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Province Introduction of China: Guangdong

Published: 01 Apr 2009 18:13:00 PST

Key Information

Introduction
Guangdong is located at the south end of Mainland China, with a coastline of about 3,368km and a land area that ranks 15th in the country. The Pearl River, which is the 3rd largest river in China, flows through Guangdong and forms a delta region. It is economically comparable to the Yangtze River Delta in eastern China, where the region’s economic hub is Shanghai.

Guangdong has played a pioneering role in China’s economic reforms ever since the country’s implementation of opening policies in the late 1970s. Three of China’s Special Economic Zones, namely, Shenzhen, Zhuhai and Shantou, are located in Guangdong’s coastal areas.

Economic Overview
Guangdong is the biggest economy in China. In 2006, the province’s GDP rose 14.1% to RMB 2.6 trillion (US$331.2 billion), maintaining its strong growth momentum. As noted, most of the GDP comes from industry and service, with just 6.1% coming from the agriculture sector.

In recent years, Guangdong’s leading economic position has been challenged by Shandong and Jiangsu, which are the second and third largest economies in China respectively. In 2006, the GDP of Shandong amounted to RMB 2207.7 billion (US$281.2 billion) while that of Jiangsu totaled RMB 2154.8 billion (US$274.5 billion), further narrowing the gap with Guangdong. Moreover, some other economic indicators have even surpassed Guangdong’s.

For example, since 2003, Jiangsu has replaced Guangdong as the largest FDI destination. The value-added industrial output of Shandong, a major benchmark of a province’s economic strength, reached RMB 1,149 billion in 2006, cutting very close to Guangdong’s output of RMB 1,178 billion.

Guangdong is the largest consumer market in China in 2006, with retail sales of consumer goods at RMB 911.8 billion, an increase of 15.7% from the previous year. It accounts for 11.9% of China’s total retail sales of consumer goods. As the region that opened earliest, Guangdong has an advanced retail market. In recent years, the retail distribution channel has further expanded and in addition to traditional department stores, other types of stores such as chain stores, supermarkets, and warehouses have seen a fast growth.

As evidenced, more than a third of the expenditure is on food and a fifth of the total expenditure is on transportation and communications. Surprisingly, given the advanced retail market, the proportion of expenditure spent on clothing is a mere 5.8%.

Guangdong saw only a modest growth in fixed asset investment in 2006. Total investments rose 16.7% to RMB 813.2 billion, ranking Guangdong third in China after Shandong and Jiangsu. Out of these investments, RMB 184.4 billion was invested in real estate development. This accounted for 23% of the total fixed asset investment.

Industry
Despite the threat of Shandong and Jiangsu surpassing Guangdong as the leading economy in China, the industrial output in Guangdong is on the rise. The total value-added industrial output reached RMB 1,178 billion in 2006, an increase of 17.6% from the previous year. Of the total value-added industrial output, that of above designated-sized enterprises amounted to RMB 1071.9 billion.

Guangdong’s robust manufacturing sector has also greatly benefited from foreign investments. As can be seen from the pie chart, foreign invested enterprises (FIEs) account for nearly two-thirds of the overall value-added industrial output. It has been reported that these FIEs have an industrial output of RMB 671.4 billion.

Guangdong is a major export-processing base for Hong Kong and Taiwan investors. Major industrial production bases are clustered in Guangzhou, Shenzhen, Dongguan, Foshan, Huizhou, Jiangmen and Zhuhai.

In addition to that, the province has a very strong manufacturing base. The traditionally strong light industries, such as textile and garment, food and beverage, toys, etc. formerly accounted for more than half of the province’s total industry output. These products still rank near the top of China’s export market.

Recently however, both the heavy industry and high-tech industry have also been developing rapidly. In 2006, value-added industrial output of the heavy industry increased 18.9% to RMB 642.5 billion. The heavy industry’s contribution to overall industrial output also increased from 47% in 2000 to 60% in 2006.

The nine pillar industries in Guangdong currently include three new leading industries – electronic information, electric machinery and special purpose equipment, and petroleum chemicals, three traditional industries – textile and garment, food and beverage, construction materials, and three potential leading industries – paper making, pharmaceuticals, and automobiles.

