The soaring, sprawling, surging city of 42 million people around China’s Pearl River Delta is now the largest city in the world.
By George Russell
“We should allow some regions, some enterprises, some workers and farmers, who because of hard work and good results achieved, to be better rewarded and improve on their livelihood … In this way, the national economy will, like a wave, surge forward, with all the people becoming relatively well off.”
With these words, China’s then paramount leader Deng Xiaoping set in motion a great experiment. In 1980, four localities in southern China became “special economic zones” that could offer flexible and fast-track procedures to foreign investors wanting to establish manufacturing facilities for export.
The four were Xiamen, Shantou, and two towns on either side of the wide Pearl River Delta – the fishing town of Shenzhen, just north of Hong Kong, and Zhuhai, just north of Macau. Deng’s declaration changed them all forever, but the two Pearl River towns most of all.
“The scale of China’s urbanisation is unprecedented throughout human history.” Li Keqiang, Chinese Premier
The expansion of Shenzhen and Zhuhai triggered the Pearl River Delta’s transformation into the workshop of the world. That transformation created one of the greatest internal migrations ever known, with rural Chinese seeking their fortunes in the country’s booming new cities. As Chinese Premier Li Keqiang put it in 2013, “the scale of China’s urbanisation is unprecedented throughout human history”.
Today the symbol of that transformation is the Pearl River Delta or PRD, an area of about 7000sq km. Depending on who is measuring, it’s made up of a core of Shenzhen, Dongguan, Guangzhou and Foshan, plus Hong Kong, Macau and Zhuhai, Zhongshan, Jiangmen, Zhaoqing and Huizhou.
The PRD’s urban areas have almost doubled in just a decade. And as the cities have swelled and intersected, the PRD has now become not 11 cities but one loosely connected megacity.
According to a new World Bank report, the core PRD in 2015 has taken the crown as the world’s biggest city, a giant of 42 million people, more than the entire population of Malaysia and almost twice that of Australia.
The World Bank report, East Asia’s Changing Urban Landscape, found the PRD had usurped Tokyo as the globe’s largest urbanised area. The greater PRD as defined by Chinese authorities, is far bigger still, with 65 million people.
One city and many
If the PRD is now one city, history and Chinese administrative rules have made it one with distinct entities and strong local rivalries. Guangzhou, the provincial capital, is the centre of power, while Shenzhen is a financial services and technology hub, home to internet giant Tencent and many start-ups. Foshan is known for manufacturing electronics, furniture and homewares, while Dongguan is highly regarded for its precision engineering.
For millions of workers, the Pearl River Delta remains a place to make money rather than put down roots. Li Shifun, a factory worker from northern China’s Heibei province, is typical. She has lived in the Fuyong area of Shenzhen for eight years. She speaks Putonghua (Mandarin, China’s national language) while most people in the province of Guangdong prefer speaking Cantonese.
“I don’t really know many local people,” she says, and adds that she tends to spend her time with people from her home province. Some of her workmates are from the same county, near the city of Tangshan, a 36-hour journey by train and bus from Shenzhen.
Her disconnect is heightened by the hukou system that means she can only collect state benefits, such as education for her children, in her hometown. China is currently liberalising the system for migrant workers, but provincial and municipal governments are slow to act because of the fiscal burdens.
A megacity matures
Yet for all its fragmentation, the PRD is taking on the characteristics of an established city. Better-off residents have a wider range of leisure pursuits than ever before: a recent public holiday weekend’s events included an appearance by Dutch electronica DJ Sander van Doorn at Shenzhen’s Boom Boom Room nightclub, a mojito street party in the Baishizhou entertainment district, and a wine-and-cheese evening at the new JW Marriott Hotel Shenzhen.
More culture is on the way: state-owned China Merchants Group hired London’s Victoria and Albert Museum to advise on construction of the Shekou Design Museum, set to open in late 2016.
“What a city like Shenzhen lacks in history and deep cultural roots, it makes up for in its ability to foster an urban environment that tolerates experimentation,” says architect Adam Mayer, author of the China Urban Development Blog, who worked in Beijing and Chengdu for three years. “This could ultimately lead into its own kind of new-found culture in the future.”
As the PRD has transformed, living standards have soared, and that’s changing the area’s economic base. Li Shifun operates a sewing machine in a Shenzhen factory making brand-name accessories for global export. She works an average of 10 hours a day and earns 5500 yuan (A$1120) a month, including paid overtime. That’s more than double Shenzhen’s minimum wage of 2030 yuan (A$413), and not far from the average for a worker in Hungary. The company provides dormitory accommodation and all her meals.
