Yu. M. SHIGANOVA, Institute of the Far East of the Russian Academy of Sciences

Keywords: China, Guangdong, regional policy, economic reforms, special export zones (SEZs), optimization of the economy structure, development problems

One of the most developed and dynamic regions in China is the southern province of Guangdong. It is the country's leading economic center and export base, as well as the largest manufacturing region of global importance. If China's share of global GDP is close to 10% ¹, then the province of Guangdong provides 1.2% of this indicator. The province's share of regional gross product (RVP) in China's GDP is 11.3%². And this is despite the fact that Guangdong accounts for only 1.9% of the area of the territory ³ and 7.8% of the population of the PRC ⁴.

In 1978, China began implementing a program of economic reforms aimed at creating "socialism with Chinese characteristics", or a socialist market economy. Over the years of reforms, which continue even today, Guangdong, formerly a rather backward agricultural province, has turned into a region with high-tech production, as well as developed agriculture. A special feature of the economic reforms in the province was the development of export-oriented production and the creation of special export zones (SEZs).

A BIT OF HISTORY

Since the 12th and 13th centuries, the city of Guangzhou (better known as Canton in European literature) has been the most important port city in trade with the Middle East. In the 16th century, the first Europeans arrived here - the British and Portuguese.

In the XVIII century. all foreign trade along the Chinese coast was banned, as China's rulers tried to protect the country from foreign penetration, and the only region in contact with the rest of the world was Guangzhou.

All foreign powers were required to trade only through Chinese firms and only in the port area in Guangdong Province, without entering the cities. Thus, they were not able to enter the Chinese market independently. Foreigners were forbidden to settle in Chinese cities and, above all, in Guangzhou, to open their consulates and hotels there.

Wanting to capture the huge Chinese market, the Western powers unleashed two military conflicts that went down in history as the " opium wars "(1839-1842 and 1858-1860), which led to the complete loss of political independence by China and the dismemberment of the country into zones of influence between foreign powers.

China turned into a semi-colony and was forced to pay an indemnity, open its cities to foreign trade with the right to stay foreigners, cede part of its territory to foreigners (Hong Kong - Great Britain).

However, along with these and many other negative consequences, a situation has been created in which the coastal eastern and southern regions have found themselves in the sphere of influence of the world market, turned into centers of accelerated socio-economic development. Shanghai and Guangzhou developed particularly rapidly, while the country's hinterlands continued to lag behind.

EXTERNAL OPENNESS AS THE MAIN INCENTIVE FOR PROVINCIAL DEVELOPMENT

In the first years after the formation of the People's Republic of China (1949-1957), the province's economy developed quite rapidly. However, in the next 20 years (1958-1978), the economic development of

Figure 1. Foreign investment volume in Guangdong Province in 1978-2011

Source: Guangdong Tongji nyanjian 2012 nyan (2012 Guangdong Province Annual Statistical Handbook), Tables 6-3 - http://www.gdstats.gov.en/tjnj/2012/table/6/06 - 03.htm

the development of the central regions of the country was considered a priority. Moreover, this was carried out mainly at the expense of funds from relatively developed coastal regions, transferred through the central budget of the country. The average growth rate of the province's RVP during this period was only 4.4%⁵, which was lower than the national average, with Guangdong ranked 25th out of 28, ahead of only An Hui, Henan and Jiangsu provinces ⁶.

In 1979, the annual volume of industrial and agricultural production per capita in China in monetary terms was 636 yuan, and in Guangdong-523 yuan. Infrastructure facilities, transport routes, communication facilities were undeveloped, and there was a shortage of electricity.

By the end of the 70s of the XX century. Guangdong was a backward, peripheral, borderline, relatively undeveloped province, located not far from capitalist Hong Kong.

In 1978, the 3rd plenum of the CPC Central Committee of the 11th convocation proclaimed a policy of reform of openness and rejection of the strategy of isolation from the outside world, active interaction with other countries, reorganization of the system within the country and modernization of the economy.

One of the features of China's reforms was its enclave nature, since they were carried out in separate regions. This made it possible to test the government's new policy with minimal social and economic costs, and then distribute successful projects throughout the country.

