‘ World’s factory’ adapts to new era
Dongguan recovers from manufacturing woes through robust reform
Dongguan in South China’s Guangdong Province, once dubbed the “world’s factory” for its robust manufacturing sector that produced everything from toys to electronics sold around the globe, has been under tremendous pressure from rising labor costs and competition from countries in Southeast Asia.
But the city has made tremendous progress in upgrading its manufacturing industry and transformed its economy, thanks to its swift reform efforts, which could be a model for other places, according to a former official.
“There was a lot speculation that China would lose its competitive edge in the processing industry with labor costs on the rise, but Dongguan just showed that’s not the case,” Wei Jianguo, a deputy director of the China Center for International Economic Exchanges, told the Global Times on Thursday.
Wei, a former vice minister of the Ministry of Commerce, said, “Dongguan showed that the processing trade can still flourish in China and that China can still maintain its position as a top world manufacturing center” with proper reforms.
Recent data suggests that Dongguan has seen stable economic growth and industrial development. In the first quarter of 2017, Dongguan’s economy grew by 7.5 percent to 123.84 billion yuan ($ 18.3 billion), faster than the national average of 6.9 percent, according to the latest official data.
Value- added industrial output among major firms in the city grew by 10 percent, accelerating from a growth rate of 6.3 percent in the same period last year, the data showed. Value- added industrial output in advanced manufacturing accounted for 53.1 percent of the total value at 71.2 billion yuan.
Such developments present a stark contrast to earlier largely- negative commentaries published around the world about the downfall of the “world’s factory” after reports of some companies leaving the city for countries in Southeast Asia.
Swift reforms
Experts attribute the positive trend to Dongguan’s swift reforms amid daunting challenges.
Dongguan officials do not shy away from admitting the challenges they face but show determination that the city will maintain its status as a world- class manufacturing hub.
“It’s true some high- end manufacturing companies moved back to Europe and the US and some mediumand low- end manufacturing firms moved to Southeast Asia,” a Dongguan official told the Global Times Sunday.
But that doesn’t change the city’s determination to upgrade its once thriving manufacturing center and transform the city’s economic growth model by focusing on services. In fact, the officials said the city had issued its “Ten Majors Action Plan” which focuses on improving the business environment in the city.
Under the plan, the city has been focusing on supporting companies in areas such as advanced manufacturing through subsidies and tax incentives, streamlining administrative procedures for businesses, and improving infrastructure and living standards to attract talent.
The city has chosen 1,260 companies, including 179 from Hong Kong, for government support in areas such as policy, land, capital and talent, according to an article on the local government’s website published on July 7. The city aims to help these firms double their revenue by 2019 based on the 2016 level of 665.9 billion yuan, the article said.
The city also plans to invest more than 125.6 billion yuan in transportation projects during the 13th Five- Year Plan ( 2016- 20) period, with plans to expand subway networks in the city and connect the city to neighboring cities such as regional economic powerhouse Shenzhen.
But Wei, the former vice minister of commerce, said it was the city’s effort to build an open economy that helped it navigate through such tough times.
“The ultimate thing Dongguan did was to build a open economy,” said Wei. “Dongguan has one of highest levels of market openness in the country, probably even higher than Beijing, Tianjin and some pilot free- trade zones.”
Wei said the city made many efforts to attract foreign companies, including streamlined administrative procedures, reduced administrative fees and tax cuts for foreign companies. “It might be one of the easiest cities in China to conduct business, just one- stop could take care of it,” he said.
Wei further noted that Dongguan’s reform and opening up efforts could be duplicated in other places.
“As all the provinces are dealing with their own economic difficulties, they can look at Dongguan. I think it’s a great model,” he said, adding that Dongguan needs to further carry out supply- side reforms to lower costs and improve efficiency.
“As all the provinces are dealing with their own economic difficulties, they can look at Dongguan. I think it’s a great model.” Wei Jianguo Former vice minister of the Ministry of Commerce