The city of Shenzhen has a population of more than 10 million

China’s Pearl River Delta is changing fast as it transforms from an export-driven manufacturing base into a sophisticated, modern city-region. The Pearl River Delta is the central part of Guangdong province on China’s south coast, immediately to the north of the Hong Kong Special Administrative Region. The Pearl River Delta’s population of 58 million is only slightly smaller than the UK or Italy and the major cities of Guangzhou and Shenzhen each have a population of more than 10 million.

International trade has been the main driver of the area’s growth. Government reforms to attract inward investment have encouraged multinational firms to set up factories to make and assemble goods shipped around the world. Guangdong accounted for trade worth more than USD1 trillion in 2013, more than Mexico or Indonesia. The province has played an important role in China’s rapid economic expansion over the past three decades.

Today, however, faced with rising land and wage costs, low-value manufacturing such as textiles has relocated to lower-wage locations overseas. The challenge for local businesses, as in many fast-growing countries, is to raise productivity.

Guangdong accounted for trade worth more than USD1 trillion in 2013

One way of doing so is by producing more sophisticated goods. Many firms have now moved into areas such as advanced electronics, information technology, medical equipment and pharmaceuticals. As the Pearl River Delta continues to upgrade industries, Guangdong’s regional government hopes that improving road links will encourage investors to shift lower-value manufacturing to the less developed eastern and western parts of the province.

Growing the services sector is another way to lift productivity. Local entrepreneurs increasingly aspire to design and market products as well as assemble and ship them. If they succeed, this will help to ensure that a greater share of profits stay in the region. It will also create demand for professional and commercial services. Entrepreneurs will need the support of accountants, lawyers and financiers to help them build their businesses and sell their goods abroad.

As well as making goods, the Pearl River Delta is set to consume more of them. The average GDP per capita could double by 2030, according to a study carried out by Guangdong and Hong Kong local authorities. This has the potential to create new opportunities for companies offering consumer goods and products ranging from high-quality groceries to financial services and international travel.

Businesses in Guangdong benefit from close links with neighbouring Hong Kong and its advanced financial services, making it easier for them to secure financing and access foreign investors and customers. Transport links continue to develop with new bridges and rail lines under construction.

Though industrial transformation presents significant challenges, the Pearl River Delta has been instrumental in pivoting the world’s economic centre of gravity towards Asia over the last 30 years, and will continue to offer vast opportunities.

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