The Pearl River Delta (PRD) in China occupies the low-lying areas alongside the Pearl River estuary where the Pearl river flows into the South China Sea. Since the "Open Door Policy" was adopted by the Communist Party of China in the late 1970s, the portion of the delta in Guangdong Province has become one of the leading economic regions and a massive manufacturing center of mainland China. The PRC government hopes that the manufacturing in Guangdong, combined with the financial and service economy and traditional western influence in Hong Kong will create an economic gateway attracting foreign capital throughout mainland China.

Emergence of the economy

The Pearl River Delta has been the most economically dynamic region of the People's Republic of China since the launch of China¡¯s reform programme in 1979. The region's Gross Domestic Product (GDP) grew from just over US$8 billion in 1980 to more than US$89 billion in 2000. During that period, the average real rate of GDP growth in the Pearl River Delta Economic Zone exceeded 16 percent, well above the People¡¯s Republic of China's national figure of under 10 percent. In 1991, almost 50% of foreign investment in China was in Guangdong, and 40% in the PRD. By 2001 its GDP rose to just over US$100 billion and it was experiencing an annual growth rate more than three percentage points above the national growth rate. The abundance of employment opportunities created a pool of wealthy, middle-income, professional consumers with an annual per capita income that puts them among China's wealthiest. Since the onset of China¡¯s reform program, the Pearl River Delta Economic Zone has been the fastest growing portion of the fastest growing province in the fastest growing large economy in the world.

According to the 2000 national Census, the Zone had a population of 40.8 million people. Per capita income has been growing substantially in recent years, as have consumer expenditures.

Although the Pearl River Delta Economic Zone encompasses only 0.4 percent of the land area and only 3.2 percent of the 2000 Census population of mainland China, it accounted for 8.7 percent of GDP, 32.8 percent of total trade, and 29.2 percent of utilised foreign capital in 2001. These figures show the remarkable level of economic development that the Pearl River Delta Economic Zone has achieved and the international orientation of the region¡¯s economy. This orientation has attracted numerous investors from all over the world who use the Greater Pearl River Delta region as a platform for serving global and Chinese markets.

Significance of Manufacturing

The Pearl River Delta has become the world's workshop and is a major manufacturing base for products such as electronic products (such as watches and clocks), toys, garments and textiles, plastic products, and a range of other goods. Much of this output is invested by foreign entities and is geared for the export market. The Pearl River Delta Economic Zone accounts for approximately one third of China's trade value.

Private-owned enterprises have developed quickly in the Pearl River Delta Economic Zone and are playing an ever-growing role in the region's economy, particularly after year 2000 when the development environment for private-owned enterprises has been greatly relaxed.

Nearly five percent of the world's goods were produced in the Greater Pearl River Delta in 2001, with a total export value of US$ 289 billion. Over 50,000 Hong Kong companies have plants there, according to a 2002 survey.

Ties with Hong Kong

Prefectures in the Pearl River Delta have benefited from proximity to Hong Kong. Hong Kong has been the source of over 70 percent of the cumulative foreign direct investment in the region since 1979, or roughly eight times the investment of North America, Japan, and Europe combined. One reason Hong Kong has played such an important role is because it links the region with the rest of the world, handling 70 to 80 percent of its seaborne exports and an even greater percentage of its airborne exports.

Hong Kong serves a distinct role as a place for firms to access the strength of the Greater Pearl River Delta region. Many western firms also use Hong Kong as a base for their Greater Pearl River Delta region activities, with senior managers often residing in Hong Kong. Hong Kong also serves as a principal location for the buying offices for companies doing business with the Greater Pearl River Delta region. Increasingly, savvy companies are developing Hong Kong/Greater Pearl River Delta strategies with their management, finance, communication, and coordination activities based in Hong Kong and their manufacturing activities in one or more of the jurisdictions of the Pearl River Delta.

While occupying an important position in the nation's economy, the PRD has also been a pioneer in reform and openness. Two of the original four Special Economic Zones (Shenzhen and Zhuhai) are located in the PRD, which allowed it to lead the way from a planned economy to a market economy. Having this "first mover advantage" in developing private enterprise, manufacturing capabilities and foreign trade, the PRD has drawn on its proximity with Hong Kong to become the manufacturing powerhouse of China. While the PRD offers a competitive market for companies to source or manufacture goods, Hong Kong provides logistic, financial, legal, design and marketing services that allow companies to export their products to rest of the world.