Located in the southern part of Guangdong Province, the Pearl River Delta (PRD) covers an area of 42,821 sq. km and is home to 47.8 million people. In 2001, its GDP reached US$101 billion and accounted for 8.7 percent of China's total GDP. The combined GDP of Hong Kong and the PRD, at about US$265 billion in 2001, was greater than that of any other region in the Chinese mainland, and equivalent to that of Switzerland. In terms of per capita GDP, the levels of income of PRD cities are taking the lead in China. For instance, per capita GDP in Shenzhen reached US$5,238 in 2001, surpassing that of Shanghai and Beijing.
The PRD is China's largest export base, especially in consumer goods. In 2001, the PRD accounted for 34 percent of China's total exports. To many foreign companies, setting up production bases in the PRD is part of their strategy for penetrating the domestic market of China. For the past decade, the eight mainland cities that form the core of the PRD have absorbed China's largest share of FDI. From 1995 to 2001, cumulative actual FDI of the PRD amounted to US$72 billion, i.e. 24 percent of the national total. What is unusual about this region versus other economically vibrant regions in the mainland is that its growth has been fueled mainly by the private sector, not government expenditures.
Hong Kong has been a big part of this boom. Since the early 1980’s, much of Hong Kong’s manufacturing base has moved to the PRD in search of lower-cost land and labor. As a result, 63,000 Hong Kong enterprises now own and manage a far-reaching network of activities in the area employing nearly 11 million people (58 times the size of Hong Kong’s own manufacturing workforce). Most of these companies are SMEs that are able to adapt quickly to market changes but do not command the access or leverage larger entities have with local authorities. The majority of Hong Kong investment that flows into China continues to be directed at the PRD. The relationship is a win-win situation. The assembly of goods takes place in the PRD but the high value-added elements, such as management, design, quality control, and finance, remain in Hong Kong. Shifting its manufacturing base has also allowed Hong Kong’s economy to focus on the service sector, which brings with it higher paying jobs. Products formerly known around the world as “Made in Hong Kong” could now rightly be marked “Made By Hong Kong.”
The PRD’s Cantonese speaking population is heavily influenced in forming its tastes and fashions by Hong Kong’s Cantonese language media. According to Hong Kong public relations agencies, at least 20 percent of Hong Kong broadcast advertising is directed towards mainland consumers. This trend in targeting the mainland customer shows that Hong Kong-based companies look to the PRD not only as a low cost manufacturing base, but also more and more as a market in and of itself. For example, the Hong Kong office of the convenience store 7-11 has finalized plans to open 300 outlets throughout Guangdong Province. Other leading Hong Kong restaurants and clothing chains are also looking at opening up branches.
The PRD’s infrastructure is constantly changing. At the top of the list of priorities is infrastructure that will better integrate Hong Kong and the region including: the construction of the Shenzhen Western Corridor; a 5.1 km bridge from Tuen Mun to Dongjiaotou; a new logistic center for the Shenzhen airport; and a light rail to run from Shenzhen to Guangzhou. In addition, Guangdong province’s telecom infrastructure is the pride of the nation with more than 24 million mobile subscribers, 16 percent of China’s total and over 10 percent of China’s 34 million Internet users. All of this rapid development provides opportunities for U.S. companies.
The synergy between the PRD and Hong Kong will substantially benefit the economic development of the region. The signing of the Closer Economic Partnership Agreement (CEPA) on June 29, 2003 between Hong Kong and the mainland has accelerated the pace of this development. On the one hand, Hong Kong and the PRD will together further develop into a production base in the global supply chain. On the other hand, Hong Kong and the PRD can well serve as the operational center for foreign companies which targeting China's domestic market.
Despite this complementary economic relationship, China’s cumbersome and non-transparent regulatory system continues to hamper some areas of cooperation. With several competing jurisdictions, resource allocation is often not as efficient as it could be. This is one of the main reasons U.S. companies, particularly SMEs, have been successful in the region by linking up with Hong Kong SMEs to market their products and services to this dynamic PRD region.
More information on Pearl River Delta, please visit Guangzhou Office web site: http://www.buyusa.gov/china/en/guangzhou.html