In March 1979, the Guangdong Provincial Party Committee proposed that the region be designated for experimental foreign investment attraction, taking advantage of the province's comparative advantages: its proximity to Hong Kong and its large number of relatives abroad (Huaqiao). The country's leadership approved the implementation of a "special policy, flexible measures" in the provinces of Guangdong and Fujian, as well as the creation of special economic zones (FEZs) in the cities of Shenzhen, Zhuhai, Shantou (all in Guangdong Province), Xiamen (Fujian Province).⁷.

According to Deng Xiaoping, who visited Guangdong Province in 1984, "a special area is a window, a window for technology, a window for managerial experience, a window for knowledge, and a window for foreign policy." ⁸

In order to attract foreign investment in these zones, a preferential policy was implemented*, especially in the area of tax incentives, preferential conditions for the sale or lease of land. Administrative procedures were simplified, infrastructure facilities were built, and optimal investment conditions were provided, including for Huaqiao (see figure 1).

Chinese leaders welcomed the Huaqiao's economic activities, recognizing them as foreign compatriots, and China as the homeland of the Huaqiao and their ancestors. The share of foreign Chinese, including investors-compatriots from Hong Kong, Macao, Taiwan, Singapore, accounts for about 70% of all foreign direct investment in China9. This high rate is due to ethnic proximity, the desire to support the development of the regions from which they came, the economic interests of Huaqiao, as well as the presence of strong ties among ethnic Chinese on the Chinese mainland, knowledge of traditions and business rules.

The inflow of foreign capital, investment in production, and placement of enterprises of multinational companies (TNCs) contributed to modernization, overcoming the lag in the level of development of productive forces, and improving the technological level of China. "Reverse engineering" (imitation of techno - and science-intensive samples), simple assembly or processing labor-intensive enterprises, tolling**, processing of toll-free raw materials** * developed. This will allow you to-

* Preferences - advantages and benefits granted to individual states, enterprises, or organizations to support certain types of activities (approx. ed.).

** Tolling (from the English toll - "duty") - processing of foreign raw materials with the subsequent export of finished products.

*** The owner of raw materials (giver), without having its own production facilities, enters into a contract with another organization (processor), which has the appropriate capacity. According to the contract, the latter of the provided raw materials produces products and transfers them to the giver (approx. ed.).

Figure 2. Dynamics of rural and urban population in Guangdong Province in 1978-2011

Source: Guangdong tongji nyanjian 2012 nyan.., Tables 4-2 -http://www.gdstats.gov.en/tjnj/2012/table/4/04 - 02.htm

It allowed China to develop and master new production facilities, gain experience, knowledge, and management skills, diversify the economy, improve the skills of employees, and provide employment and foreign exchange earnings. Gradually, the level of production and operations increased.

In 1979, the Guangdong Provincial Chamber of Commerce and Industry registered China's first company with foreign capital. As of March 2010, the number of such companies was already 90557 ¹⁰, and over the next 30 years, the province consistently ranked first in China in this indicator.

As industry developed in Guangdong, the migration of residents from neighboring Sichuan, Guangxi, Hunan, Henan, Hubei, Anhui, etc.increased in search of jobs. ¹¹ A vast market of low-skilled and cheap labor began to form here, ready to work in local industries under any conditions. According to 2003 data, almost 70% of migrant workers in Guangdong were from other provinces.¹²

Since the opening of China's economy, Hong Kong firms have taken the opportunity to reduce the costs associated with two important factors of production-land and labor. Labor-intensive, energy-intensive and environmentally harmful industries began to be transferred to neighboring Guangdong (especially in the Zhujiang Delta region) and other coastal provinces. As a result, up to 30% of the added value of the entire Hong Kong industry as a whole and up to 70-80% of the added value in such individual industries as the production of leather products, electronics, and plastic goods were actually created at Chinese enterprises.¹³

On the territory of Hong Kong itself, the main activities of companies have become management, finance, development, design, marketing, etc. From here, capital, equipment, and technology were supplied, and management was carried out, while production and assembly were carried out on the territory of China. This system is called "from the front - shop, from the courtyard-production" (Qiandian, Houchan).

