Guangdong, China
Guangdong is a province on the South China Sea coast of China. The province covers an area of more than 212,000 square kilometres and has a population of 86.36 million in 2013.
Since the start of the Reform and Opening Up in 1978, Guangdong has undergone rapid industrial development. The share of the manufacturing industries to the Gross Domestic Product (GDP) increased from 24% in 1979 to about 47% in 2012 in Guangdong Province. Statistical data on the development of the manufacturing industry from 1978 to 2012 showed a significant increase in the contribution made by the manufacturing industry to Guangdong’s economy in the period.
Share of Manufacturing Industries to Gross Domestic Product
Year Share of the manufacturing industries to GDP
1979 24%
1989 34.4%
1999 42%
2009 45.7%
2012 46.5%
Light industry has always been of importance in Guangdong. Apart from handicrafts, food processing and the manufacture of textiles are the two major light industries of Guangdong. Most of these industries are clustered in Guangzhou, Dongguan, Shunde and Shantou. On the other hand, major heavy industry in Guangdong includes metal processing, the manufacture of machinery, shipbuilding and ship-repairing and the production of automobile.
1. Move to inland provinces
Recently, more and more manufacturing industries in Guangdong have moved their plants to or setting up new plants in the inland provinces away from the south-eastern coastal areas. The improved transportation network in the inland provinces Yunan and the preferential policies offered by the central government have attracted many factory owners to relocate their plants to these inland provinces.
The following are a few examples of the inland migration of the manufacturing industries in Guangdong:
Foxconn moved major production line to North China’s Langfang
In 2010, Foxconn planned to move its major production line from Shenzhen to Zhengzhou to reduce labour costs.
Dell might move plant to save labour costs
Dell planned to move its manufacturing plant from the coastal city of Xiamen to the central or western regions of China such as Chengdu after wages increased in China’s coastal cities.
Pfizer looked inland for less costly talent pool
Due to the higher cost of talent in China’s coastal regions, some multinational companies relocated to untapped inland cities for equally skilled, but less expensive brainpower. As the world’s largest pharmaceutical firm, Pfizer will build a new operation at Wuhan, Hubei for its global research and development project.
2. Develop hi-teach industries
During the past years, the provincial government of Guangdong has promoted industrial restructuring. It encourages the region to ‘empty the bird cage for new birds to settle down’. It is about eliminating old industries and introducing some advanced ones. The region aims to develop high-tech, capital-intensive and high-end manufacturing industries. Pharmaceutical, electronics, telecommunications, computers and other business machines will be the future core of Guangdong’s hi-tech manufacturing industry.
3. Promote sustainable develolpment
China is focusing its efforts on sustainable development after its economy has experienced a rapid growth over the last thirty years. To further promote sustainable development in the industrial sector, the Chinese government has provided funding and other resources to assist its capacity building, technology transfer, and information publication, etc. These efforts and assistance have led to many successful projects and significant achievements. The establishment of the Eco-industrial Park at Yinnashan, in Mei County is one of the examples.
1. Labour shortage
Since 2004, the Guangdong province has been encountering labour shortage. There are a variety of explanations for the labour shortage problem. Ageing population, poor working conditions, low wages, improving economic conditions in other less developed inland provinces are all reasons for it. Above all, that the major reasons are the less attractive salary and deteriorating work conditions in the manufacturing sector. In addition, with the development of manufacturing industry in inland provinces, rural dwellers are no longer interested in working in the coastal regions far away from their homes. The coastal provinces are losing their power to suck workers from their hinterland.
2. Rise in production cost
Increases in land prices and taxes, as well as stricter environmental and safety regulations all play a part in causing a rise in the production cost of manufacturing industry in China. The production cost of manufacturing industry rises sharply in the coastal provinces. The biggest contributing factor is labour cost.
In 2012, an investment bank released a survey of over 200 Hong Kong-based manufacturers operating in the Pearl River Delta. It is found that wages have already risen by 10% in 2012. For example, Foxconn, a Taiwanese contract manufacturer that makes Apple's iPads in Shenzhen, put up salaries by 16-25% in 2011.
3. Stricter pollution control
In the past decades, due to the rapid industrial and urban development, the pollution problems in Guangdong province have been serious. The provincial government of Guangdong has implemented stricter pollution control requirements and standards in order to improve the situation. If those existing production facilities fail to meet the requirements and standards, they will be forced to close or move. Factories that continue to stay in the province must invest in more environmentally friendly manufacturing systems. Such policies have increased the cost of production.
References:
1. Guangdong Statistical Yearbooks
http://www.gdstats.gov.cn/tjsj/default.htm
2. Guangdong Statistical Yearbook 2013
http://www.gdstats.gov.cn/tjnj/2013
3. Yinnashan Eco-industrial Park