The Pearl River Delta (PRD)

General Overview

The PRD Economic Zone (PRDEC), which consists of Guangzhou, Shenzhen, Dongguan, Foshan, Zhongshan, Zhuhai, Jiangmen and parts of Huizhou and Zhaoqing, has since the start of the ‘Open Door’ policy been China’s most vibrant economic region. The region is now an important industrial market for all kinds of inputs, materials, and capital goods as well as a major market for transport and transport related services.

Per capita income has been growing steadily over the past thirty years, hand in hand with consumer expenditures, making cities such as Shenzhen and Guangzhou among the most prosperous in the Chinese Mainland. The region’s proximity to Hong Kong, one of the primary catalysts for the region’s early development means its consumer tastes closely follow those of the west, creating attractive markets for foreign retailers.

Although the PRDEC accounts for only 0.4 percent of China’s total land mass and less than 4 percent of the nation’s population, it accounts for more than 10 percent of the country’s GDP, and attracts almost 20 percent of all inbound FDI.

The Greater and Pan-PRD Economic cooperation zone

At present Hong Kong companies employ more workers in the PRD region than the entire population of Hong Kong. With more and more businesses in the PRD straddling the three administrative regions of Guangdong, Hong Kong and Macao the government has established the Greater Pearl River Delta (GPRD) Economic Cooperation Zone. The role of which is to integrate Hong Kong and Macao into the wider Chinese economy by streamlining investment regulation across the entire region and rationalising and integrating logistics development in the GPRD Area.

Included in the zone are Hong Kong, Macao and nine Guangdong municipalities. The infrastructure projects spearheading integration include improved road infrastructure, the construction of the Guangzhou terminus of the national intermodal rail network that will incorporate 18 full containerised rail hubs nationwide, and increased air freight integration between Hong Kong and Guangzhou Baiyun Airport.

At present Hong Kong is still China’s biggest investment conduit. In an effort to stretch the benefits of that investment further into the southern China hinterland the government has also established the Pan-PRD Economic Zone. With economic growth and prosperity in the coastal regions far outstripping the west the government, and business, are keen to move production further inland.

Increasingly as Shenzhen becomes a victim of its own success and land and wage rates rise, forcing the industrial hinterland further back into China makes sense. Integrating logistics infrastructure in the eight provinces surrounding the GPRD is hoped to encourage investment into the wider South China region as a whole.

Logistical overview

As with many of China’s primary economic hubs, the PRD has traditionally been more integrated into the global economy than into the national economy. Hong Kong is perhaps the example par excellence in this respect – with other cities in the region following to lesser degrees.

In this vein, the logistical structures of the region have for many years been primarily focused on binding the region into the global system of production. Following Hong Kong’s lead in the sixties and seventies, the PRD has been quick to build high quality, internationally operated, world class port facilities – primarily in and around the mouth of the Pearl River. Logistics services in the region have focused primarily on integrating the region with Hong Kong and providing export services and infrastructure for manufacturing enterprises taking advantage of the zone’s preferential economic policies.

However, as competition between enterprises has developed, and wage and rent prices have grown as the region prospered, regional development strategies have begun to look inland at development of hinterland cargo generation. In part to take advantage of lower cost production bases, in part to reap the benefits of the government’s ‘Go-West’ strategy, and in part to fill the massive export capacity coming online in the region and the shortfall created by the global economic slowdown.

Key Dynamics

  • The changing role of Hong Kong – port facilities in Hong Kong are very likely to see their role in the region diminish as infrastructure across the border increasingly rivals its more expensive neighbour. Also, with the commencement of direct trading links with the island of Taiwan cargo traditionally transhipped through the Special Administrative Region is likely to significantly drop off. Added to this, transhipment business at the port is likely to be additionally affected by the development of deep water ports in Vietnam–thereby negating much of the current need for transhipment in Hong Kong.
  • Shenzhen and Guangzhou airports – freight capacity, better facilities, improved customs clearance environments, supporting infrastructure networks and improved services at both Shenzhen and Guangzhou airports are likely to put increased pressure on Hong Kong airport as a lower cost alternative. By 2015 cargo throughput at Shenzhen airport is planned to reach 2.5m tonnes.
  • Ports in the PRD are and will increasingly compete for shares of hinterland cargo by extending their cargo draw capacity further inland through the expansion of intermodal rail facilities nationwide and dedicated port-to-city container railways (e.g. Shekou-Changsha). Industrial development on the western banks of the Pearl River is likely to accelerate as new port facilities on the western shore open up the relatively underdeveloped and lower cost region to increased access and direct investment.
  • Macroeconomic policies to integrate the PRD into the wider southern and southwest regions of China will likely increase the flow of goods through the PRD gateway to the world.
  • Increased GDP and consumer expenditure will continue to make the region an attractive market for international manufacturers, especially those specialising in high-value consumer goods.
  • Development of the Pan-PRD regions – the Pan-PRD region is an economic cooperation zone that includes the provinces of Sichuan, Yunnan, Guizhou, Hunan, Jiangxi, Fujian, the island and province of Hainan and the autonomous region of Guangxi.
  • The construction of a 50 km sea bridge connecting Hong Kong, Macao, and Hong Kong, commenced in December 2009, will integrate the Pearl River Delta area to an unprecedented degree upon its completion in 2015.