialization, urbanization and marketization, the
been designed to better connect the Greater PRD and to PRD remains home to a vibrant economy, which the
improve its links to these adjoining regions. government (at all levels) is doing its best to reshape.
To accomplish this, some local governments are
The PRD Today implementing stricter approval measures for certain
industries, ranging from increased minimum registered
The PRD has long been considered the heart of capital thresholds (some raised as much as tenfold)
high-tech China, with Shenzhen, Guangzhou and to more stringent criteria for total investment or
Dongguan (as well as Zhuhai and Huizhou) considered output value per square meter invested. Furthermore,
centers for the manufacture of consumer electronics local governments in more heavily-invested areas
and other high-tech products. The PRD hosts direct are increasingly refusing to approve investment
and indirect production arrangements for a wide from enterprises in non-capital-intensive, low value-
variety of goods sold worldwide, offering both original added or environmentally harmful industries, forcing
434
