Competition between Guangdong and Jiangsu: What experience Jiangsu should learn from Guangdong?
I recently read an article about competition between Guangdong and Jiangsu, which are two provinces with leading economy strength in China. Portion of the author’s analytics might be useful for us to better understand the development situation of Guangdong and Jiangsu.
Guangdong had been ranking first as the largest economy province in China for over 20 years since China carried out the country’s economy revolution policy. However, Jiangsu’s economy was drastically developed in recent 10 years, showing an increasing strength to catch up from behind of Guangdong.
According to the article, in comparison of each province’s GDP of first half year in 2015, Guangdong’s GDP in the first half year is only RMB 60 billion more than Jiangsu’s. This figure shows that the GDP difference between the two provinces is getting shrinkage. The author predicted that if in account of the current growth rate of Guangdong and Jiangsu, by 2016, Jiangsu will surpass Guangdong to be the largest economy province in China.
However, the author also remarked that during the competition, the two provinces should take the opportunity to us each other’s successful experience. The author also further pointed out that Guangdong still has cutting edges in the aspects as follows:
Development quality
In recent years, Guangdong slowed down in economy development, though Guangdong is still slightly superior to Jiangsu in terms of development quality.
In 2014, China’s gross GDP reached RMB 63,646.3 billion, among which, the fixed capital investment reached RMB 51,276.1 billion, accounting for 80.6%. In 2014, Guangdong was the province with the lowest fixed capital investment, which accounted for only 38.2%. Shenzhen, a city in Guangdong, was the only one with the fixed capital investment below 20%, accounting for only 17%.
Guangdong has already detached its economy development from the stage that relies on investment. Guangdong has stronger endogenous competence of growth. According to a recent research conducted by the author, Shenzhen ranked first among China’s top 5 cities with endogenous growth competence, followed by Guangzhou. In addition, Foshan, which is known as a famous manufacturing center in China, was in the top 5 list too. The research finding is a proof to show Guangdong’s advantage in endogenous competence. It is very significant to China and worthy of being learned by Jiangsu.
Multiple industry structure
Guangdong and Jiangsu are similar: Both provinces have leading industries with high and new technology; both are China’s manufacturing centers and have visible outward-oriented economy feature. But the two provinces have a big difference in terms of the industry structure and development model.
Firstly, Guangdong has more central cities than Jiangsu. The development level of Guangdong’s agriculture, industry, and service (hereinafter refer to three-industry) is also more developed than Jiangsu.
In 2014, Guangdong’s “three-industry” ratio reached 49.1%, while Jiangsu reached
46.7%. The difference occurred as Jiangsu has no enough central cities and the service industry in Jiangsu cannot achieve independent development.
Let’s look at the “three-industry” ratio of main economy cities in Guangdong and Jiangsu. In 2014, Guangzhou’s ratio was up to 68.8%, while Nanjing’s ratio was up to 55.8%. The other two cities in Guangdong, namely Shenzhen and Dongguan, the “three-industry” ratio of each was exceeded by 50%. However, Jiangsu’s other two economy cities, namely Suzhou and Wuxi, the ratio of each was not above domestic average.
Nearby Hong Kong, Shenzhen and Guangzhou are still the two magnates in the Pearl River Delta. On the other hand, in the Yangtze River Delta, Shanghai is absolutely a central city. The service industry in Shanghai brought extrusion to other cities in the Yangtze River Delta. Over several years of future, Jiangsu’s “three-industry” ratio might not have a sharp rise.
Secondly, Guangdong’s domestic demand is stronger than Jiangsu.
According to the statistics, Guangdong’s gross retail amount of the social consumption goods reached RMB 2.27 trillion in 2012, which is RMB 400 billion more than Jiangsu. The latter reached RMB 1,821.53 billion. Under impact of international financial crisis, Guangdong’s overall economy suffered a setback, but Guangdong still maintained undefeated, thanks to its vast domestic demand.
Thirdly, Guangdong’s industry structure is more diversified.
In the past, Jiangsu used collective economy as the model core. Since the late 90s, the economy of township enterprises in Jiangsu has seen an increasingly recession. So Jiangsu has turned to develop its economy by a new strategy, which focused on outward-oriented economy development. Jiangsu began to cooperate with Taiwan, Singapore and other American and European countries and regions. A number of industries zones, such as Suzhou industrial zone, Suzhou new town, Kunshan economic development zone, Wujiang development zone, etc., were established successively. This indicates that the domination of Jiangsu’s economy structure has been changed from local enterprises to foreign enterprises.
Jiangsu had formulated the layout for industry transform and upgrade since it imported foreign capital. The pillar industries in Jiangsu, for example, the IT industry, achieved a growth with leaps and bounces by taking the chance when Taiwanese industry was transferred. BENQ and ASUS, the two IT giants landed in Suzhou to make the city stand out from other ones and Suzhou became the capital of China’s IT industry. Suzhou’s communication and electronic industry also sprang up by following this way.
Currently, Jiangsu has set up with pharmaceutical manufacturing, aerospace manufacturing, electronic and communication equipment, and other new and high technologies, which are pillar industries in Jiangsu. Among which, the electronic industry became the first pillar of Jiangsu. However, among Jiangsu’s traditional industries, the proportion of those with intensive labors decreased visibly.
Guangdong is also an important place where brought outward-oriented enterprises together. Overall, Guangdong’s manufacturing industry shows polarization. The foreign enterprises in Shenzhen and the local manufacturing enterprises in Foshan and other places are mainly based on traditional labor intensive industry, but in Shenzhen, Guangzhou and other places, in where, the high-end manufacturing industry is mainly based on the local enterprises. Though the high-end industry in Guangdong is powerful, but Jiangsu is a cut above in terms of the total output of the high-end industry.
Among top 500 private enterprises, the listed ones from Jiangsu are more than Guangdong. But Jiangsu’s economy mainly relies on foreign enterprises, while Guangdong’s main industry like ZTE Corporation, Tencent, Kingdee, Launch, etc, all are local enterprises.
In 2012, Guangdong’s leading manufacturing industry saw an increase rate of 8.3%. However, comparing to Jiangsu, the proportion of the high-end and traditional industry in Guangdong is still not perfect. The proportion of the traditional manufacturing is still over sized. This is the biggest key point for Guangdong to transform industry in future.
Different industry structure leads to different development model. Jiangsu’s new outward-oriented economy development model has been all the go for nearly ten years. But Jiangsu’s industry might encounter threats once the foreign capital is withdrew as Jiangsu’s new economy development model is short of foundational industry.
Guangdong is not the same. At the beginning of this year, Dongguan encountered a severe frustration; on the whole, Guangdong’s strength has not been impacted as Guangdong has a more multiple industry structure.
Guangdong’s development model is different. On the whole, Guangdong’s industry structure is more diversified. From middle age of 90s till now, Guangdong has formed multiple development models: Dongguan represents the outward-oriented model; Shenzhen represents the second model, which focuses on new and high technology industry. In addition, Guangzhou develops auto industry and other high-end manufacturing sectors; Foshan represents the third model, which is a manufacturing base of home appliance, wooden products, and furniture. Therefore, Guangdong is back up with strong local economy.
Moreover, as representative cities, Zhanjiang and Maoming also carried out a model in cooperation with central government to expand the chemical industry, stainless steel industry, and big projects. At the same time, Guangdong as the leading economy province in China, it brought up Guangzhou and Shenzhen, which are two center cities in China. The “three-industry” in Guangdong is developed. Guangdong has a mixed type of development model, which is contributed to create a multiple industry structure and consolidate Guangdong’s risk-resistance strength for economy.
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