Guangdong Province, known for its manufacturing industry, is referred to as the “locomotive” of China’s economic development. However, currently facing a double blow of a sluggish domestic economy and setbacks in foreign exports, the Guangdong economy is struggling.
On Monday, August 25th, the Financial Times reported that during the heyday of China’s low-cost manufacturing industry, Houjie Town in Dongguan was famous for its numerous shoe factories and vibrant nightlife catering to tens of thousands of domestic and foreign buyers who visit annually. However, with the escalating tensions in the US-China trade war, the local low-end manufacturing industry has entered a period of structural decline. Coupled with weak consumer confidence, many factories are idle, and surrounding restaurants and shops are struggling to make ends meet.
Chef Li Jilei has been working and living in Houjie for over a decade. He feels uncertain about the future. He told the Financial Times, “Business is bad, many factories have closed down, but our children go to school here, so we can’t leave.”
Although the US-China trade negotiations are still ongoing, the US has reduced additional tariffs on Chinese goods to 30%. However, the uncertainty of existing tariffs and future prospects have greatly impacted the Guangdong economy, which heavily relies on exports. Guangdong’s total exports reached nearly 5.9 trillion yuan in 2024.
Alicia Garcia-Herrero, Chief Asia-Pacific Economist at Societe Generale, told the Financial Times that tariffs have a significant impact on Guangdong because the province’s enterprises are at the heart of the US-China trade war.
She pointed out that even before President Trump launched his tariff offensive, the slowdown in China’s domestic real estate sector and weak domestic demand had already affected the Guangdong economy. The latest trade offensive has dealt a severe blow to the region’s economic growth prospects.
Well-known Chinese real estate companies such as Evergrande, Jiayuan, Vanke, and Country Garden are headquartered in Guangdong. However, the recovery of property prices in Guangdong is slower compared to other provinces. Plummeting property prices have led to weakened consumer and corporate confidence, resulting in retail sales in Guangdong falling below the national average.
“Guangdong’s situation is no longer as promising as before,” Garcia-Herrero said. “Indeed, there are problems in some areas.”
She noted that even China’s high-tech exporters, such as the Guangdong-based electric vehicle manufacturer BYD, are seeking to expand their overseas production bases. Additionally, Trump’s cancellation of the small parcels tariff exemption has directly impacted Guangdong, as many suppliers for fashion e-commerce companies Shein and Temu are located in the province.
Ronggui is Guangdong’s first industrial town with an industrial output value exceeding 100 billion yuan. Zhou Jingjing, a street vendor selling dumplings, expressed that her business can only barely survive. With fewer nearby factories running overtime at night, her late-night snack stall income has been severely affected.
Mr. Liang, a worker at a local refrigerator factory, stated that due to declining export demand during the COVID-19 pandemic, his monthly wage has decreased from 9,000 yuan to 7,000 yuan over the past two years. Despite the pay cut, he is burdened with a mortgage and supporting his child’s education, therefore, he dare not quit his job or seek alternative employment.
Guangdong’s economic growth rate in 2024 was only 3.5%, falling short of the national target for the third consecutive year and significantly below the national average of 5%. Some people question how the Chinese authorities calculate an average economic growth rate of 5% when Guangdong’s growth is only 3.5%.
A netizen commented, “The authorities make the people ‘not ask, just believe.'”
The report pointed out that Guangdong contributes more to national tax revenue to the central government than any other province. In recent years, China’s economic weakness has required Beijing to allocate a larger proportion of tax revenue to stimulate economic growth in impoverished regions.
Sam Kwok, an analyst at Fitch Ratings, said, “The overall economic situation is not good, but Guangdong Province still needs to pay taxes.”
Another Hong Kong netizen lamented that industries in the Pearl River Delta had long shifted to the Yangtze River Delta, and currently, Guangdong’s consumption situation is even worse than inland cities such as Chongqing. Frankly speaking, both Guangdong and Hong Kong are now living off their past successes.