Electronics
Guangdong is the national electronics industry base as well as the only province with the industrial output of electronics exceeding RMB 1 trillion in China. In 2006, the industrial output of the electronics industry amounted to RMB 1,189.1 billion, while the value-added industrial output reached RMB 209.5 billion, accounting for 36% and 30% of the country’s total respectively. The industry contributes approximately 8% to the province’s economic growth.

At the end of 2006, there were 3,099 electronics enterprises in the province, accounting for 32% of China’s total. Among them, 1101 enterprises (35% of the total) were located in Shenzhen, 345 enterprises (11% of the total) in Guangzhou. Other important production bases include Zhuhai, Foshan, Dongguan and Shantou. Examples of major products produced in Guangdong are telecommunications equipment, personal computers, video/audio products, consumer electronic products, electronic parts and components, and optical information storage.

Currently, the province has quite a large number of successful domestic enterprises whose products are also well-known in the global market. Major domestic brands include Huawei, ZTE, TCL, Midea, Konka, and Galanz. Among 2007’s top 100 electronic information enterprises, 23 are based in the Guangdong province. Included below are brief overviews of two of the more famous brands.

Huawei

Huawei was established in 1988 with its headquarters in Shenzhen. It is a private high-tech enterprise which specializes in R&D, sales and production of communications equipment, and the provision of customized network solutions for telecom carriers. In 2007, the operating revenue of Huawei amounted to RMB 65.9 billion, rendering it the third largest electronic information manufacturer in China. Huawei also ranks the second highest in China in terms of R&D expenditure, with an expenditure of RMB 5.9 billion. In terms of exports, it ranks top in the country, with an export value of RMB 34.7 billion.

Midea

Midea is a leading electronics manufacturer in China. It is located in Shunde and has three production bases, two of which are in Guangdong and one in the Anhui province. While it started off as an electric fan producer, the company now produces a wide range of electrical appliances such as air conditioners, microwave ovens, rice cookers, water dispensers, heaters, dishwashers, etc. Its operations grew so rapidly that in 2001, Midea was large enough to acquire Sanyo’s microwave oven division and by 2007, the operating revenue of Midea had amounted to RMB 51.8 billion, ranking them the fifth largest in electronic information enterprises in China.

Petroleum and Chemicals
Petroleum and chemicals is a newly developed industry in the Guangdong province. However, the growth rate is above the average growth of entire industrial enterprises by almost two percentage points at 24.3% in 2007. The total industrial output of this industry amounted to RMB 412.8 billion, while value-added industrial output reached RMB 145.7 billion, an increase of 24.3% and 19.1% from 2005 respectively. Major enterprises in this industry include Sinopec Maoming Refining&Chemical, Sinopec Guangzhou Petrochemical, CNOOC Shenzhen Ltd, CNOOC and Shell Petrochemicals Company Ltd.

This industry saw two significant developments in recent years. Amoco Chemical Co. developed a purified terephthalic acid plant in Zhuhai, making it the largest investment in the chemical industry in China to date. Also, in 2006, Royal Dutch Shell, CNOOC and the Guangdong provincial government jointly invested US$4.2 billion in a petrochemical project in Huizhou. The aim of this project is to create a set of ethylene cracking facilities. The plant, with an annual production capability of 800,000 tons of ethylene and 430,000 tons of propylene, began production in the middle of 2006.

Textile and Garment
Guangdong is the largest textile and garment production and export base in China, with Guangdong controlling about 25% market share of the total production in China. The province exported US$22.4 billion textile and garments in the first eight months of 2007, an increase of 29.2% from the previous year. This export value is higher than the second largest exporter, Zhejiang province, by almost US$10 billion. By the end of 2006, Guangdong had more than 6000 textile and garment enterprises with major production bases in Dongguan, Foshan, Zhongshan, Guangzhou, Shantou, and Zhuhai. Key players in this industry are the Guangdong Yida Textile, Yishion and Foshan Shunde Qianjin Industry Co.

As the first area in China to open up to foreign investors, Guangdong has attracted a large number of foreign garment makers and exporters. These foreign companies also facilitated the transfer of technology that helped local enterprises grow quickly. In recent years, however, Guangdong faced the problem of rising labor and land cost. Most of the private enterprises are labor-intensive, and focus on mass production and export of low-end products. All these challenge the sustainable growth of the local enterprises.