The facade was Hong Kong, the rest of the production process was moved to China. As a result, the economies of the two regions grew together and even became mutually dependent, which allowed Hong Kong to actively develop the third sector, lead in economic indicators, and contributed to such processes that affect structural changes in the economy as industrialization and urbanization of mainland China.

These two processes can be traced in digram 2.

The graph clearly shows a steady increase in the urban population while simultaneously reducing the rural population. At the turn of the century, both indicators jumped in opposite directions: a sharp increase in the urban population and a decline in the rural population. The largest share of urban population is recorded in the most developed cities of the province - Guangzhou (76.26%), Shenzhen (99.90%), Foshan (88.42%), Dongguan (87.30%), Zhuhai (73.57%); the rural population prevails in the least developed cities of the province - Yunfu (63.04%), Maoming (64.94%), Zhanjiang (63.32%), Heyuan (59.96%), Meizhou (56.99%)¹⁴.

As for the employment structure of the population, there is a noticeable influx of workers from the agricultural sector to industry and services (figure 3).

In the 80s of the XX century. China took a course to create a market-oriented socialist economy, which meant an active reorganization of the entire economic mechanism. The budget and tax system were reformed, as well as the public sector and foreign economic activity. Provinces and some enterprises were granted the rights of independent foreign economic activity, the economic independence of state-owned enterprises was expanded, a new system of pricing and public procurement was introduced, etc.

Urban markets were opened for the peasants, trade centers and specialized markets were created; peasants everywhere switched to the family contract system, and enterprises of volosts and settlements resumed their work. The rights of local authorities to dispose of foreign exchange software were expanded.-

Figure 3. Changes in the number of employees by economic sector in Guangdong Province in 1980-2011 (million people).

Source: Guangdong tongji nyanjian 2006 nyan.., Table 5-1 -http://www.gdstats.gov.cn/tjnj/2006/table/05/5_c.htm; Guangdong tongji nyanjian 2008 nyan.., Table 5-1 - http://www.gdstats.gov.cn/tjnj/2008/ table/5/c5_l.htm; Guangdong tongji nyanjian 2010 nyan.., Table 5-1 -http://www.gdstats.gov.en/tjnj/2010/tablc/5/c5_l.htm; Guangdong tongji nyanjian 2012 nyan.., Table 5 - 1 - http://www.gdstats.gov.cn/tjnj/ 2012/table/5/05 - 0l.htm

Figure 4. Guangdong Province's PRT indicator in 1978-2011 (billion yuan).

Source: Guangdong tongji nyanjian 2012 nyan.., Table 3-1 -http://www.gdstats.gov.en/tjnj/2012/table/3/03 - 01.htm

A multi-layered economy, enterprises with foreign investment from Hong Kong, Macao and Taiwan, as well as foreign investment itself, was being formed. Gradually, the market was formed with its more efficient allocation of resources. The functioning of the price mechanism, the development of non-state forms of ownership, and the formation of an open economy have begun. All this has led to an increase in the role of coastal regions, an increase in household incomes, and an increase in GDP, while at the same time there is a centralized state administration and planning.

In the spring of 1992, during Deng Xiaoping's trip to the south, Guangdong was tasked with achieving the level of development of four Asian small "dragons" (Hong Kong, Singapore, Taiwan, South Korea) within 20 years.

SOME RESULTS OF THE DEVELOPMENT OF GUANGDONG PROVINCE

By 2011, the province's PRT had increased 64-fold from its 1978 level, and by 1985, Guangdong had managed to double that figure. The subsequent doubling took only 5 years (1990), followed by a doubling of the RVP in 1994, and then in 2000 and 2006 ^.15 The rapid industrial development of Guangdong Province over the past 33 years can be seen in figure 4.

During the reform years (from 1978 to 2008), the province's average annual economic growth rate was 13.6%, ¹⁶ compared to the national average of 9.8% in 1979-2007.¹⁷ In the 11th five-year plan (2006-2010), the average annual GDP growth rate was 12.4%¹⁸.

Guangdong is also very involved in international trade. The province's share in China's total exports is 28.72%, imports - 23.76%, and the province accounts for 13.5% of total foreign investment in the country.

