As China enters the first year of its 15th Five-Year Plan in 2026, local governments are actively rolling out robust policies to drive regional industrial competitiveness. However, as Michael Enright, a leading expert in industrial clusters, cautions, without rigorous methods to identify and characterize industrial localization, regional policies risk targeting the same industries across different places, rather than tailoring strategies to the specific nature of local economies.[1]
My recent study addresses this gap by providing a systematic and comparable analysis of industrial specialization across Chinese regions. Specifically, it applies the location quotient (LQ) method1 to the latest industrial output data for 31 manufacturing industries at the city, provincial and national levels. The analysis focuses on the specialization patterns of the Guangdong-Hong Kong-Macau Greater Bay Area (GBA) within the national context – particularly in comparison with the Yangtze River Delta2 (YRD) – and examines the nine Pearl River Delta (PRD) cities within the regional context. By combining LQs with industrial output shares, the study also provides a detailed assessment of the competitive strengths of these nine PRD cities in the regional economy.
Industrial Specialization of the GBA
LQs based on industrial sales revenue across 31 Chinese provinces show that the GBA (represented by Guangdong province) is specialized in 12 out of 31 manufacturing industries. The table summarizes the GBA’s specialized industries and compares them with those of the YRD.
It shows that, while a broad-based manufacturing powerhouse, the GBA’s specialization profile, especially in comparison with the YRD, reveals a clear competitive edge in consumer-oriented sectors (electronics, household goods, cultural and sports, apparel), mid-tech and moderately capital-intensive industries (rubber & plastics, electrical equipment, printing & media reproduction), as well as design-intensive industries (cultural & sports products and furniture). Many of these industries rely on flexible, agile manufacturing capabilities to respond quickly to fast-changing market demand.
An exception is the ICT equipment industry, where the GBA combines high value added with advanced technological content and substantial capital intensity. The region accounts for over a third of national sales in ICT equipment, far exceeding Jiangsu’s 15% share and the YRD’s combined share about 28%, reflecting the strong concentration of the country’s major ICT firms in the region.
Industrial Specialization in PRD Cities
LQ benchmarking uncovers a multifaceted PRD economy encompassing high‑tech industries, traditional manufacturing and resource‑based processing. The figure illustrates industrial specialization across the PRD, represented by the top three LQ industries in each city.
Combining LQs with cities’ provincial industrial output shares confirms that Guangzhou and Shenzhen are the GBA’s undisputed industrial leaders. Guangzhou excels in transport equipment and pharmaceuticals, Shenzhen in electronics, instruments and creative industries.
Foshan, Dongguan and Zhuhai form the second tier of industrial strength in the PRD. Foshan is a traditional-industry powerhouse, specialising in sectors ranging from textiles, furniture and metal products to electrical and general equipment, supported by ongoing smart transformation. Dongguan, though having lower provincial output shares and fewer specialised industries than Foshan, leverages its export‑oriented legacy and proximity to Shenzhen to remain competitive in traditional sectors such as paper and leather goods, while advancing in electronics and other high‑tech industries. Zhuhai is uniquely specialized in aerospace maintenance, driven by Airshow China and efficient connectivity to the Hong Kong International Airport, while also contributing to Guangdong’s chemical and pharmaceutical sectors.
The remaining cities do not hold substantial provincial shares in most of their specialised industries but still exhibit distinctive industrial strengths. Huizhou (a petrochemical hub anchored by the Daya Bay complex) and Jiangmen (specializing in railway, shipbuilding, aeronautics and other transport equipment, and chemicals) contribute to Guangdong’s capital-intensive sectors. Zhongshan’s industrial specialization profile resembles that of Foshan and Dongguan, but with much smaller provincial output shares, suggesting a need for further industrial consolidation and upgrading. Zhaoqing plays an upstream role in resource-based processing and is increasingly recognized for its contributions to waste utilization, highlighting circular-economy potential.
A Dynamic Region
Overall, the study demonstrates that a region’s industrial strength and development trajectory arise from a synergy of public policies, industrial heritage and resource endowments. While the analysis utilizes China's standard industrial classification, which may not capture the potential emerging industries hidden within its categories, it does not undermine the significance of the findings, as the author believes that regional development cannot rely solely on high-tech or cutting-edge industries. Traditional industries often serve as the backbone of regional economies, providing significant employment and household income.
I also share the principle upheld by many management theorists and entrepreneurs: that there are no sunset industries, only sunset technologies. Established industries can become regional advantages and drive sustainable development when supported by innovation, well-aligned strategies and favourable policies. The GBA exemplifies this, showcasing a dynamic and complementary division of labour that enables refined coordination and integration for mutual reinforcement.
1 LQ is a widely used tool in economic geography that compares a region’s share of a specific activity with its share of a broad aggregate. It enables comparability across regions or sectors of different scales and offers finer differentiation of industrial specialisation among regions.
2 The YRD officially includes the four provincial-level administrative regions of Shanghai, Jiangsu, Zhejiang and Anhui.
Endnote:
[1] Enright, Michael J. 2000. ‘The Globalisation of Competition and the Localisation of Competitive Advantage: Policies towards Regional Clustering.’ In Hood, N., Young, S. (eds) The Globalisation of Multinational Enterprise Activity and Economic Development. Palgrave Macmillan, London. https://doi.org/10.1057/9780230599161_13
• For the working paper on “Specialisation of Manufacturing Industries in the Guangdong-Hong Kong-Macau Greater Bay Area – Location Quotient Approach” by Dr Sophie Zhang, visit https://ustlfsci.hkust.edu.hk/reports/thought-leadership-brief-series-specialisation-manufacturing-industries-guangdong-hong-kong
Dr Sophie Z Zhang, Manager, HKUST Li & Fung Supply Chain Institute