Services
Guangdong has a vibrant service sector with enormous growth potential. The province’s service sector is characterized by the presence of diverse channels, a high level of maturity, strong clustering and radiation effect, and brisk trading.

Retail
Guangdong has one of the most developed retail markets in China. In 2006, the added value of the retail and wholesale sector amounted to RMB 254.2 billion, up 11.2% from the previous year. The sector accounted for 22.7% of the province’s services sector and contributed 9.7% to the GDP.Large foreign retail enterprises have established a presence in Guangdong. These include Wal-Mart from the U.S., Carrefour from France, Jusco from Japan, Park’N Shop, Watsons and Mannings from Hong Kong.

Real Estate
Real estate is the second largest industry of the service sector. In 2006, the value-added of the real estate sector amounted to RMB 178.5 billion, an increase of 13.9% from 2005. It accounted for 16% of the service sector and 6.8% of the province’s GDP.
Shenzhen-based Vanke is the largest residential building developer in China. In 2006, the sales revenue of the company amounted to RMB 21.2 billion, and net profits reached RMB 2.2 billion. Both represented an increase of more than 50% from the previous year.

Logistics
Guangdong has always been the logistics hub in southern China. Logistics and its related services, such as road transportation, warehousing, loading and unloading, processing, packaging, delivery and related information and consultancy service for ordinary goods, have developed quickly, and the industry saw a rapid growth of 17.1% to RMB 111.4 billion. Demand for large-scale, third-party logistics companies are also expected to rise.

Finance
Guangdong is an important financial market in China. In 2006, the value-add of the financial industry rose 10.8% to RMB 93.2 billion. It was ranked the largest in China, almost RMB 10 billion higher than the second largest financial market in the Zhejiang province.

Along with the fast growing financial industry, non-performing loans remain a concern in Guangdong. A sound and holistic social credit system and banking regulations have yet to be developed.


Foreign Trade and Foreign Investment
Guangdong is the largest foreign trade center in China. In 2006, total foreign trade reached US$527.2 billion, having increased by 23.2%. Export value rose by 26.8% to US$302 billion and import value increased by 18.7% to US$225.2 billion.

Among the export products, machinery products exported had a value of US$204.5 billion (an increase of 24.4%), and garment and textile products had an export value of US$35.5 billion (rising by 61.1%).

Foreign invested enterprises are the largest contributors to the province’s exports. Exports by FIEs amounted to US$193.9 billion, accounting for 64% of total exports. Exports of private enterprises have also expanded very quickly, increasing by an astounding 57.9% to US$47.3 billion.

Major trading partners of the Guangdong province include Hong Kong, the United States of America, countries in the European Union and ASEAN, as well as Japan.

The booming Yangtze Delta region has recently threatened the leading position of the Pearl River Delta, with foreign investment momentum in Guangdong weakened. The largest FDI destination has also shifted to Jiangsu since 2003. In 2006, the utilized FDI reached US$14.5 billion, up 17.4% from 2005, ranking Guangdong second in China. Most of the funds were invested in Guangdong’s manufacturing sector, accounting for 58.4% of the total funds invested. Major industries include computer and accessories, machinery and electrical products, refined chemicals, as well as some traditional industries such as toys, garments and textiles. The service sector has also seen a rapid growth, with real estate being one of the most attractive industries. 7.2% of the total utilized FDI came from this industry in 2006. During the year, 8,452 foreign investment contracts were approved, amounting to a total of US$24.6 billion.

Major Development Zones
There are several major development zones in Guangdong. Among them are the Guangzhou Development District, Shenzhen High-Tech Industrial Park, and Daya Bay Economic and Technological Development Zone.


Guangzhou Development District (GDD)
GDD is the only one in China that has four kinds of industrial parks under a single administrative committee. It is one of the cornerstones of Guangzhou. In 2006, the district’s GDP reached RMB 78.9 billion, 20.9% higher than in 2005. GDD accounted for 13% of the total economy of Guangzhou and had substantially contributed to Guangzhou’s growth. The six pillar industries have a total industrial output of RMB 166.6 billion, up 29% from 2005, accounting for 83.15% of the district’s total.

