Guangzhou: Industry, Economics, and Policy
Guangzhou, the capital city of Guangdong province, is an important political, economic, industrial, and cultural center in the South China region.
North of Hong Kong, Macau, and the South China Sea, Guangzhou’s location in the Pearl River Delta has long secured the city’s position as the southern gate of mainland China. As the origin of the ancient Chinese Maritime Silk Road, it was the oldest foreign trading port in mainland China and the only one that has never been closed.
Now, as one of the prominent cities included in the Guangdong-Hong Kong-Macau Greater Bay Area (GBA) plan and a key location on the Belt and Road Initiative (BRI), Guangzhou is growing into a global transport hub, trade center, and a science and technology innovation center.
Guangzhou boasts of advanced infrastructure, including the third-busiest airport (Guangzhou Baiyun International Airport) in terms of passenger throughput, the fourth-largest port (Guangzhou Port) in terms of cargo throughput, and the most well-connected railway network in mainland China.
The China Import and Export Fair, or Canton Fair, is the most prestigious trade fair in China, and is held in Guangzhou every spring and autumn. A mass of merchants and foreign enterprises from over 200 countries and regions attend the fair every year.
Guangzhou also has the third largest number of national high-tech enterprises (over 11,000) and is home to the majority of the province’s university personnel and scientific and technological workers.
The 2018 White Paper on the Business Environment in China, released by The American Chamber of Commerce in South China, found that Guangzhou is the most popular investment city in China.
In 2018, over 30,000 foreign-invested enterprises had settled in Guangzhou. Overall, 297 of the Fortune Global 500 companies have set up 921 projects in Guangzhou. Of the total Fortune Global 500 companies, 120 companies have their headquarters or regional headquarters in Guangzhou.
The tertiary industry (service sector) is the main contributor to Guangzhou’s GDP, representing 71.7 percent of the GDP in 2018.
Automobiles, electronics, and petrochemicals are the main three pillar industries of Guangzhou. These three industries’ combined output value account for 55.5 percent of the city’s total GDP.
Other industries, like wholesale and retail trade, finance, real estate, leasing business service, and transportation services also contribute significantly to the city’s GDP.
Moreover, designated as a “Made in China 2025” pilot demonstration city, Guangzhou’s high-tech industry is flourishing. In 2018, the output value of its advanced products and high-tech products represented 59.7 percent and 13.4 percent, respectively, of the total output value of all industrial enterprises above a designated scale. (By designated scale we mean enterprises with an annual business income of RMB 20 million / US$2.9 million and above.)
Other economic indicators
Investment and consumption:
- Total investment in fixed assets: RMB 593.8 billion (US$88.2 billion); and
- Total retail sales of consumer goods: RMB 925.6 billion (US$137.4 billion).
Import and export:
- Total value of imports and exports: RMB 981 billion (US$145.6 billion);
- Total value of imports: RMB 420.3 trillion (US$62.4 billion); and
- Total value of exports: RMB 560.7 trillion (US$83.2 billion).
Policies and trends: Why should firms look to set up in Guangzhou
Guangzhou’s Comprehensive Urban Plan: 2017-2035 (Draft) aims to build Guangzhou into a “livable flower and dynamic global city” by 2035.
Businesses should note that China has set a mandate for its cities to focus on smart resource consumption and environmental protection, which will be a part of Guangzhou’s urban growth strategy as well.
In addition, Guangzhou will have to coordinate with the Greater Bay Area’s development objectives, such as strengthening the city’s connections with Hong Kong and Macau.
Guangzhou’s Nansha New Area sub-zone of the China (Guangdong) Pilot Free Trade Zone, for example, was launched in 2015 and is designed to promote free trade between Guangdong, Hong Kong, and Macau. Other important economic zones are Guangzhou Development District , Guangzhou Nansha Development Zone, the Airport Economic Zone, Zengcheng Economic and Technology Development Zone, and Sino-Singapore Guangzhou Knowledge City.
These development zones and other smaller industrial parks produce about 70 percent of the city’s total industrial output and accommodates more than 9,000 enterprises and more than one million employees, according to the Chamber of Commerce of Guangzhou.
Moreover, Guangzhou is also developing into an international hub of shipping, aviation, and sci-tech innovation.
The regional government has labeled high-tech industries – new generation information technology, artificial intelligence, and the biopharmaceutical industry (“IAB” industries) and new energy and new materials industries (“NEM” industries) as future competitive industries.
Guangzhou hopes to attract foreign investment in these industries and to set up in its development zones, offering streamlined business processes and financial subsidies.
On June 6, 2019, the Guangzhou government released 59 measures to boost its manufacturing sector. The measures reduce the examination and approval time of establishing enterprises to four working days and relaxes the tax and social insurance burden, land cost, and transportation costs on enterprises.
Guangzhou is among the most pro-growth and investment-friendly destinations in China, yet, setting up a foreign-invested enterprise (FIE) or a factory here may still be challenging for foreign investors with limited or no experience of doing business in China.
Determining the right corporate structure, making use of Guangzhou’s preferential policies and subsidies, and building relationships with key authorities will require local expertise on the ground.