Upgrade for China export hub comes at wrong time
SHENZHEN, China (Reuters) - Just as China's "world factory" of the Pearl River Delta sees its first signs the worst of the global crisis is over, it faces a fresh threat from a drive to upgrade its rusting, low-end industrial zones.
Critics say the push will cause a fresh wave of factory closures and add to the rising loss of jobs, doing further harm to a region that produces a third of China's exports and generates a tenth of economic activity.
The incentive for change is clear. After 30 years of rapid industrialisation, officials say the Pearl River Delta's (PRD) overwhelmingly low-cost, low-margin export-focussed manufacturing assembly model is increasingly unsustainable.
The region in Guangdong province north of Hong Kong has also been overtaken by the Yangtze River Delta -- a much larger region near Shanghai in eastern China that has had more success at attracting high-tech industry investment.
China's exports are still falling rapidly from year-earlier levels but data on Thursday showed they rose a modest 0.2 percent from April, adding to other evidence that the economy may be on the path towards recovery.
But some are questioning the timing of the push for more advanced industry in the PRD, which has seen a collapse in orders from major buyers in the United States and Europe wipe out 20-40 percent of its business.
Thousands of factories in the sprawling industrial area known as the workshop of the world have closed and the government has estimated more than 23 million rural migrant workers have lost their jobs nationwide, with the PRD particularly hard hit.
"The world is in chaos, yet the Guangdong government has prematurely launched a campaign of upgrading the industrial structure," said Dong Tao, a China economist for Credit Suisse.
"That strategy has some flaws and the timing couldn't be worse," Tao added.
"EMPTY THE CAGE"
Guangdong's reformist Communist Party leader Wang Yang is pushing for a shake-out of "backward productive forces." Even as the slump worsened last year, he called for the chance to "to empty the cage for new birds."
"In the Pearl River Delta there is only so much land. The cage is only this big, and yet to attract advanced industries there is no land left," Wang Yiyang, the deputy director of the Guangdong Development Research Centre.
"What can you do? So you need to phase out the old labour-intensive industries to create more space," Wang, who advises on the PRD's development strategy, told Reuters.
The strategy to phase out old factories remains more a guideline than mandatory policy right now, but it is backed by Beijing, whose top economic planning agency published a "2020" reform and development blueprint to transform the PRD into an advanced manufacturing and services hub.
"The overall industrial level is low ... the innovative capability is insufficient, and the overall competitiveness is not strong," the report said. Continued...