In 2006, GDD approved 197 foreign investment projects with contracted investments of US$1.8 billion, an increase of 34.9%. The utilized FDI reached US$792 million, accounting for 26.8% of Guangzhou’s total. Most of the funds were invested in the manufacturing sector with a total utilized FDI of US$305 million, up 40% from 2005. Major invested industries include communication equipment and electronics, chemicals, and pharmaceuticals. Hong Kong is the largest investor in the district with a utilized FDI of US$326 million, an increase of 1.95 times from 2005. In 2006, the export value of GDD amounted to US$7.5 billion, accounting for 23.2% of Guangzhou’s total.

Shenzhen High-tech Industrial Park
Located in western Shenzhen, the park is a major contributor to Shenzhen’s economic growth. In 2006, total industrial output of the park amounted to RMB 160.2 billion, up 17.1% from 2005. From this amount, high-tech products comprised a total of RMB 155.2 billion, accounting for 97% of the park’s total. In 2006, the value-added industrial output amounted to RMB 32.7 billion, up 25.1% year-on-year. The park contributed 11.4% to the city’s value-added industrial output while the land area only accounted for 0.6%. Currently, a number of famous enterprises have set up business in the park. Domestic brands include Huawei, ZTE, Lenovo and TCL, and foreign brands include IBM, Compaq, Epson and Philips.

Education
By the end of 2006, there were 105 regular higher educational institutions (including universities and advanced vocational schools), and more than 1 million students studying in these institutions. Famous universities include Zhongshan University and South China University of Technology. Although the province has a large talent pool, the fast growth of high-tech industries (especially R&D related activities) in the Yangtze River Delta has eroded the attractiveness of Guangdong.

Zhongshan University
Founded in 1924 by Dr. Sun Yat-sen, the university consists of 4 campuses (South Campus, North Campus, East Campus and Zhuhai Campus) with a total land area of 6.17 km2. Three of the four campuses are located in Guangzhou and one is located in Zhuhai. Currently, more than 76,000 graduates and undergraduates are studying in the four campuses.

South China University of Technology

Located in the capital city of Guangdong, the university was established in 1952. It consists of two campuses, namely the north campus in Tianhe District and the south campus in the University Town of Panyu. Presently, the university has over 64,000 students studying there.

Major Administrative Areas in Guangdong Province
There are 21 administrative areas in the province of Guangdong. As seen from the table, the capital city of Guangzhou and the city of Shenzhen have the highest GDP. Guangzhou, Shenzhen and Foshan also received the highest amount of investments with RMB 168.7 billion, RMB 128.7 billion and RMB 89.5 billion respectively.

The following subsections provide an overview of the two major cities of Guangzhou and Shenzhen.

Guangzhou

Introduction
Guangzhou is the capital of Guangdong province. It is the most populous city in the province and the third largest in China. It is 120 km away from Hong Kong. Guangzhou has no real winter; therefore, the city is sometimes referred to as “Flower City”.

Investment Climate
Guangzhou is the economic centre of the Pearl River Delta. In 2006, the GDP of the city accounted for 23.3% of Guangdong’s total, the highest among all the cities in the province. It is also ranked third amongst all the Chinese cities, after Shanghai and Beijing. The service sector is the largest contributor to the GDP, amounting to RMB 350.4 billion, and accounting for 57.7% of the city’s GDP.

The total industrial output of Guangzhou amounted to RMB 810.3 billion, while the value-added industrial output reached RMB 221 billion in 2006, rising 16.8% and 17.4% respectively. The three pillar industries - automobiles, electronics and petrochemicals – have a combined total industrial output of RMB 306.8 billion, accounting for 42.2% of the industrial output of above designated-sized enterprises of Guangzhou.

The total industrial output of above designated-sized enterprises amounted to RMB 727.2 billion. The automobile industry is the largest manufacturing industry with an industrial output of RMB 116.2 billion in 2006, up 34.1% year-on-year. Within this industry, auto parts manufacturing has seen a fast growth of 71% in 2006. Petrochemical and electronic industries have an industrial output of RMB 108.9 billion and RMB 81.7 billion respectively.

Guangzhou is the third largest consumer market in China. In 2006, retail sales of consumer products reached RMB 218.3 billion. The sale of food and beverage, garments and shoes, and automobiles are the three largest categories of consumption goods.

