New hubs to cushion exodus from Pearl River Delta
Pearl River Delta eventually seen losing status as world's factory but inland provinces will ensure the mainland remains a production powerhouse
An exodus of factories from the Pearl River Delta has led some to question whether China can remain the so-called factory of the world, but even if the delta loses its pre-eminent status, the mainland will remain a manufacturing powerhouse, thanks to the rise of new manufacturing bases in interior provinces, analysts say.
"The reason is that labour costs and the value of the yuan are rising, so many manufacturing companies have moved to Myanmar and other Southeast Asian countries," Lo said. "The result is China will still be the world's biggest manufacturing country, but it will be less important as the world factory."
But inland cities such as Chongqing would emerge as manufacturing hubs to replace the waning contribution of the delta because they were less expensive than coastal areas in the costs of production and land, he said. "Wuhan, Chongqing and Chengdu will be important manufacturing centres. They will ensure that China remains an important manufacturing centre."
Stephen Green, the greater China research head of Standard Chartered, echoed these sentiments. "The low value-added labour-intensive stuff like toys, textiles and shoes are leaving China. But most of the rest of China's manufacturing is staying and moving inland where they get tax breaks, cheap land and labour. That is the dominant trend."
In the first 11 months of last year, Chongqing's trade jumped 92.8 per cent to US$49 billion, according to the Chongqing government website. Exports sourced from the city reached US$35.78 billion in the period, ranking it in 10th place by value.