The Pearl River Delta, with Guangzhou located at its centre, was once dubbed “the world's factory floor”. However, with COVID-19 casting a shadow over the manufacturing industry, the city is beginning to embrace new industries.
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Guangzhou has always taken pride in its manufacturing industry. But the growth rate of Guangzhou’s secondary industry dropped by 7 percent during the first half of the year; it might be because of the basis of Guangzhou’s manufacturing industry – a considerable part of its industrial structure is composed of traditional manufacturing industries, such as petrochemical and automobile manufacturing, which are greatly affected by the pandemic, according to an analysis report by the National Business Daily.
Automobile, petrochemical and electronic manufacturing have been the three pillar industries of Guangzhou, enabling it to achieve rapid and remark-able development during the past 15 years. But in fact, the growth rates of those industries have dropped sharply since 2014, and they are no longer the main driver of the economic growth in the region.
Han Yu, a partner at Kingpound Law Firm, points to three reasons why Guangzhou’s traditional manufacturing industry can’t keep up the momentum: (1) strict environmental protection supervision has made it difficult for the heavily polluting manufacturing industries such as the chemical industry to survive; (2) in the context of national industrial upgrading, the heavy industry has become less competitive; and (3) the market demand for products of such enterprises is declining, too.
"Guangzhou is reinventing itself from a 'world's factory floor' to a hub of strategic emerging industries and advanced manufacturing. The integration of digital and industrial development will become a new trend."
-Lu Yuefeng, Dentons
The sagging performance of the traditional manufacturing industries is reflected in the legal services market. “The business performance decides how much the companies are willing to pay for legal services fees. With the decline of traditional industries, there’s no longer high demand for lawyers serving in these industries, such as traditional legal consulting works,” Han says.
But changes have taken place.
“Guangzhou is reinventing itself from a ‘world’s factory floor’ to a hub of strategic emerging industries and advanced manufacturing. The integration of digital and industrial development will become a new trend,” says Lu Yuefeng, a director at Dentons’ Guangzhou office.
Wu Guoquan, a director at DeHeng Law Offices, tells ALB that lawyers have observed such changes in their legal services. “There have been a number of industrial Internet projects launched in Guangzhou since 2018; and some large domestic and foreign technology companies in Guangzhou have started to apply technologies in industrial production ... In particular in the machinery manufacturing and processing industry, we have some clients who widely use robots, manipulators and other technological means in the production of equipment.”
Guangzhou is also building advanced manufacturing zones, such as the advanced manufacturing cluster in the Guangzhou Development Zone in Huangpu District, the National New Industrialization Demonstration Base (in big data) in Pazhou, and the Nansha Industrial Base.
According to the Three-year Action Plan for Making Guangzhou a City of Advanced Manufacturing Industry, by 2021, Guangzhou will build two world-class advanced manufacturing clusters in terms of automobiles and ultra-high-definition video and new display, and build four national advanced manufacturing clusters, including new materials, urban consumption industry, high-end equipment manufacturing, and biomedicine.
All these efforts have started to pay off. Autonomous driving companies Pony.ai and WeRide.ai are now headquartered in Nansha; and Xpeng Motors, headquartered in Tianhe District of Guangzhou, completed its $1.5 billion IPO on the New York Stock Exchange at the end of August. And industrial clusters of new display, semiconductor and integrated circuit have also taken shape.
A NEW IMAGE
While the city is accelerating the trans-formation of traditional industries, Guangzhou has something deeper to think about: what kind of image the city is trying to build? Especially in the Greater Bay Area, how to make Guangzhou a city that is different from Shenzhen, Hong Kong or other places?
In fact, the Outline Development Plan for the GBA already gives a quite clear positioning for Guangzhou, that is, Guangzhou should “be given full play to the leading role of the national central city, and should comprehensively strengthen its functions as an international trade centre, a comprehensive transportation hub, and a technology, education and cultural centre.”
In order to match the above-said expectations, Guangzhou is picking up speed to attract businesses of emerging industries; and its first target is the new economic industries represented by the Internet.
“Guangzhou had a painful experience in (the Internet) field. There were several Internet companies started up in Guangzhou, but it failed to keep them here. For example, NetEase moved from Guangzhou to Hangzhou. In the era of mobile Internet and 5G, Guangzhou has a strong desire to win a place in this sector in the future competition,” Han of Kingpound says.
Drawing on its advantages in terms of education, scientific research and talent, Guangzhou has started to vigorously build an Internet industry cluster in recent years. Wu tells ALB that Pazhou, Panyu, Donghu Development Zone, Nansha, and Huangpu Development Zone have all attracted innovation and technology companies. Pazhou, once known for the Canton Fair, stands out from the aforesaid areas. In the future, “it will become an area where the Internet companies gather and the digital Guangdong economic cluster area.”
According to Cyzone.cn, there are currently 20 Internet companies building their headquarters in Pazhou. DeHeng’s Guangzhou office moved to Pazhou just a year ago. “We are observing the development and changes in Pazhou every day. It is now at the stage of construction and laying the foundation, the relevant industries will have significant outputs in three to five years,” Wu comments.
The financial industry is another sector that Guangzhou has an eye to.
“In fact, Guangzhou has been pressured by neighbouring cities in recent years; the pressure from Shenzhen is mainly at the financial level. Because of the Shenzhen Stock Exchange, Shenzhen’s financial assets are several times that of Guangzhou ... Guangzhou has always wanted to increase its competitiveness in the financial sector,” Wu says.
The financial sector in Guangzhou met the expectations during the first six months, achieving a growth rate of 8.1 percent. Standard Chartered announced not long ago that it would invest $ 40 million to establish a GBA Center in Guangzhou, which is expected to be put into operation in the third quarter.
Wu tells ALB that Guangzhou has built international financial cities in Dongpu and Chebei, and Nansha has also joined hands with the International Finance Forum to promote the construction of the Guangzhou Nansha International Financial Island Project.
“In addition, Guangzhou is also considering the development of futures trading and carbon trading, and the establishment of related resource trading centres to drive the development of financial businesses. It also expects to give play to the role of a city of commerce and trade in promoting the development of trade finance, including trade financial settlement and trade financial product supply chains,” Wu says,
It is not only the Internet and finance sectors; the medical and pharmaceutical, as well as the information technology industries in the city are also making rapid progress.
Today Guangzhou is home to some leading enterprises in the medical and pharmaceutical sector, such as Guangzhou Kingmed Diagnostics Group, GE, BeiGene, and Thermo Fisher Scientific. And in the field of artificial intelligence and new generation technology, there have emerged some technology companies such as PCITECH, Gizwits, Ehang, and Guangzhou NINED Digital Technology.
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