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New strategy propels Guangdong's development

By Liang Qiwen (China Daily)
Updated: 2008-10-27 11:43

Known as a pioneer in China's reform and opening, Guangdong province will invest more than 50 billion yuan ($7.32 billion) in the next five years to implement a new labor and industry strategy, known as "Double Transfer", to maintain sustainable development and remain a force in the mainland economy.

However, it is not easy to achieve the target since the province is facing serious pollution problems, an energy crisis and many other challenges.

The strategy aims to transfer labor-intensive industries from the Pearl River Delta (PRD) to less developed regions of the province. Workers from less developed areas will be encouraged to work in local manufacturing and service industries, or find employment elsewhere in the PRD.

A purpose of the new policy is to accelerate the PRD from a traditional manufacturing industry base to a center of service-oriented, advanced manufacturing systems.

So far, many small and medium-sized enterprises in the PRD have closed or suspended operation.

There are several reasons for the change and pollution is one of them.

The past two-plus decades were a golden development period for the labor-intensive enterprises in the PRD, but it came at high cost to the environment.

Take Foshan for example. Foshan was the most polluted city in the whole province last year, according to a review by the environmental protection departments of Guangdong and Hong Kong.

"Foshan is one of the biggest ceramics manufacturing centers in China," Lan Weibing, director of Foshan ceramics industry association, says. "The industry brought a huge economic benefit to the city but caused pollution as well."

As such, the local government cracked down on polluting ceramics businesses.

Last year, more than 40 ceramic factories, about 10 percent of the total in Foshan, were shut down because they hadn't complied with the government's environmental regulations.

Enormous numbers of factories in the PRD are also discharging thousands of gallons of industrial and domestic sewage daily into the waterways.

As of 2007, the flow capacity of rivers in the PRD was only about 6.67 percent of the whole province; however, the PRD discharged 69.7 percent of the whole province's sewage.

The domestic sewage of the region was 2.4 billion tons that year, taking up 70 percent of the whole province's amount.

The same factories, as well as the growing number of personal vehicles are also heavily polluting the air.

"In order to fulfil the purpose of 'Double Transfer', the government's actions against polluting enterprises will be stricter," Ye Chunrong, head of the Taiwan enterprises association in Dongguan, says.

Ye says he believes the shift of small- and medium-sized manufacturing enterprises out of the PRD is only natural.

Dongguan's growth in the last 30 years has reflected that of the PRD, making it a mini-PRD of sorts. It grew from a backward agricultural town into an affluent city thanks to its manufacturing industry.

Dongguan Mayor Liu Zhigeng once said: "If enterprises in Dongguan are better-off, the city will be good; but if the situation is reversed, Dongguan will be miserable."

The fact is that 37 percent of enterprises in Dongguan have recorded deficits in the first three quarters of this year, a municipal government conference revealed on October 7.

And from January to September, the number of new foreign-invested enterprises dropped by 25 percent from the same period last year.

The existing enterprises are also receiving fewer export orders.

Besides environmental issues, the energy crisis is another obstruction that may influence the economic development of the PRD.

Last year, electrical supply in Guangdong was strained even more than its previous low point in 2006. The greatest shortage was more than 6 MW, a quarter of the national electrical shortage.

The total electrical demand for all of China reached 274.5 million MW, a 15 percent increase, compared with the same period last year, according to China Southern Power.

A reason for the power shortage was due to the dramatic drop in coal supplies in recent years.

The Guangdong Economic and Trade Department said an international shortage of coal forced the province to sharply reduce its amount of imported coal by 13.6 percent this year.

In July the Guandong provincial government vowed to guarantee that the supply of electricity, coal and gas would be "normal", but energy costs have continued to rise, making it more difficult for the small and medium enterprises in the PRD to survive.

"The cost of shoe making industry in Dongguan city, including raw materials, land and energy, grew by 30 percent last year," Huang Chunming, a head of the city's shoe industry association, says.

Guangdong Governor Huang Huahua says the 'Double Transfer' system would be the most effective measure to solve the problems and carry out a new round of development.

But entrepreneurs say it would be a very long process if Guangdong is able to completely transform itself into an advanced manufacturing and service industry center.

"Dongguan may need 10 years to complete in adjusting its current industrial structure from labor-intensive to technology-intensive," Mayor Liu said earlier this year.

What is the PRD's solution for the difficulties? "The provincial government will not encourage new labor-intensive manufacturing enterprises to set up business in the PRD in the future," Pan Xudie, an official of the provincial government's development research center, says.

Enterprises that want to survive must upgrade their facilities and improve productivity while becoming eco-friendly, Pan says.