Over the past 35 years, the region has been actively increasing the output of industrial products (according to the terminology adopted in China-the first sector of the economy), developing the service sector (the second sector), while the role of agriculture (the third sector) has been rapidly declining. The change in the shares of each of the sectors of the Chinese economy can be traced in chart 6.

Guangdong accounts for almost 50% of China's total output of household appliances, especially televisions and air conditioners (see Table).

Currently, the main industries of the province are those related to electronic information, electrical equipment and petrochemicals. New high-tech industries have been developed -

Figure 5. Growth rates of China's GDP and Guangdong Province's RVP in the period from 1979 to 2010 (%)

Source: Guangdong tongji nyanjian 2012 nyan.., Table 3-1 - http://www.gdstats.gov.cn/tjnj/2012/table/3/03-04.htm; Zhongguo tongqi zhaiyao 2012 (Chinese Statistical Collection for 2012). Beijing, 2012, p. 23.

Figure 6. Ratio of RVP sectors in Guangdong Province from 1978 to 2011 (%)

Source: Guangdong tongji nyanjian 2012 nyan.., Tables 3-4 -http://www.gdstats.gov.en/tjnj/2012/table/3/03 - 04.htm

information technologies, biotechnologies, production of optoelectronic equipment and new materials. At the same time, the textile industry, food and beverage production, construction materials, electrical appliances, paper, non - ferrous metallurgy-traditional basic industries that have given impetus to rapid economic growth-require reform and modernization.

In order to develop high technologies in the cities of Zhongshan, Zhuhai, Shenzhen, and Guangzhou, new and high technology development zones of national significance were created, as well as a technical and economic development zone in Guangzhou. The cities of Guangzhou, Shenzhen, Shantou, and Zhuhai have free trade zones, Guangzhou and Dongguan have national economic development zones, Guangzhou and Shenzhen have export production zones, and regional industrial zones and industrial parks.¹⁹

Until 1988, the province of Guangdong included the island of Hainan, which then became a separate province and the largest free economic zone in China. Over the 25 years of its existence, this FEZ has achieved a 49-fold increase in foreign trade, and the average annual economic growth rate was 16.8%²⁰

Shenzhen has one of the Chinese stock exchanges. It was established in December 1990. Today, this exchange is among the largest exchanges in the Asia-Pacific region (APR) and in the world, surpassing the Shanghai Stock Exchange in terms of the total number of listed companies and securities ²¹.

Twice a year, Guangzhou is visited by over 200 thousand ²² foreign entrepreneurs who come here to participate in the China Import and Export Exhibition (CIFF). First opened in 1957, it has been held annually in spring and autumn ever since. In October 2013, the next 114th exhibition was held.

In the 1950s, when the main foreign trade partners of China were socialist countries, the fair was the only opportunity to obtain foreign currency through exports. Its first visitors were specially invited guests, mainly from Asian countries, as well as from Hong Kong and Macao.²³

Attaching great importance to the activities of the Canton Fair, the central government has repeatedly allocated funds for the construction of additional exhibition complexes and hotels, as well as the development of the necessary transport and other infrastructure.

Table

Guangdong Province's share in the total output of selected products of the whole of China (%)

Source: Guangdong tongji nyanjian 2012 nyan... - http://www.gdstats.gov.cn/tjnj/2012/ml1htm

Now the province has a well-developed transport network and a complex of infrastructure facilities that ensure the production and socio-economic development of the region. There are 4 major railways, one of which connects Guangzhou with Beijing, and the other - with Hong Kong, the length of roads is 84563 km, more than 100 ports (the main ones are Huanggu, Zhanjiang, Shekou and Chiwan), 8 airports ²⁴. In order to stimulate further development of the country's economy, the Government actively promotes the creation and improvement of infrastructure facilities.

In 2009, construction began on the world's longest bridge connecting Zhuhai with Hong Kong and Macao ²⁵ (the Xiang-zhu-ao project), which is scheduled to be completed in 2015-2016.

