Traveling through Guangdong Province in southern China, one finds neither the flashy showmanship of Shanghai nor the grandeur of Beijing. Instead, visitors can see, hear and feel Chinese-style capitalism and begin to understand why the region has become known as the workshop of the world.
Hundreds of factories stretch out for miles. At noon, thousands of workers in standard-issue blue jeans and white coats, most sporting ponytails, pour out for their lunch breaks. The frenzy – moving tons of earth to make room for even more factories as well as building parks and restaurants to accommodate the workers – continues unabated into the night.
A simmering debate
Yet, a recurring debate among businesspeople both inside China and beyond its borders is whether Guangdong has been left in the dust by faster-growing parts of the country, particularly the areas in and around Shanghai. The fact is, however, that Guangdong remains the richest, most dynamic province in China and continues to attract the biggest share of foreign direct investment (FDI).
After a quarter century of double-digit growth, the province's GDP is on track to jump another 14 percent this year, with most projections at around $230 billion. Exports were at $131.2 billion in the first half of this year, up 28.3 percent and the highest in the country, accounting for nearly a third of the national total. FDI, meanwhile, is pouring in. During the first six months of 2006, contracted FDI was at $11.48 billion, up 13.5 percent from the previous year, while utilized FDI stood at $6.83 billion, up 21.4 percent.
True, lower-value, thinner-margin production may be moving to cheaper regions. But there's not necessarily anything wrong with that, as Guangdong has been quietly climbing up the technology chain, making more higher-value goods. Shanghai may have more Fortune 500 constituents, and Vietnam may offer lower production costs, but in the words of Harley Seyedin, president of the American Chamber of Commerce in southern China, "This is where the smart money is."
Location, location, location
The biggest advantages for Guangdong remain location, location, location. The province sits on the coast and is pierced through its middle by the Pearl River. Guangdong is also close to the two special administrative regions of Hong Kong and Macau, which have convertible currencies, mature legal systems and world-class financial services industries. Thanks to a recent relaxation of visa requirements and plenty of reliable, high-speed ferries, these two economic dynamos are easily accessible within 90 minutes from any of the Pearl River Delta's main cities.
Aside from the widely known cities of Guangzhou and Shenzhen, several major cities – Huizhou, Dongguan, Zhongshan, Foshan, Zhaoqing, Jiangmen and Zhuhai – have grown up in the delta. Each has more than a million people, though most Westerners have never heard of them. But manufacturers and investors know them well enough, and any company considering outsourcing their manufacturing to China should take the time to get to know what makes each city unique.
Jiangmen, for instance, is among the world's largest exporters of plastic bags. Zhongshan's Guzhen township is the lighting capital of the world, with 1,800 companies employing 40,000 people and making all manner of lamps. Foshan's Shunde township is the unofficial "home appliance champion" of China. Dongguan is the king of shoes and furniture. Shenzhen companies, meanwhile, made 200 million pairs of eyeglasses in 2006, accounting for 60 percent of the global market.
A Guangzhou resurgence
The biggest of Guandong's cities is Guangzhou. In recent years, the city government has been investing heavily to upgrade its industrial structure, focusing on such heavyweight industries as petrochemicals, pulp and paper, shipbuilding and, perhaps the future jewel in its crown, automobiles. Thanks to the influx of Japanese giants Honda, Nissan and Toyota, Guangdong jumped from seventh place to first in China's car-export standings in 2006, shipping $230 million worth in the first 10 months. A joint venture between Toyota Motor Corp. and Guangzhou Motor Co. that began production in May 2006 has already done so well that the company is planning to double output for 2007. According to Guangzhou Toyota's vice president, Hu Su, "It is like working with a blank sheet of paper here."
The city also has been building support infrastructure at an astonishing pace: Baiyun International Airport, which will eventually have the capacity to serve as many as 80 million passengers each year, handled 601,000 tons of cargo in 2005. The International Convention and Exhibition Center in Pazhou, home to the country's biggest trade fair (the biannual Canton Fair) is starting an expansion that will make it the biggest exhibition venue in Asia. And the Nansha Development Zone in southern Guangzhou will soon offer the region's biggest deepwater port, which will help lure many companies that in the past have shipped exclusively from Hong Kong.
Of course, not only giants can benefit from being in Guangdong. "Guangdong has everything a small or medium-size company could need," says Bill Wheeler, who previously worked in Dongguan and now runs a high-tech manufacturing plant for a major U.S. maker of audio equipment in Suzhou, near Shanghai. "Most of all, it has the 'cluster effect,' with suppliers all within easy reach. That's what I miss the most about being there."
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