29 Apr 2024
Since the high profile Two Sessions meeting in March, much of the policy talk has been about “new quality productive forces” and modernizing the country’s industrial base. Given Guangdong’s status as mainland China’s manufacturing powerhouse, we expect the Greater Bay Area (GBA) to benefit. Against this high-tech backdrop, we address three key aspects – how the region’s manufacturing sector is changing, what can make it evolve further, and important best policies for future growth.
Guangdong Province remains the country’s largest manufacturing base for electronic goods like smartphones and computers. However, growth has slowed and this sector is highly export dependent, so there is an urgent need to develop strategically important industries. We think the province’s manufacturing future lies in new economic sectors like new energy vehicles (NEVs), integrated circuits, and optoelectronic devices. Production in all three grew rapidly last year (see Charts 1 and 2).
Manufacturing loans in the province rose 24.4% y-o-y in 2023, led by bank lending to advanced manufacturing (up 37%) and high-tech manufacturing (up 35%) (Southcn.com, 26 January). Guangdong has also rolled out tax benefits to encourage R&D investment, and while technological advances need backing from the capital market, the GBA has a clear advantage here – Hong Kong’s status as an international financial centre.
Businesses in the GBA should be able to benefit from improving the flow of people, data, and capital, especially for technology-driven projects. The EU’s best practices in this area could be a good reference for the GBA. In addition, a joint task force of GBA local governments is discussing a “one-stop shop” for business registration to improve co-operation and support foreign direct investment. Finally, a huge shortfall of skilled manufacturing workers is forecasted by 2025, according to the Ministry of Industry and Information Technology. The government is making efforts to reform the college curriculum and provide tailored vocational training.
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