11 December 2018

Guangdong’s rise to the elite US$1 trn GDP club

Guangdong, China’s largest provincial economy, is throwing down the GDP gauntlet to some of the world’s key economies.

Initial figures from the province’s reform and development commission reveal that Guangdong’s gross domestic product expanded by more than 8 percent last year to surpass US$1 trillion for the first time.

The achievement is all the more impressive considering there were only 15 countries worldwide that met that mark in 2012, according to the World Bank. If seen as a separate economy, Guangdong is expected to be in the same league as South Korea (US$1.13 trillion) and Mexico (US$1.18 trillion) in terms of nominal GDP in 2013.

Guangdong University of Foreign Studies professor Feng Xiaoyun {封小雲} told the Hong Kong Economic Journal that the breakthrough reflects the province’s push to overhaul its economic structure over the past few years.

In raw numbers, last year was a good one for Guangdong’s economy. The province’s export sector bucked the tepid national trend by growing 7.5 percent to near the US$1.1 trillion mark. But that growth rate was still slower than that of its GDP, suggesting that the province is shifting from an export-oriented model to a more balanced path of development. Guangdong governor Zhu Xiaodan {朱小丹} said in November that domestic consumption accounted for more than 54 percent of the output in 2012.

This dovetails with a shift from manufacturing to the services sector as the largest contributor to the province’s economy. Retailers in Guangdong sold altogether 2.55 trillion yuan (US$421 billion) worth of goods and services in the past year, up 12.3 percent from a year earlier.

Guangdong provincial mouthpiece Nanfang Daily gives some of the credit for these changes to the emergence of a number of technology and capital-intensive industries including electronics, semiconductors, IT, new energy as well as internet value-added services. The province is home to industry leaders such as Tencent (00700.HK), BYD (01211.HK), Huawei (002502.CN), ZTE (00763.HK, 000063.CN) and Vanke (000002.CN, 200002.CN). Leading commercial lights like Gree (000651.CN), Midea (000333.CN), China Merchants Bank (03968.HK, 600036.CN), Ping An Bank (000001.CN) and Guangzhou Automobile (02238.HK, 601238.CN) also call the province home.

But analysts warn that the province’s actual achievements may have been overstated as yuan appreciation over the past year gave a big lift to its GDP in US dollar terms. Also, Guangdong’s sheer economic size may not be so impressive given that it is home to more than 100 million people. Its per capita GDP — less than US$10,000 — still trails that of other wealthy coastal provinces like Zhejiang and Jiangsu.

Imbalances in regional development are also an issue. Guangzhou, Shenzhen, Foshan and Dongguan — all in the thriving Pearl River Delta — made up the bulk of Guangdong’s GDP — 70 percent as of 2012. But growth was sluggish in the rest of the province, especially in the northern and southwestern regions.

The provincial authorities have responded with a 1.2 trillion yuan infrastructure scheme to improve access to those less-developed counties and encourage businesses headquartered in the main growth centers to set up plants in designated industrial transfer zones outside the delta.

– Contact the writer at [email protected]



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