Guangdong's greener future
Winston Mok says the renewal of China's economic powerhouse will best be achieved by focusing development on the delta, upgrading people's skills and creating a greener environment in its outer regions
Long China's leading economic region, Guangdong is at risk of being surpassed soon by Jiangsu . Stronger in innovation, Jiangsu has been growing faster. Yet, at the same time, parts of the Pearl River Delta are still going strong.
The delta, representing 80 per cent of Guangdong's economy, is expected to grow much faster than Greater Tokyo. If this strong growth can be sustained, the delta should surpass the Tokyo metropolitan area to become the world's largest metro economy in about a decade.
Rather than defending its No 1 position in China, Guangdong should perhaps focus on driving the delta to the world's top spot.
As a pioneer of economic reforms, Guangdong is now facing difficult transitional challenges. Destined for the highest echelon, Guangdong's new head, Hu Chunhua , is determined to rejuvenate the province. But behind the façade of China's largest provincial economy is a land of contrasts in prosperity.
Some 70 per cent of Guangdong lies outside the delta area. It is home to 40 per cent of the province's people - but generates only 20 per cent of the economy. Incomes are low. Hu wants to improve these poor areas by investing in infrastructure.
To bolster growth, Guangdong has budgeted 1.4 trillion yuan (HK$1.8 trillion) for infrastructure in the next three years. However, 90 per cent of the planned investments are outside the delta. Rather than spreading the economic pie evenly, better results could be achieved by concentrating on the delta region, with its well-established industry clusters. The delta's development has been fuelled by the influx of people from other provinces, as well as from outer Guangdong.
Instead of industrialising the outer regions, a better way to improve the lives of people there is to draw them into the delta with sustained growth.
The path to Guangdong's economic renewal lies not in faster highways but in higher-skilled people. Guangdong's investment in education is among the lowest in the nation - resulting in lack-lustre university enrolments. Its low-quality workforce has impeded industrial upgrades and innovation. The good jobs have gone to better-trained people from other provinces. With tough job prospects for graduates, skills-based training may become even more relevant.
In its partnership with Guangzhou in redeveloping Datansha Island, Singapore will be bringing its know-how in vocational training. If successful, this experience may be more broadly applied, including in rural Guangdong.
So, what could the future hold for the rest of Guangdong other than to be a provider of human resources to the delta?
- Agri-business, including high-value agriculture. Food is the growth industry this century. As per the US experience in the 19th century, the expanding transport links to Guangdong's outer regions will boost agricultural productivity and transform the sector. With food safety a key concern, Guangdong can develop a significant food business nationwide if it can win the trust of consumers with high-quality standards - such as through a "Green Guangdong" seal.
- Leisure and tourism. The growing middle class in the delta is looking for ways to escape congested urban areas. With the longest coastline in China, if coastal pollution can be arrested, Guangdong can be an alternative to Hainan .
- Senior and retirement care. With the ageing population of China, including Hong Kong, services for the elderly are big business opportunities. As a leader in elderly-related medicine, with a good climate and strong infrastructure, Guangdong may become the Florida of China.
These three non-polluting opportunities are all labour-intensive and can generate significant employment. Expanding infrastructure may help, but perhaps planned with tourism and agriculture, rather than industry, in mind.
The task at hand for the leaders of Guangdong is not to build industries or urban centres in its poorer regions, but to improve the lives of people there. The best way is to upgrade their skills so they can migrate to the delta, to be enabled by hukou reforms.
Instead of a diffused effort, focusing on the delta is the best way forward. For the rest of Guangdong, the opportunities lie not in accepting the polluting industries rejected by the delta, but in welcoming green industries.
While people from the poorer regions flock to the delta in search of economic opportunities, the green environment they leave behind will nourish the minds and bodies of the middle class - a beautiful Guangdong, as envisioned by "Little Hu".
Winston Mok is a private investor, a former private equity investor and McKinsey consultant. An MIT alum, he studied under three Nobel laureates in economics