Pearl River Delta: Opportunities and Challenges

In the past decades the Pearl River Delta has become the centre of the world’s processing industry. The Chinese government hopes that the cities in the region will develop into an integrated urban region in the near future that can turn into the centre of global economy. The present study points out the factors that facilitate the further integration of the cities of the Pearl River Delta, and also the factors that pose challenges to be addressed.


The Pearl River Delta – China’s industrial centre producing for export – comprises eleven cities: Hong Kong (Xianggang), Macao (Aomen), Guangzhou, Shenzhen, Zhuhai, Foshan, Zhongshan, Dongguan, Zhaoqing, Huizhou and Jiangmen. The total population of the eleven cities is 68 million, which is almost the population of the 20th most populous country, Thailand (68.9 million).[i]The largest city of the region is Guangzhou with a population of 14 million people, followed by Shenzhen with 11.9 million, four other cities typically have populations of over five million people, while one of the most densely populated cities in the world is Macau (645 thousand people). (Fig. 1)  The nominal gross economic output of the region was over 1,387 billion USD in 2016.[ii]The economic power of the Pearl River Delta is best reflected by the fact that although the region’s population is 5% of that of China, it produces more than 10% of its economic output, which would in itself make the area the 12th most powerful national economy, surpassing the economic power of Russia (1283.2 billion USD).[iii]The region’s per capita nominal gross domestic product was USD20,412 in 2016, which is approximately the same as in Saudi Arabia (USD20,029 /person).[iv]While the central question in the studies about China in the past few years has been whether China can avoid the trap that medium income countries fall into, the Pearl River Delta area has already reached the level of developed countries. There are of course huge differences among the cities of the region, the most developed ones are Macau (USD69,370/person), Hong Kong (USD43,742/person) and Shenzen (USD25,206/person), at the other end of the spectrum there are Jiangmen (USD8,036/person) and Zhaoqin (USD7,706/person).[v]

The eleven cities of the Pearl River Delta and their main data from 2016[vi]

The study goes on to analyse those factors that stimulate the possible further integration of the Pearl River Delta cities and those that appear as challenges and hinder the deepening of relations.

Goals and political aspirations

The initiative aiming at the convergence of the Pearl River Delta was first formulated in the 13th Five-Year Plan (2016-2020).[vii]In March 2017, the Prime Minister of the People’s Republic of China, Li Keqiang confirmed that the government handles the execution of the plan as a priority. Accordingly, in June 2017 the National Development and Reform Commission, which plays a key role in planning and execution, Guangdong Province, Hong Kong and Macau signed an agreement on implementation, the date of which can be regarded as the starting date of the initiative. In fact, the grandiose plan is not without history. The background of the initiative is the National Reform Commission’s proposal of 2009, the “Outline of the Plan for the Reform and Development of the Pearl River Delta Region (2008-2020)”, [viii]and a 2011 study, “The Action Plan for the Bay Area of the Pearl River Estuary”, published by the experts of Hong Kong, Macau and Guangdong Province.[ix]Both documents are intended to draw decision makers’ attention to the opportunities of cooperation.

The central element of this ambitious initiative is to promote cooperation among the cities of the region to create a world-class city cluster that by 2030 would obtain a leading role in the most advanced processing industry, innovation, transport as well as logistics, trade and finance. The defined goals seem easily attainable.[x]Guangdong Province is currently China’s, and also the world’s most important processing industry centre. Considering freight transport, Shenzhen and Hong Kong are among the most important ports in the world, while Guangzhou and Hong Kong are hub airports of international significance. Finally, Hong Kong is one of the most powerful financial centres, and Shenzhen, the second financial centre of China after Shanghai, is already closely connected to Hong Kong (joint stock exchange). The formation of the city cluster is supported by the significant specialisation of the cities, which means that cooperation among them creates economic advantage in principle.[xi]

