Guangdong pushes to make entire province an economic powerhouse

Guangdong is pulling out all the stops to make the whole province an economic powerhouse, offering opportunities but also challenges

PUBLISHED : Thursday, 12 September, 2013, 12:00am
UPDATED : Thursday, 12 September, 2013, 5:45am

College student Tang Zhiqiang has spent all summer helping his parents plant rice on their farm in the Guangdong village of Xiadong.

Tang's ancestors have worked this land for generations. They are among the poorest of the poor in a rural area that is a world away from Guangzhou, the prosperous heart of the Pearl River Delta just 60 kilometres away.

The family scrapes a living, struggling to support Tang, 22, and his two sisters in their college studies. But life is about to change forever. Tang's family believes this is the last year that they will bow down and till the land.

Xiadong and the 45-square-kilometre area surrounding it is set to be absorbed by the city of Qingyuan to provide homes for 400,000 people by 2020 at a cost of 30 billion yuan (HK$37.7 billion).

Tang has suddenly become an eligible bachelor, as matchmakers see young men from the area as a good catch due to the belief that their families will be compensated and receive prime apartments in the new development.

Qingyuan's new town isn't the only one planned for the poorer areas of Guangdong. In the next few years at least a dozen such towns will be built, each backed by huge investments by the provincial authorities.

It's all part of an ambitious plan by provincial party chief Hu Chunhua to close the gap between delta region cities that have benefited from a three-decade industrial boom and rural regions.

Hu plans to spend 672 billion yuan on transport, industrial zones and new cities and towns.

He hopes investment-led growth in 12 economically backward cities can become the engine for development as the export-led region deals with rising costs and declining orders.

The party chief wants Meizhou, Maoming, Jieyang, Yangjiang, Shanwei, Shaoguan, Zhanjiang, Chaozhou, Shantou, Yunfu, Heyuan and Qingyuan, to double or even treble their economic output by 2018.

Guangdong now has the biggest economic divide of any mainland province.

Li Chunhong, director general of Guangdong's Development and Reform Commission, said gross domestic product per capita for the 12 targeted cities remained below the national average despite Guangdong's economy having been bigger than that of every other province for more than two decades.

He said the 12 cities, encompassing 70 per cent of Guangdong, had an average per capita GDP last year of just under 26,000 yuan - one fifth of the US$20,000 of Shenzhen.

The delta area covers only 23 per cent of the province but accounts for more than 80 per cent of its GDP.

The imbalance can be traced back to Deng Xiaoping's reform and opening up in the 1980s. The delta received most of the capital flowing into the province from Hong Kong and Macau. The rough terrain beyond the delta, despite being richer in natural resources, has enjoyed little of the economic benefit.

More than 20 million young Guangdong men and women have flocked to the delta to seek a living, delaying the development of the province's remote regions.

The stakes are high, not just for the regions affected but for the leaders trying to bring change.

The split reflects a wider urban-rural divide on the mainland, and leaders who tackle the problem enhance their chances of career advancement at the national level.

But does anyone have the answer?

In 2004, Zhang Dejiang , then the provincial party chief, said the increasing gap was hampering Guangdong's economic goals of leading, accelerating and balancing economic development.

He launched the "Pan-Pearl Delta" scheme to speed up economic integration in the province. Also known as "9+2", the scheme encompasses nine neighbouring provinces as well as Hong Kong and Macau.

In 2011, Wang Yang, Guangdong's party chief at the time, prescribed a policy he called "empty the cage and change the birds" - encouraging enterprises to move labour-intensive manufacturing out of the delta to make way for service and technology-driven industries.

Wang said the underdeveloped regions of Guangdong would benefit as factories moved there.

But despite the initiatives, little progress has been made; one school in Leizhou, in the city of Zhanjiang in the province's southwest, can't provide even a single toilet for its 300 pupils.

Guangdong's wealth gap remains wider than those of other coastal provinces such as Jiangsu, Zhejiang and Shandong.

Hu unveiled his own recipe for change in July: a frenzy of road and high-speed-rail construction until 2020, with a plan to link all counties with highways and increase the number of the major highways leading to neighbouring provinces from nine to 20. Rail lines would run to most cities in the north, east and west.

Hu's vision would slash the journey time between the delta and remote regions to 21/2 hours by car and just one hour by train. Such journeys can take up to five hours by road today.

Money will also be spent on new industrial zones, with the aim of doubling each county's industrial output within three to five years. Also included in the plan are several cities with populations of more than one million, and more with populations ranging from 200,000 to 500,000.

Hu's theory is that transport problems have long stood in the way of efforts to tackle regional imbalances. Once roads and railways are in place, Hu believes, companies in the delta will move to rural areas. And he is prepared to put up the money … despite growing concerns about local government debt.

"The provincial government will support 70 per cent of the funding of new highways as the municipal governments of the 12 cities take care of the rest," said Yang Xiping, deputy director of the provincial transport department.

"We will also use bank loans and private capital. The financial risk to our government is still under control and safe," said Li, of Guangdong's Development and Reform Commission.

Party chiefs of the 12 cities are also confident about raising funds for their industrial parks and new towns.

According to Huang Qiang, party head of Yunfu in northwest Guangdong, provincial authorities have already approved the construction of its West River New Town. The development will cost 30 billion yuan, almost 10 times the revenue received by the city's government last year.

"The current downtown is only 20 square kilometres with 200,000 people … in five years, we will set up a new downtown with double the population," Huang said.

Yuan Jinquan, a member of the party's standing committee in Yunfu, said: "Private capital will be the main source of support for the new town and industrial parks.

"Private capital will be introduced to build hotels, schools, hospitals and commercial real state projects… We will also sell land and use bank loans to raise funds for construction."

Officials have few doubts about this brave new world. Leaders of each city are confident theirs will offer a healthy and civilised urban environment, while industrial parks allow hi-tech businesses to create jobs.

"To be honest, labour costs in these cities have also been soaring in recent years" due to their proximity to the delta, said Zhang Fan, director of Qingyuan's Eco-industrial New Town. "Our advantage here is cheap land and power supply and friendly measures to support enterprises."

XYY Industrial Group, a camera and scanning equipment producer, moved its production base from Shenzhen to Heyuan in 2010 and saw costs fall by 10 per cent. But the picture isn't entirely rosy.

"We also suffer labour shortages here, and even higher logistics costs than in Shenzhen," said Xu Liang, assistant to the company's general manager. "But moving out of the delta is a trend in the manufacturing industry, although our profits are the same as they were in Shenzhen."

For young people like Tang, the future can't come soon enough.

"Last year my dream was to have a job and marry a woman in Guangzhou," Tang said. "Now I have decided to go back to Qingyuan after graduation. My two sisters will go home too."

Despite the optimism, the experience of others caught up in the mainland's maelstrom of change is never far from his thoughts.

"The only problem is, we are kind of worried about whether we will face enforced demolition in order to make way for the new town," he said. "The municipal government says the new town will begin to take shape in three years. But so far no official wants to discuss with us how they are going to compensate us for our land."