Testing time for testing ground
Guangdong has to reinvent itself if it wants to stay ahead of the competition, warn investors.
GUANGDONG, which has earned a reputation for being the “world’s factory”, has long been the richest province in China.
Its gross domestic product (GDP) in 2014 was valued at 6.78 trillion yuan (RM4.15 trillion) and the southern province is targeting 7.5% economic growth this year.
But the overall economic slowdown in China, coupled with increasingly expensive labour, is posing challenges to foreign investors.
The European Union Chamber of Commerce in China, in its recently published “South China Position Paper”, cautioned that the region has to be more aggressive in reinventing itself as a preferred investment destination when facing competition from other alternatives.
The chamber’s South China chapter chairman, Alberto Vettoretti, said the region needed to ensure a larger scale of “three flows”, referring to the flow of people, goods and services, and information.
“Guangdong has been a victim of its own success and excess, having benefited from a sheer endless influx of cheap migrant workers from all across China and an effective, albeit increasingly disrupted, supply chain within the region,” he said.
In the process of transforming from a lowcost manufacturing hub to an economy emphasising high-tech industries, the most populous province in China has to address the problems plaguing investors.
Improving quality of life and Customs regulations, protecting intellectual property rights, enhancing regulatory transparency and ensuring consistent implementation of policies were some of the recommendations put forward by the chamber.
Slow Internet speed and the Great Firewall of China, which keep certain social media sites, websites and content deemed sensitive on the Internet at bay, are affecting business development in South China, said the chamber.
“Essentially, this means that companies are not able to carry out R&D to the best of their capabilities, which reduces efficiency and impacts their bottom line,” it said.
A majority of the businesses polled cited long waiting time, repeated trials, and a complete inability to communicate, run searches and do research as having a negative economic impact on their internal processes.
Thirteen per cent of the companies said they either put their R&D plans on hold or decided not to invest in R&D altogether in China.
The chamber suggested that the government increase Internet speed and lift restrictions on the Internet if it was committed to developing South China as a hub for high-tech industries.
Language barrier and cultural differences remained one of the obstacles faced by European investors, hindering effective communication.
The chamber, which has over 300 members in South China, proposed that the local government emulate Foshan’s system by hiring foreigners to communicate with foreign companies directly on behalf of the Chinese government.
The position paper also pointed out that shortages of talent with engineering and technical skills could be overcome by supporting the establishment of vocational schools and providing incentives for companies to develop technical training for their employees.
In April this year, the Guangdong Free Trade Zone, which encompasses the Nansha, Qianhai-Shekou and Hengqin zones, was officially established.
It brings the Pearl River Delta one step closer to realising its reform and development plan by 2020.
“South China has always been a testing ground for the central government to try out new policies and extend them to the rest of the country if proven successful,” Vettoretti said.
“European companies should seize the opportunity to engage with South China at this time of transition.”