  • Hong Kong is one of the busiest financial centres in the world providing world-class services. It is a significant centre of higher education in Asia (university of Hong Kong, Chinese University of Hong Kong), and also has international importance in the sectors of creative industry, such as the film industry. Hong Kong’s financial institutions can play an important supportive role in the investments of the other cities of the cluster. The city has a well-travelled, highly educated and English-speaking layer of society that is indispensable for the Pearl River Delta to live up to the expectations. At the same time, the city had to face in the past years that it spends a relatively small amount on research and development (1.1% of the GDP), and lags behind Shenzhen and Guangzhou in this respect.
  • Macau’s key sectors are gambling and tourism (e.g. conference tourism), but depends on imports in practically everything.
  • Guangzhou, the capital city of Guangdong Province is traditionally the local political, economic and transportation centre. In its economic life, the most decisive role is played by the diverse industry, but the service sector is also gaining more significance. Two of the leading universities of China, the Sun Yat-sen University and the South China University of Technology are located in the city.
  • Shenzhen, as the first free trade zone, was the centre of exporting producers of the processing industry for a long time, but in the past period it has become the centre of Chinese high-tech services and processing industry, it hosts several internationally known companies like Huawei, ZTE, BYD etc. Shenzhen spent 4.1% of its gross economic output on research and development in 2017, which can be compared at state level only to the amount spent by South Korea. In spite of all this there is still room for development in higher education and the health sector.
  • Zhuhai’s major economic field is processing industry (predominantly the production of electronic equipment and machinery). After the opening of the Hong Kong-Zhuhai-Macau bridge the city will probably develop faster, mainly in the service sector, part of which will relocate to Zhuhai from Hong Kong and Macau.
  • Foshan is one of the most important export ports of China, especially in the transportation of electronic goods, household appliances, textile, plastic, leather and clothing. Its dominant industry is light industry.
  • Zhongshan is a recreation and leisure centre. After the opening of the Hong Kong-Zhuhai-Macao bridge its accessibility will substantially improve. Its central location will be further enhanced by the construction of the Shenzhen-Zhongshan bridge.
  • Dongguan was once famous for small and medium-sized light industry companies, today it has growing significance as production background for companies of high added value.[xii]
  • Zhaoqing is a historical and cultural city, a centre of tourism.
  • Huizhou is the centre of electronics manufacturing and petrochemical industry.
  • Jiangmen is one of China’s leading textile and clothing industry centres.

Specialisation can in theory ensure better market access, improve company synergies and the more efficient flow of experts, research results and knowledge.

The aim of the central plans is to grow the Pearl River Delta into one of the leading urban regions of the world. When comparing the data of the Pearl River Delta and the most significant urban clusters, like San Francisco, New York or Tokyo Bay, it can be concluded that as regards population and economic performance it represents a similar volume, while the level of development remains far behind (Fig 2). However, thanks to China’s dynamic growth, the level of the economic development of the Pearl River Delta is expected to catch up with the rival clusters in the near future.

Pearl River Delta Greater New York San Francisco Bay Tokyo Bay
Population 66.7 23.4 7.2 43.5
Economic output (million USD) 1,334 1,614.6 712.8 1,783.5
Per capita economic output 20,000 69,000 99,000 41,000
Land area thousand sq.  km 56.0 17.4 17.9 36.8

Fig. 2 The Pearl River Delta compared to the most significant city clusters of the world.[xiii]

Real deepening of the relationship among the cities cannot happen without infrastructure that ensures connections. There’s no lack of grand infrastructure development plans requiring substantial central resources. The basis for the connection between the cities is ensured by a unified road and railway network. From the aspect of establishing road connections, it is of crucial importance that the two sides of the bay should be connected with bridges. There are several large, multi-lane road bridges, the Hong Kong-Macau-Zhuhai bridge that will be opened in 2018 (in the value of 15.9 billion USD),[xiv]the Shenzhen-Zhongshan bridge, the construction of which started in 2017 (with a planned cost of 6.6 billion USD).[xv]Additionally, the establishment of high speed railway connection of all the participating cities has also started – which is going to free substantial capacities for freight transport at the same time -, and there are also plans for joining the underground networks of the neighbouring cities.