CHALLENGES TO RAPID ECONOMIC DEVELOPMENT

The development of the province over the past 30 years has surprised many, embodying the concept of a "Chinese economic miracle". However, it is worth mentioning the problems and obstacles to further stable and dynamic development of the region.

First, there is a significant differentiation in the levels of development of individual regions of the province. In 2011, the spread of RVP levels per capita was up to 6.5 times (the highest figure in Shenzhen - 110,421 yuan, the lowest-in Meizhou-16,623 yuan), respectively, the most developed and prosperous cities are the cities of the Pearl River Delta, while the rest of the territories are quite backward. This is a consequence of the influence of geographical conditions, the current economic system, historical and cultural factors, etc. The gap in income levels between regions leads to an aggravation of social contradictions and social tension. Districts that are lagging behind in terms of socio-economic development require additional funding and resources, and the poor do not have access to education and minimal social benefits, which begins to slow down the economic growth of the entire region.

Secondly, the economy of Guangdong has been focused on the external market for a long time, so the province was the first to experience the global financial and economic crisis of 2008. The reduction in external demand led to the closure of many, especially medium-sized and small-scale industries, increased unemployment, increased social costs due to the inefficiency of the economic model used, and a high degree of dependence of the regional economy on the world market conditions, crises, price spikes, demand instability, etc.

Numerous industrial bankruptcies in the province in 2008 and 2009 also resulted from the entry into force of the Labor Contract Law of the People's Republic of China, ²⁶ which regulates labor relations, effective January 1, 2008. It should be noted that the timely adoption of this law, protecting the interests of workers, hit the owners, which provoked a wave of bankruptcies.

However, the decline in foreign trade in Guangdong Province in 2009 was less significant than in the entire country (10.8%27 vs. 13.9% for the whole of China28). Since 2010, both export and import volumes have been growing again.

Third, in recent years, the province, especially its economic centers, has faced a sharp increase in wages, changes in the government's requirements for labor safety and social security, a shortage of both cheap and skilled labor, changes in export tax refund schemes, rising prices for land rent, the cost of materials, raw materials, and the aggravation of the labor market. social contradictions caused by an increase in the income gap between different segments of the population, new government requirements for electricity consumption, environmental protection, a decrease in import volumes, a strengthening of the yuan and, consequently, an increase in the cost of Chinese products, insufficient attention to R & D, lack of protection of property rights, etc.

It is becoming increasingly clear that the region needs to develop new strategies and reform the existing model of economic development, reorientation to the domestic market. The province is losing its competitive advantages in labor-intensive, export-oriented industries, and numerous social and environmental problems require solutions. Openness

This results in a high degree of dependence on the global economy.

THE 12TH FIVE-YEAR PLAN AND DEVELOPMENT PLANS FOR GUANGDONG PROVINCE

The provincial development plan for the 12th five-year period (2011-2015) assumes GRP growth rates of more than 8% and the average per capita indicator of more than 7% ²⁹. The relative slowdown in economic growth is associated with the abandonment of the strategy of increasing only economic indicators, switching attention to the quality of this growth and improving the standard of living of the population, resource scarcity, switching to intensive management methods, taking into account the environmental factor, and changing the model of economic development.

It is planned to increase the urbanization rate from 64 to 68%, further growth in the value added of the service sector - from 46 to 48%, R & D expenditures - from 1.8 to 2.3% of RVs, and the share of high-tech products added to RVS - from 20.6 to 26%^30.

In the future, it is planned to develop possible areas and levels of openness, use the potential of various zones and economic districts, develop new industries, as well as services related to production (financial, insurance, logistics, information, scientific and technical, research and design activities, holding commercial exhibitions), and focus on the development of high-tech industries (microchips for the next generation of mobile communication technologies, electronic equipment, LED chips, thin-film solar cells, electric vehicles, as well as semiconductor lighting equipment, solar-powered solar cells, equipment for nuclear power, wind energy use, aerospace industry, etc.), research activities of enterprises, take into account environmental aspects of development.

In traditional industries, it is planned to increase the level of informatization, use advanced equipment, management technologies, conduct research and development, and introduce new sales systems.