Canton Fair is a fair held each spring and autumn in Guangzhou. It has been around since 1957 and is the largest trade fair in China in terms of product categories, number of exhibitors and traders, and transaction deals. The 103rd Session of the Canton Fair will be held from 15th to 20th and 25th to 30th April 2008.

Foreign Investment
In 2006, the total foreign trade of Guangzhou reached US$63.8 billion, up 19.2% from 2005. Export value was US$32.4 billion, up 21.4%. Foreign-invested enterprises’ export reached US$19.7 billion, accounting for 60.8% of the city’s total exports.

During 2006, 1025 investment projects were approved with a total investment of US$4.4 billion, up 29.1%. The utilized FDI amounted to US$2.9 billion. By the end of 2006, 151 Fortune 500 companies had set up business in Guangzhou with a total investment of US$11.2 billion.

Important Travel Information
Time taken to travel from Baiyun International Airport to:
- Beijing
- Shanghai
- Chengdu
- Dalian
- Hong Kong
- Tokyo
- Seoul 2 hours 40 mins
1 hour 50 mins
1 hour 55 mins
3 hours 5 mins
50 mins
5 hours 10 mins
4 hours 15 mins

Shenzhen

Introduction
Originally a small fishing village, Shenzhen was singled out as the first Special Economic Zone (SEZ) to test free market principles in China in 1979. The city is only 55 km from Hong Kong, and was chosen so as to attract investments from neighboring Hong Kong. Shenzhen SEZ occupies one-sixth of Shenzhen city.

Investment Climate
Shenzhen has experienced rapid economic growth since 1979. The city is now one of the economic powerhouses of China as well as the largest manufacturing base in the world. Out of all the Chinese cities in 2006, Shenzhen ranked No.4 in terms of GDP. The manufacturing sector and service sector account for 53.2% and 46.7% of the city’s GDP. In 2006, the total industrial output of above designated-sized enterprises amounted to RMB 272.3 billion, up 17.2% from 2005.

Foreign invested enterprises (FIEs; mainly from Hong Kong) are the largest contributors with a value of RMB 195.2 billion, accounting for 71.7% of the total. The pillar industries (namely, telecommunications, PC, and electronics) have a combined total industrial output of RMB 128.5 billion, up 33.3% from 2005, accounting for 47.2% of Shenzhen’s total. Huawei and ZTE are among the two most famous IT enterprises in the city. Finance is an important industry in Shenzhen, with almost 100,000 people working in the industry. Financial industrial output contributed 8.1% to the city’s GDP in 2006 and 9.4% in 2007.

The insurance market has also expanded quickly. In particular, because Shenzhen is a typical export-oriented economy, export credit insurance is a booming business there.

One of the two stock exchanges in China is located in Shenzhen. By the end of 2006, 579 companies with a combined total of 621 stocks were listed in the Shenzhen bourse. The total market cap of tradable shares amounted to RMB 857.5 billion, up 121.2% from 2005.

Foreign Investment
Although the central bank issued a tightening policy in 2006, Shenzhen’s foreign trade maintained a strong momentum. The total exports and imports have caused the city to rank the highest among all the Chinese cities for 14 consecutive years.

In 2006, the total foreign trade of Shenzhen reached US$237.4 billion, up 29.9% from 2005. Export value was US$136.1 billion, up 34.1%, of which foreign-invested enterprises’ exports reached US$86.1 billion, accounting for 63.3% of the city. Hong Kong is the largest trading partner of Shenzhen.

In 2006, the value of goods exported to Hong Kong was US$58.1 billion, up 29% from 2005, accounting for 42.7% of total exports. The US, EU, Canada and Korea are also the major countries that Shenzhen exports to.

The utilized FDI amounted to US$3.3 billion, up 10.1% from 2005. Of this amount, 55.6% of funds were invested in the manufacturing industry. Leasing and business service, transportation, and real estate have attracted 9.9%, 7.9% and 5.5% of the foreign investment respectively. By the end of 2006, 141 Fortune 500 companies had set up business in Shenzhen.

Important Travel Information
Time taken to travel from Bao’an International Airport to:
- Beijing
- Shanghai
- Chengdu
- Dalian
- Hong Kong
- Tokyo
- Seoul 2 hours 50 mins
1 hour 50 mins
2 hours 5 mins
3 hours
40 mins
5 hours 45 mins
4 hours 20 mins