Across the Organisation for Economic Co-operation and Development (OECD), globalisation is increasingly testing the capacity of regional economies to adapt and exploit their competitive edge, while also offering new opportunities for regional development. This is leading public authorities to rethink their strategies. Moreover, as a result of decentralisation, central governments no longer have the sole responsibility for development policies. Effective relations between different levels of government are now required in order to improve the delivery of public services.

Guangdong is China’s most populous province. With 95.4 million inhabitants, its population size, which represents one-third of that of the United States, and 75 to 90% of that of Japan and Mexico, exceeds all other OECD member countries. The total land mass of the province is almost equal to that of the United Kingdom. Unsurprisingly, the density is strikingly high, actually the highest among China’s provinces, and above that of all OECD member countries. This high concentration of population is linked to a deep urbanisation process (a 63.4% urbanisation rate compared to the national average of 46%) whose rate over the last two decades is probably unprecedented in human history. Chosen as a test bed for a wide range of economic reforms when China introduced the “Open Door” policy in 1978, Guangdong has transformed itself from a backward agricultural, lagging region into a dynamic industrial-based economy. Attracted by massive job creation, a sustained inflow of rural migrant workers from other provinces has fuelled Guangdong’s high annual population growth, which over 1990-2008, stood at 2.8%, i.e. more than 3 times China’s average and 4 times the OECD average.

This chapter provides an overview of demographic and economic trends of the province within its national context and as compared with OECD member countries. The first section highlights the rapid and deep urbanisation process of the last three decades which is unprecedented in human history. It shows how rapid industrialisation has generated a model featuring strong spatial concentration of people and firms, and the emergence of the Pearl River Delta, a cluster of nine cities, that concentrates more than half of the total population of the province and which has acquired the recognition of “the World’s Factory”, since it has the world’s largest concentration of low and medium value-added manufacturing. The second part of this chapter highlights the position of Guangdong as the largest economy of China.

This chapter analyses the main competitiveness challenges for Guangdong. It starts with an analysis of trends in production capacity in the different sub-regions of the province highlighting an important industrial restructuring process, especially in the inner Pearl River Delta, with new drivers of productivity concentrated in some parts of the province. While the recent period signals recovery, these past trends have pointed out the need to climb the value chain and to reduce the strong reliance on exports by focusing more on the domestic demand. These challenges need to be addressed in the context of intensive internal competition in the higher value chain segment especially the Yangtze River Delta (YRD) where Shanghai is re-emerging as China’s principal metropolis. They also need to take into account the strong regional disparities that the Guangdong economic model has generated with 79% of the GDP produced by the PRD and 64% by the three largest metropolitan regions (GuangFo, Shenzhen and Dongguan). The second part of the chapter discusses the main structural weaknesses that should be addressed to move up the value chain and reduce territorial imbalances, including a lack of advanced human capital, insufficient innovation capacity, trade obstacles and limited accessibility in some parts of the province.

This chapter will first review the policy instruments that have been implemented since the introduction of the “Open Door” policy in the province of Guangdong, which have led to the formation of an externally oriented economic development, e.g. promotion of investment attraction and spatial industrial specialisation. Conscious of the emerging challenges, the central and the provincial governments have recognised the limits of the Guangdong economic model and reiterated their wish to promote the region as a key development pillar of China through industrial upgrading whilst preserving the spirit of China’s harmonious society by dealing with territorial equity issues.

This chapter analyses Guangdong's main environmental and climate change challenges, as well as existing and potential policy responses. Section 1 of this chapter analyses the links between economic growth and environmental degradation in the Greater Pearl River Delta, with particular focus on energy consumption and shortages, water and air pollution, and greenhouse gas emissions. Section 2 explores the potential impacts of climate change on Guangdong and the economic losses associated with inaction. Section 3 discusses existing policy responses, as well as implementation challenges, and areas in which action on environmental priorities could be expanded.

Previous chapters have underlined the importance of developing regional innovation systems, and improving regional planning, transportation and environmental management. Governance mechanisms are essential for the provision of these goods and services: they require intergovernmental co-ordination as they have spillovers, planning in order to direct market developments and funding to be able to provide them. The first section provides an overview of the main institutions in Guangdong and their responsibilities. In order to make a strong transition to a high value-added economy, Guangdong will have to find a new balance between inter-city competition and co-operation, as is argued in the second section, with more attention to stimulating co-operation mechanisms, including cross-border co-operation. The effectiveness of planning, assessed in the third section, is currently constrained by the limited extent to which it reflects market developments, weak co-ordination between levels of governments and monitoring mechanisms that could be improved.

While road densities give a general indication of relative accessibility, the most accurate measures of actual accessibility are drive times. We conducted GIS-based analysis for this Territorial Development Review of road-based accessibility to eight strategic locations in Guangdong: Guangzhou in the Inner PRD and Hong Kong, China; Huizhou in the eastern part of the Outer PRD; Jiangmen and Zhaoqing in the western portion of the Outer PRD; Shantou in the Eastern Coastal Corridor; Shaoguan in the Northern Region; and Zhanjiang in the Western Coastal Corridor. Locations were selected to compare the relative accessibility of cities in the Inner and Outer PRD, and Guangdong’s three peripheral regions.

The industrial structure of each PLC has been analysed in terms of: i) the volume of gross industrial output value in 2007; ii) the industrial sectors’ concentration, and trends in concentration from 2000 to 2007, by calculating location quotients of gross industrial output value relative to Guangdong as a whole for both years; iii) the productivity of each sector in each PLC in terms of average gross output value per firm; and iv) a comparison of these productivity levels against provincial averages.