China's Silicon Delta

Estimated reading time: 2 minutes

China’s Pearl River Delta was once dubbed the “factory floor” of the world. These days, however, it is more accurate to call the area “Silicon Delta” – a high-technology and innovation hub for the world’s second-largest economy.

Over the course of little more than a decade, the area has become home to some of the world’s largest high-tech companies. Hundreds of thousands of people are employed in manufacturing bases and research and design workshops in the region, and many of the Pearl River Delta’s cities are becoming centres of advanced manufacturing and services.

Shenzhen, with more than 10 million inhabitants, makes high-tech hardware, spanning everything from telecommunications equipment, information technology (IT), biotechnology and pharmaceuticals to computers, smartwatches and aerial drones. Ample engineering talent and fast logistics aid the progress from prototype to product – as does plentiful spending on research and development.

In 2013, Shenzhen spent RMB58 billion, or 4 per cent of the municipality’s GDP, on research and development, more than any other part of the Chinese mainland. The total value of high-tech products made in Shenzhen reached RMB1.4 trillion in 2013, up 9.3 per cent from the previous year. That accounted for 50.4 per cent of the total output value of industrial enterprises. Many of Shenzhen’s high-tech giants also spend a significant portion of their earnings on research and development.

The Pearl River Delta’s transformation has had strong government support. In May, the government announced its “Made in China 2025” policy, which aims to promote IT, robotics, aerospace, railways, electric vehicles and other advanced industries in a bid to move China’s economy away from the low-value manufacturing model that fuelled growth in the past.

Echoing this, Guangdong province issued the “Guangdong Province Intelligence Manufacturing Development Plan (2015-25)”, which likewise aims to promote innovation and the use of cutting-edge, value-added industries among local companies, helping them to improve their manufacturing capabilities.

In reaction to rising labour costs, Guangdong-based manufacturers are investing heavily in robotics and other automation equipment. The Guangdong provincial government has announced that Guangdong will spend RMB943 billion on replacing human labour with robots within the next three years, and plans to have 80 per cent of its factories automated by 2020.

Last year, the provincial government budgeted more than RMB672 billion to develop rural areas over five years and prompt labour-intensive manufacturing to relocate from cities into Guangdong’s rural regions. The goal is to free up space in the increasingly overcrowded Pearl River Delta, thus helping manufacturers there to keep moving up the value chain.