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Evolution, Enhancement & Expansion

The Pear River Delta looks set to grow from strength to strength if current challenges can be overcome, say speakers at the Third PRD Conference

Guangdong's economy grew 14.6 per cent year on year in the first three-quarters of this year and the PRD region represents 95 per cent of Guangdong's economy. Despite this stellar growth, the PRD is facing a number of challenges, with energy and labour shortages being the most serious.

"We hear now that some factories are only able to operate four or five days a week," HKGCC Chairman Anthony Nightingale said. "And I am told that there are now 1.8 million job vacancies in the PRD."

Speaking to the 400-plus audience at the Third Pearl River Delta Conference organised by HKGCC and the South China Morning Post on November 1 in Zhongshan, Mr Nightingale said environmental protection, especially air pollution, was another challenge that needs to be solved.

The conference, entitled "Evolution, Enhancement and Expansion: The Delta within the Pan-PRD," provided a practical approach to how businesses in Hong Kong and China can actualise the benefits of the PRD and use it as a base to expand into the Pan-PRD.

More than 60,000 companies in the Pearl River Delta are invested in by Hong Kong businessmen and more than 200,000 Hong Kong people are living and working in the PRD. And despite the fact that China's other economic engine, the Yangtze River Delta is often viewed as a threat to Hong Kong, Mr Nightingale said that he expects the PRD itself to remain the bridgehead for Hong Kong business to expand into Mainland China. 

"The PRD is still Hong Kong companies' first choice in location to start their investment plans in the Mainland," he said.

Xie Pengfei, Deputy Director-General of the People's Government of Guangdong Province, and Director of the Center for Development Research of the People's Government of Guangdong Province, was similarly upbeat about the region's prospects.

"I believe that in the next 30 to 50 years, with development and community development in China, the Pan-PRD region will be one of the most vitalised regions in China with the fastest economic growth," he said.

He believes that Guangdong is entering a new stage of development as the region's wealth expands. Last year, urban savings in Guangdong reached some RMB1,360 billion, signifying the province is not only an economic powerhouse, but also that its citizens have a high level of disposable income.

"If you look at the lifestyle of Guangdong residents, they are already at the middle-class level compared to the nation-wide averages. Actually we are slightly better than middle class," he said. 

This rising wealth is creating opportunities for service industries, especially retailers. Peter Lau, Chairman and CEO of Giordano, predicts Guangzhou will grow into a shopping mecca to complement the luxury goods and latest designs that Hong Kong is renowned for internationally.

"These two cities would attract the other 30 million people in and around this region to actually make a trip to Guangzhou or to Hong Kong for shopping," he said. 

This could turn out to be a double-edged sword, however. Because people in the PRD will have more disposable income, competition for their RMB among retailers is expected to increase, Mr Lau predicts.

"There is going to be tremendous competition in retail especially, because retail has a very low entry barrier.  The cost of opening a shop in Zhongshan, for example, is relatively cheap.  So all of a sudden you are going to find a neighbour, an unwelcome neighbour that you never saw before next door," he said.

Wang Junzhou, General Manager, GOME Electrical Appliances Holding Ltd, which runs the Mainland's largest home appliance chain with 150 outlets, pointed out that Guangdong's added attraction for retailers is that they can get higher prices for their goods.

"For example, we can sell our TV sets in Guangdong for RMB6,000-7,000, but in Sichuan, in Guizhou, the price may be as low as RMB2,000," he explained, adding that land and labour costs in the two regions where their factories are located significantly affected the retail price.

Getting visitors in and out of Guangdong is expected to be smoother once major infrastructure works are complete. Airports, roads and railways will facilitate tourism, investment and trade in the delta, but worries about inter-competition and redundant projects are far from being amicably solved.

Hong Kong's status as the region's primary airport could come under attack sooner than expected as the Mainland authorities speed up the tempo on aviation reform.

Guangzhou's new Baiyun Airport is not expected to develop a network that would threaten Hong Kong until the turn of the decade. The cargo market, however, is soon expected to come under threat as Lufthansa, Air France and Northwest Airlines' freighter services are expected to take off from Baiyun next year.

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