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6 White Paper on the Business Environment in China
3.1 Introduction to South China
The term “South China” immediately brings to mind the Region 2015 Minimum 2015 Minimum
Pearl River Delta (PRD) - China’s manufacturing center and Monthly Wage Hourly Wage
beating “economic heart.” Broadly defined as including nine cit-
ies in southeast Guangdong province (Guangzhou, Shenzhen, Shenzhen RMB2,030 RMB18.5
Dongguan, Foshan, Huizhou, Jiangmen, Zhaoqing, Zhong-
shan and Zhuhai), the PRD’s true centers are to be found in Guangzhou RMB1,895 RMB18.3
Guangzhou (the provincial capital) and Shenzhen (China’s first
and most successful special economic zone). Zhuhai * RMB1,650 RMB15,8
To think of the PRD only in terms of these cities, howev- Dongguan RMB1,510 RMB14.4
er, would be to ignore the instrumental role in economic de-
velopment played by the special administrative regions (SARs) Foshan RMB1,510 RMB14.4
of Hong Kong and (to a lesser extent) Macau, with which the
cities of Guangdong have long leveraged their proximity. The Zhongshan RMB1,510 RMB14.4
Closer Economic Partnership Arrangements (CEPA) con-
cluded in 2003 between Mainland China and Hong Kong and Jiangmen RMB1,350 RMB13.3
Macau, respectively, have phased out tariffs and trade barriers,
liberalized trade in services and boosted trade and investment Huizhou RMB1,350 RMB13.3
in Guangdong. As such, the term “Greater PRD” was coined to
refer to the PRD, Hong Kong and Macau as a group. Zhaoqing RMB1,350 RMB13.3
The more remote, less developed (and often more mountain- *Zhuhai independently sets minimum wages
ous) towns of Guangdong province and neighboring provinces
of Fujian, Hainan and the Guangxi Zhuang Autonomous Region stantial but nevertheless decreasing productivity growth. This
are the final pieces of the South China puzzle. A series of eco- has been a major driver behind the flight of labor-intensive in-
nomic and infrastructure-focused government policies have been dustries from China in recent years to lower-cost alternatives
designed to better connect the Greater PRD and to improve its such as Vietnam. Other factors pulling investment away from
links to these adjoining regions. the region include China’s increasing emphasis on the service
sector over manufacturing, as well as decreasing industrial land
The PRD Today availability in the PRD.
The PRD has long been considered the heart of high-tech Despite this, and spurred by on-going processes of indus-
China, with Shenzhen, Guangzhou and Dongguan (as well as trialization, urbanization and marketization, the PRD remains
Zhuhai and Huizhou) considered as centers for the manufac- home to a vibrant economy, which the government (at all lev-
ture of consumer electronics and other high-tech products. The els) is doing its best to reshape. To accomplish this, some lo-
PRD hosts direct and indirect production arrangements for a cal governments are implementing stricter industry approval
wide variety of goods sold worldwide, offering both original measures, ranging from increased minimum registered capital
equipment manufacturing (OEM) and branded goods. The thresholds (some raised as much as tenfold) to more stringent
Shenzhen Stock Exchange is the national leader for high-tech criteria for total investment or output value per square meter
enterprises; China’s leading technology enterprises, including invested. Furthermore, local governments in more heavily-in-
Huawei, Tencent and ZTE, were all founded in Shenzhen. vested areas are increasingly refusing to approve investment
from enterprises in non-capital-intensive, low value-added or
Yet the PRD is a region in transition. In recent years, low environmentally harmful industries, forcing such enterprises to
labor costs (once the major attraction of the region) have been locate elsewhere in the PRD or further inland. Lastly, research
increasing rapidly. Minimum labor costs are one measure of and development, with government support, is also increasing
this, with Shenzhen as a particularly illuminating example. The in the region. Together, these trends can be seen as indicative of
city raised its minimum monthly wage by RMB 222 in March a maturing economy.
