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development in China – the growth is slowing down but Despite government support, however, Vettoretti
the quality and value of the growth is upgraded,” Lu said. cautioned that ultimately businesses must adapt to
be successful in the long-run amid China’s changing
With China’s economy in transition, Vettoretti said that economic landscape. “Businesses need to become leaner
GDP growth is no longer the most important indicator and cut unnecessary costs, and restructure where they
to judge performance. “China knows it has to change its need to. As margins are shrinking, many businesses are
economic model – even more so in Guangdong province embracing a China+1 strategy to both lower costs and
– so slower growth is acceptable,” he said. “They know risk exposure.”
that they can no longer rely on low-value, polluting
industries, and the transition process started a long The PRD and YRD’s struggles to hit their growth
time ago. Some traditional sectors are still thriving by targets simultaneously show where China’s economy is
adopting technology, going lean, and roboticizing.” struggling and where it is evolving. As two of China’s
most developed regions, the PRD and YRD are faced with
Much of the damage from the slowdown is being the difficult task of shedding the traditional parts of their
felt in specific sectors, Vettoretti noted, while others economies that have become untenable. Yet, the maturity
continue to grow at a strong rate. Medical, new materials, and complexity of these economies may also make them
education, automotive suppliers, AI, and Asia-bound tech the best-positioned regional economies in China to
are some of the industries that Vettoretti sees succeeding transition to the next stage of economic development –
on the back of strong local and regional demand. one driven by services, technology, and efficiency.
Still, he cautioned that even where sales are healthy, Although GDP growth in and of itself may not be the
“margins across industries are trending down.” Lu said most accurate statistic to describe opportunities for
that this trend can be seen using indicators outside of foreign investment, slower growth is a reality of China’s
official growth statistics. “In 2018, more than 10 listed economy in transition. “Guangdong has always been
companies in Guangdong reported financial losses of over amongst the first provinces to face the brunt of economic
RMB 1 billion,” she said. difficulties given the nature of the region,” Vettoretti
observed. “But it has also been the first at engineering
In response to slowing growth, Vettoretti said regional new ways around this.”■
governments across China are introducing an array of
policies to lower costs for businesses, such as energy cost This article was published by China Briefing, which is produced by
subsidies, social security cost reductions, and industry- Dezan Shira & Associates. The firm assists foreign investors throughout
specific incentives. And in the longer term, the PRD and Asia from offices across the world, including in in China, Hong Kong,
YRD’s ambitious regional integration plans could spring Vietnam, Singapore, India, and Russia.
new life into the economies of both areas.
5 AmCham South China
development in China – the growth is slowing down but Despite government support, however, Vettoretti
the quality and value of the growth is upgraded,” Lu said. cautioned that ultimately businesses must adapt to
be successful in the long-run amid China’s changing
With China’s economy in transition, Vettoretti said that economic landscape. “Businesses need to become leaner
GDP growth is no longer the most important indicator and cut unnecessary costs, and restructure where they
to judge performance. “China knows it has to change its need to. As margins are shrinking, many businesses are
economic model – even more so in Guangdong province embracing a China+1 strategy to both lower costs and
– so slower growth is acceptable,” he said. “They know risk exposure.”
that they can no longer rely on low-value, polluting
industries, and the transition process started a long The PRD and YRD’s struggles to hit their growth
time ago. Some traditional sectors are still thriving by targets simultaneously show where China’s economy is
adopting technology, going lean, and roboticizing.” struggling and where it is evolving. As two of China’s
most developed regions, the PRD and YRD are faced with
Much of the damage from the slowdown is being the difficult task of shedding the traditional parts of their
felt in specific sectors, Vettoretti noted, while others economies that have become untenable. Yet, the maturity
continue to grow at a strong rate. Medical, new materials, and complexity of these economies may also make them
education, automotive suppliers, AI, and Asia-bound tech the best-positioned regional economies in China to
are some of the industries that Vettoretti sees succeeding transition to the next stage of economic development –
on the back of strong local and regional demand. one driven by services, technology, and efficiency.
Still, he cautioned that even where sales are healthy, Although GDP growth in and of itself may not be the
“margins across industries are trending down.” Lu said most accurate statistic to describe opportunities for
that this trend can be seen using indicators outside of foreign investment, slower growth is a reality of China’s
official growth statistics. “In 2018, more than 10 listed economy in transition. “Guangdong has always been
companies in Guangdong reported financial losses of over amongst the first provinces to face the brunt of economic
RMB 1 billion,” she said. difficulties given the nature of the region,” Vettoretti
observed. “But it has also been the first at engineering
In response to slowing growth, Vettoretti said regional new ways around this.”■
governments across China are introducing an array of
policies to lower costs for businesses, such as energy cost This article was published by China Briefing, which is produced by
subsidies, social security cost reductions, and industry- Dezan Shira & Associates. The firm assists foreign investors throughout
specific incentives. And in the longer term, the PRD and Asia from offices across the world, including in in China, Hong Kong,
YRD’s ambitious regional integration plans could spring Vietnam, Singapore, India, and Russia.
new life into the economies of both areas.
5 AmCham South China