Fig. 3 The major infrastructural investments in the Pearl River Delta[xvi]

Beyond the large infrastructural projects central support is provided for strengthening cooperation in the areas of innovation, advanced processing industry, logistics and finance. The planned Lok Ma Chau Loop Innovation and Technology Park that is under construction, or the new Qianhai quarter of Shenzhen are part of something that can be regarded a kind of “financial free trade zone”, and the Guangzhou Nansha New Area free trade zone all belong to these. The success of all the above plans would be too early to try to predict in their current phase.[xvii]

Besides all these, the project has a long term political goal as well, which is to support the full integration of Hong Kong and Macau into China. After regaining control over Hong Kong in 1997, China promised to preserve the partial political independence and social-economic system for fifty years. Later this model set a precedent at the time of Macao’s return (1999), as a result of which the political principle of the “one country two systems” was applied in China. According to the agreement, the two cities are special administrative regions with a high degree of autonomy (e.g. independent legislative, and executive bodies, independent court system). Because of all this, certain circles in Hong Kong consider the project as a threat to their independence. The decision to end ticket control at the border on the Shenzhen-Hong Kong section of the high-speed railway caused serious tension, because some regard that the aim of this is to impair Hong Kong’s autonomy and not to reduce travel time.[xviii]According to more optimistic opinions, the integration of the Pearl River Delta is suitable to strengthen trust, hostile approach to it is not in the interests of Hong Kong or Macau.[xix]

The Beijing government stresses that the Pearl River Delta initiative complements China’s foreign policy flagship initiative “One Belt One Road”. This is because the region can become a natural hub for the maritime section of the “One Belt One Road”, the so called “Maritime Silk Road”, which would further enhance China’s relationships with the South Asian countries. However, it is not necessarily clear what this pursuit exactly means for the Pearl River Delta, because the region has had traditionally close relationships with South Asia, mainly through the Chinese minority living in the area. The region was regarded as the gate to China earlier as well, so the local companies see growth opportunities not necessarily in the foreign but rather in the domestic market because of the dynamically growing volume of consumption.[xx]


Although the Pearl River Delta belongs to one country, it is strongly divided, which seriously impacts the flow of goods, services, workforce, capital and information. First of all, there is undoubtedly a serious political division embodied by the “One Country, Two Systems” principle mentioned above. Second, three currencies are used in the region, besides the yuan there are the Hong Kong dollar and the Macanese pataka. Third, the free flow of capital is ensured in Hong Kong and Macau, while in the inland territories restrictions continue to be in effect.[xxi]Fourth, Hong Kong and Macao are free ports, constituting a separate customs territory next to China. China wants to control the flow of information, which is a notable difference if compared with the practice of Hong Kong and Macau.  Finally, there is still no unified and working administrative institution that would join the region, so the individual planning and decision making of the cities remain, which inevitably will result in a less effective coordination of necessary steps. There have been steps taken in relation to the issues listed above in order to realise certain projects (e.g. Qianhai, Nanshan etc.), but no attempts towards comprehensive political and regulatory unification have been made, basically because of the different standpoints and interests of Hong Kong and Macau.

Due to all these reasons, the Pearl River Delta cannot be compared to the competitors mentioned earlier, because those are not so much internally divided. Division creates considerable obstacles in the way of the free flow of workforce ad capital, which would be indispensable for economic unity (as shown by the example of the EU).

According to other critical notions, the region would be capable of successfully fighting global competitors if it could become internationally attractive for talented and creative people. For foreign workers China is currently difficult to decipher, it has a legal system different from the Western one and its regulations lack transparency, all of which is seriously discouraging.[xxii]

Better connectedness poses serious challenge to the poorer cities of the region. First, in cities with comparative disadvantage, underdevelopment may become constant. Second, those cities that have better wages and higher standard of living might attract innovative and young workforce, creating a kind of brain drain. Thus, the economic concentration of the richer cities is expected to further increase the already significant differences among the cities. The central government has to find a solution for this problem.

Finally, the Chinese government has to justify why the investments that are aimed at deepening urban cooperation but require huge financial resources are made in one of the richest parts of China rather than in the central and Western regions that need it much more. This enhances the regional differences within China further, although overcoming such differences is exactly one of the central goals of the government.