2015, to RMB 2030, making it the highest nationwide . Many
other PRD cities raised their minimum wages in 2015 as well. Future Outlook
Increasing labor costs stand in contrast to the region’s sub- “The Outline of the Plan for the Reform and Development of
the Pearl River Delta (2008-2020),” put forward by the National
248 Development and Reform Commission (NDRC), describes the
PRD region as an experimental area for scientific development
and calls for the creation of three super-metropolitan areas, re-
spectively, Guangzhou and Foshan, Hong Kong and Shenzhen,
and Macao and Zhuhai. Provided with greater autonomy, the
PRD is expected to be at the forefront of new economic patterns
3.1 Introduction to South China
The term “South China” immediately brings to mind the Region 2015 Minimum 2015 Minimum
Pearl River Delta (PRD) - China’s manufacturing center and Monthly Wage Hourly Wage
beating “economic heart.” Broadly defined as including nine cit-
ies in southeast Guangdong province (Guangzhou, Shenzhen, Shenzhen RMB2,030 RMB18.5
Dongguan, Foshan, Huizhou, Jiangmen, Zhaoqing, Zhong-
shan and Zhuhai), the PRD’s true centers are to be found in Guangzhou RMB1,895 RMB18.3
Guangzhou (the provincial capital) and Shenzhen (China’s first
and most successful special economic zone). Zhuhai * RMB1,650 RMB15,8
To think of the PRD only in terms of these cities, howev- Dongguan RMB1,510 RMB14.4
er, would be to ignore the instrumental role in economic de-
velopment played by the special administrative regions (SARs) Foshan RMB1,510 RMB14.4
of Hong Kong and (to a lesser extent) Macau, with which the
cities of Guangdong have long leveraged their proximity. The Zhongshan RMB1,510 RMB14.4
Closer Economic Partnership Arrangements (CEPA) con-
cluded in 2003 between Mainland China and Hong Kong and Jiangmen RMB1,350 RMB13.3
Macau, respectively, have phased out tariffs and trade barriers,
liberalized trade in services and boosted trade and investment Huizhou RMB1,350 RMB13.3
in Guangdong. As such, the term “Greater PRD” was coined to
refer to the PRD, Hong Kong and Macau as a group. Zhaoqing RMB1,350 RMB13.3
The more remote, less developed (and often more mountain- *Zhuhai independently sets minimum wages
ous) towns of Guangdong province and neighboring provinces
of Fujian, Hainan and the Guangxi Zhuang Autonomous Region stantial but nevertheless decreasing productivity growth. This
are the final pieces of the South China puzzle. A series of eco- has been a major driver behind the flight of labor-intensive in-
nomic and infrastructure-focused government policies have been dustries from China in recent years to lower-cost alternatives
designed to better connect the Greater PRD and to improve its such as Vietnam. Other factors pulling investment away from
links to these adjoining regions. the region include China’s increasing emphasis on the service
sector over manufacturing, as well as decreasing industrial land
The PRD Today availability in the PRD.
The PRD has long been considered the heart of high-tech Despite this, and spurred by on-going processes of indus-
China, with Shenzhen, Guangzhou and Dongguan (as well as trialization, urbanization and marketization, the PRD remains
Zhuhai and Huizhou) considered as centers for the manufac- home to a vibrant economy, which the government (at all lev-
ture of consumer electronics and other high-tech products. The els) is doing its best to reshape. To accomplish this, some lo-
PRD hosts direct and indirect production arrangements for a cal governments are implementing stricter industry approval
wide variety of goods sold worldwide, offering both original measures, ranging from increased minimum registered capital
equipment manufacturing (OEM) and branded goods. The thresholds (some raised as much as tenfold) to more stringent
Shenzhen Stock Exchange is the national leader for high-tech criteria for total investment or output value per square meter
enterprises; China’s leading technology enterprises, including invested. Furthermore, local governments in more heavily-in-
Huawei, Tencent and ZTE, were all founded in Shenzhen. vested areas are increasingly refusing to approve investment
from enterprises in non-capital-intensive, low value-added or
Yet the PRD is a region in transition. In recent years, low environmentally harmful industries, forcing such enterprises to
labor costs (once the major attraction of the region) have been locate elsewhere in the PRD or further inland. Lastly, research
increasing rapidly. Minimum labor costs are one measure of and development, with government support, is also increasing
this, with Shenzhen as a particularly illuminating example. The in the region. Together, these trends can be seen as indicative of
city raised its minimum monthly wage by RMB 222 in March a maturing economy.
2015, to RMB 2030, making it the highest nationwide . Many
other PRD cities raised their minimum wages in 2015 as well. Future Outlook
Increasing labor costs stand in contrast to the region’s sub- “The Outline of the Plan for the Reform and Development of
the Pearl River Delta (2008-2020),” put forward by the National
248 Development and Reform Commission (NDRC), describes the
PRD region as an experimental area for scientific development
and calls for the creation of three super-metropolitan areas, re-
spectively, Guangzhou and Foshan, Hong Kong and Shenzhen,
and Macao and Zhuhai. Provided with greater autonomy, the
PRD is expected to be at the forefront of new economic patterns