Not so many years ago, Li and hundreds of millions like her epitomised China’s economic model: a vast pool of low-cost labourers toiling in factories churning out export products. But that has changed radically. Rising input costs such as land and wages, labour shortages, slowing export markets and growing environmental awareness have curbed factory development.
To maintain social stability, factory workers in Guangdong provinces have been given greater benefits over the years, such as minimum wage laws. Strikes over pay and conditions – especially at units of foreign companies – have been cautiously tolerated.
As a result, some companies are changing their operations. One of the world’s largest hat makers, Mainland Headwear Holdings, has opened factories in Bangladesh, where it pays workers about 550 yuan monthly, compared with 4000 yuan in Dongguan.
Factory work is also losing its appeal for many Chinese, who see more opportunities in services and the burgeoning domestic economy. Li, for example, would like to return to her home province and start a retail business or work closer to her family. “I don’t want to live in Shenzhen my whole life,” she says.
A new type of urbanisation
A project as large as the Pearl River Delta was bound to hit bumps on the way. While the original 1980 plan to create special economic zones was groundbreaking, some local officials thought it didn’t go far enough. By 1981 Shekou, a coastal town within Shenzhen best known for its dyeing factories, was offering an even faster track to investment approvals for technology companies.
Such fragmented development continues, with much urban policy controlled at the municipal or district level. Occasionally, freewheeling local officials are reined in, as they were in the recent designation of Shekou, Nansha and a portion of Zhuhai as self-governing trade zones.
“This seems to be a move on the part of the Guangdong provincial government to bypass the municipalities and impose some degree of regional coordination in shipping and trade across the Pearl River Delta,” says urban planning academic Nick Smith, a former visiting lecturer at Chongqing University.
China’s urbanisation policy is at a crossroads. “[China’s] urbanisation and growth have been based on robust export demand, cheap labour, cheap land and artificially low pricing of environmental externalities. None of these can support growth or urban development in the future,” the Organisation for Economic Cooperation and Development (OECD) noted in its OECD Urban Policy Reviews: China 2015.
China is facing a shift to a new model of urbanisation, based on growth that relies more on domestic demand. “The export manufacturing sector will be upgraded to a science and technology orientation,” says Frank Chen from CBRE China.
“Modern service industries are encouraged rather than traditional manufacturing.”
Looking to the future
Greater physical integration – through links such as the 50km Hong Kong-Zhuhai-Macau Bridge project – will be accompanied by better networking of financial infrastructure. The Hong Kong stock exchange should be integrated with Shenzhen’s this year, replicating the Shanghai-Hong Kong Stock Connect transactions.
“The Pearl River Delta, once the hub of China’s exports to the rest of the world, will now become one of the major global centres for trade as well as finance,” predicts Venant Chiang, head of China and Hong Kong property research at Jefferies investment bank.
But a seamless assimilation of the whole Greater Pearl River Delta Region into a single entity is virtually impossible, say experts. “Given that Hong Kong and Macau are special administrative regions and enjoy totally different and independent legal systems, full integration is unlikely in the foreseeable future,” says Chen.
And for many Hong Kong business people, the mainland runs a poor second for liveability.
“Hong Kong has better air quality and a tidier environment, better and more choices of restaurants and accommodation, safer food and drinks, better security and human rights, freer flow of information, lower tax rates and it’s easier to go abroad,” says Sunny Liu, a finance director at Closure Systems International, a US bottle-cap maker with manufacturing operations in Guangzhou. Those sort of freedoms may trump any number of Shenzhen design museums.
Yet as the Pearl River Delta megalopolis grows, it will likely change and evolve beyond its planners’ vision. “Urban resilience, particularly in the face of environmental change and sea level rise, is important,” says urban specialist Nick Smith, who is currently completing a PhD at Harvard. “But humanity has also proven remarkably innovative at adapting and rebuilding our cities.”
China’s ‘pocket’ dynamos
While much attention has been focused on the rise of China’s megacities – Beijing, Shanghai and the Pearl River Delta region – the country’s dynamic smaller cities are where many fortunes will be won and lost.
China has 415 urban areas with 100,000 to 500,000 people, the smallest population size category examined by the World Bank’s East Asia’s Changing Urban Landscape report. These smaller cities are very attractive to both companies and investors.
“Middle-class growth rates will be far greater in the smaller cities of the north and west,” conclude Yougang Chen and Amy Jin in research for McKinsey & Company.
Procter & Gamble sells its personal care products in 1300 smaller urban areas across the country, while companies such as luggage manufacturer Samsonite plan to target lower-tier cities in China to take advantage of a burgeoning middle class and an e-commerce boom.
According to A.T. Kearney’s 2015 Global Retail E-Commerce Index, smaller cities will drive China’s e-commerce market as consumers bypass less extensive physical retailing options.
This article is from the July issue of INTHEBLACK