It is necessary to increase international competitiveness, optimize the export structure at the expense of high-tech products with high added value, expand sales markets, transport infrastructure, improve the investment climate, expand the use of foreign investment, participate in international economic cooperation (international economic projects, international transfer of industries, investment abroad), and develop our own TNCs.

At the 18th CPC National Congress held in Beijing in November 2012, the government announced plans to "actively support the rapid development of the eastern provinces" along with the expansion of production, qualitative and structural changes in the economy of other regions of China.³¹ The most developed coastal regions should "continue to be at the forefront of modernization and make a more significant contribution to the country's reform and development" ³².

Guangdong remains in the spotlight as a development priority region and the southern engine of China's economy, but now it needs a new strategy that continues to deliver strong growth rates while addressing existing challenges.

¹ Zhongguo tongji zhaiyao 2012 (Chinese Statistical Collection for 2012). Beijing, 2012, p. 191.

² Guangdong Tongji nyanjian 2012 nyan (2012 Guangdong Province Annual Statistical Handbook) http://www.gdstats.gov.cn/tjnj/2012/ml1.htm

³ Ibid.

⁴ Ibid.

⁵ http://www.gd.gov.cn/govpub/rdzt/60gqzt/60jjcj/200909/ t20090927_103604.htm

^{Bo Zhiyue.} 6 Guangdong Under Wang Yang: "Mind Liberation" and Development. EAI Background Brief No. 405, 12 September 2008 -http://www.eai.nus.edu.sg/BB405.pdf

⁷ http://dangshi.people.com.cn/GB/232052/233491/233494/16247 993.html

⁸ http://www.people.com.cn/GB/shizheng/1026/2787246.html

^{Lyubomudrov AV} 9 Foreign direct investment in the Chinese economy // Russian Foreign Economic Bulletin, 2010, No. 2 (February) - http://www.vavt.ru/journal/id/29233F/SFile/3 -7. pdf

¹⁰ http://www.gd.gov.cn/tzgd/gdtzdt/201005Д20100514_120666. htm

¹¹ http://www.people.com.en/GB/paper49/11465/1034720.html

¹² Ibid.

^{Reginald Y. Kwok, Alvin Y. So.} 13 The Hong Kong-Guangdong link: partnership in flux. NY., M.E.Sharpe, 1995, p. 173.

¹⁴ Guangdong tongji nyanjian 2012 nyan...

¹⁵ Ibid.

¹⁶ http://finance.people.com.en/GB/l1643714.html

¹⁷ http://www.stats.gov.cn/tjfx/ztfx/jnggkf30n/t2008111740251 7351.htm

¹⁸ http://www.gddpc.gov.cn/fgzl/fzgh/ztgh/sewghgy/201106/1 20110615_155249.htm

¹⁹ http://www.cadz.org.cn/index.jsp

²⁰ http://russian.news.cn/economic/2013 - 04/30/c_132350459.htm

²¹ http://www.hkex.com.hk/eng/newsconsul/hkexnews/2012/ documents/120119news.pdf; Shenzhen stock exchange fact book 2011 -http://www.szse.cn/main/files/2012/05/22/660666916109.pdf; http://english.sse.com.cn/aboutsse/

²² http://www.cantonfair.org.cn/html/cantonfair/en/about/2012-09/130.shtml

²³ http://nghtchld.com/guangzhou/part-one-the-historical-era-the-birth-of-the-canton-fair-1957 - 1978/

²⁴ http://www.crc.mofcom.gov.cn/crweb/rcc/china/guangdong. htm

²⁵ http://news.xinhuanet.com/politics/2009-12/15/content_12648 816.htm

²⁶ http://www.gov.cn/ziliao/flfg/2007 - 06/29/content_669394.htm

²⁷ Guangdong tongji nyanjian 2012 nyan...

²⁸ http://news.xinhuanet.com/fortune/2010 - 01/10/content_12784 970.htm

²⁹ http://www.gddpc.gov.cn/fgzl/fzgh/ztgh/sewghgy/201106/ t20110615_155249.htm

³⁰ Ibid.

³¹ Full text of Hu Jintao's report to the 18th CPC Congress / / People's Daily website, November 19, 2012. - http://russian.people.com.en/31521/8023962.html

³² Ibid.

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