Concerning its size, the Pearl River region is already one of the most important city clusters in the world, and – due to favourable economic prospects – it is expected to strengthen further. The most important question from the region’s aspect is how successfully the integration of the cities can be deepened. Factors that support cooperation include the different specialisation of the cities, the significant infrastructural investments and political will, while challenges to be overcome are posed by strong internal division, differences among the cities and the deficiencies of the Chinese legal system that all create obstacles in the way of the free flow of services, workforce, capital and information.

Author: Viktor Eszterhai


[i] „World Population Prospects, the 2017 Revision”, Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat (30.03.2017.)

[ii] LAU, Lawrence J.: „Gong jian yue gangao da wan qa” 共建粵港澳大灣區, Chinese University of Hong Kong, November, 2017. (30.03.2017.)

[iii] „GDP (current US$), World Bank national accounts data,” The World Bank. (30.03.2017.)

[iv] „GDP per capita (current US$) World Bank national accounts data,” The World Bank. (30.03.2017.)

[v] LAU, 2017. 2.

[vi] KPMG, 06 2017

[vii] „The 13th Five-Year Plan for Economic and Social Development of The People’s Republic of China. 2016–2020”, National Development and Reform Commission. 2016. (30.03.2017.)

[viii] „Outline of the Plan for the Reform and Development of the Pearl River Delta Region (2008-2020)”, The National Development and Reform Commission, December, 2008. (30.03.2017.)

[ix] „Regional Cooperation Plan on Building a Quality Living Area”, Guandong Province Housing and Urban-Rural Development Department, Environment Bureau Hong Kong SAR Government, Secretariat for Transport and Public Works, Macau SAR Government. (30.03.2017.)

[x] „The Greater Bay Area Initiative” KPMG, September 2017. 4. (30.03.2017.) (KPMG, 2017).

[xi] LAU, 2017. 3-4.

[xii] YAU, Thomas: „Dongguan: from ‘made in China’ to ‘created in China’” In: The South China Morning Post, January 16, 2018. (30.03.2017.)

[xiii] KPMG, 06 2017

[xiv] „Hong Kong-Zhuhai-Macau Bridge construction set to finish this year”, In: Nikkei Asian Review, May 18, 2017. (30.03.2017.)

[xv] „New sea tunnel to link Shenzhen with nearby city” In: Xinhua, October 18, 2017. (30.03.2017.)

[xvi]YAU, Cannix: „Is Hong Kong’s giant bridge a road to nowhere or path to new opportunities?” In: The South China Morning Post July 11, 2017. (30.03.2017.)

[xvii] KPMG, 08 2017

[xviii] YAU, Cannix – LAU, Stuart: „Hong Kong signs joint checkpoint deal for high-speed rail project, allowing mainland Chinese officials to work on city soil”, In: The South China Morning Post, November 18, 2017. (30.03.2017.)

[xix] „Greater Bay Area visit offers a chance to build trust”, In: The South China Morning Post, February 24, 2018. (30.03.2017.)

[xx] „What China can learn from the Pearl river delta” In: The Economist, April 8, 2017.  (30.03.2017.)

[xxi] LAU, 2017. 4-5.

[xxii] HSUAN, Feng Da – MING, Liang Hai: „Four challenges ‘Greater Bay Area’ planners must overcome to ensure success” In: The South China Morning Post, January 3, 2018. (30.03.2017.)

Viktor Eszterhai is a senior analyst at the Pallas Athene Innovation and Geopolitical Foundation (PAIGEO). He completed his Ph.D. in History at Eötvös Loránd University in 2018. Between 2014 and 2015 he was a senior scholar at Tsinghua University, Department of International Relations and in 2017 he was visiting scholar at Fudan Development Institute. His research topics are the Chinese characteristics in foreign policy; China and Central and Eastern European relations; non-western international relations theory.

Eszterhai Viktor

Viktor Eszterhai is a senior analyst at the Pallas Athene Innovation and Geopolitical Foundation (PAIGEO). He completed his Ph.D. in History at Eötvös Loránd University in 2018. Between 2014 and 2015 he was a senior scholar at Tsinghua University, Department of International Relations and in 2017 he was visiting scholar at Fudan Development Institute. His research topics are the Chinese characteristics in foreign policy; China and Central and Eastern European relations; non-western international relations theory.

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