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Guangdong: Reenvisioning Guangzhou

In Parts I and II of this report from South China's Guangdong Province, the core region of China's economic reforms and opening up, I presented Party Secretary Wang Yang's vision of transformation and plans for responding to the global economic crisis. Here I describe my discussions with Guangzhou Party Secretary Zhu Xiaodan about the changes under way in the province's capital. As I traveled through Guangdong and spoke with government officials and business executives, there was near-unanimous support for Wang Yang's vision of how to transform Guangdong. All realized the difficulties and short-term pain, and the potential for instability, but nonetheless they felt that hard decisions made now would yield a much stronger Guangdong in the future. Arriving in the provincial capital, Guangzhou, I met Liu Zijing, president of the city's Baiyun Airport. In 2008 the airport handled 33 million passengers, almost 50 times the number in 1978, and, notwithstanding the financial crisis, Liu forecasts growth: 38 million passengers in 2010, 60 million in 2015, 70 million in 2020, and ultimately 100 million (requiring five runways). International routes from Guangzhou will increase from 57 in 2008 to about 90 in 2010, he says, reflecting the city's growing global clout. Federal Express's regional hub has already added 136 flights a week. And Liu echoed Secretary Wang Yang in highlighting the opportunities offered by the global situation. "The economic downturn is bad, no question," he agreed, "but we now have more time to adjust, develop agilely, and improve our service quality. Developing too rapidly has been burdensome," he says. "We must prioritize environmental concerns, including noise control, energy-saving procedures, and treating wastewater for use in landscaping." When I visited Guangzhou Party Secretary Zhu Xiaodan, he started by clearing up a common misconception. "People assume that because Guangdong Province grew so rapidly in 30 years that all is new. Guangzhou, Guangdong's capital, was founded in 214 B.C. and inhabited continuously. The city center remains in the same place." The city has reached a turning pointGuangzhou has long been China's most outward-looking urban area, dating back to the era when the British and Americans and others had outposts there. More recently, Guangzhou has been the home of the Canton Trade Fair, the largest and most important event that brings together importers and exporters. Known for its dense rows of slum-like shantytowns of not more than a decade ago, Guangzhou today has become of one Asia's most modern metropolises. Secretary Zhu emphasized that the city has reached a turning point. Guangzhou's GDP increased 45 times over the three decades of reform, he said, while urban disposable income increased 55 times. In 2008, Guangzhou's per-capita GDP reached $11,600. "Compared with some cities in Asia, we still have a ways to go," Zhu said, "but compared with where we were, we've done pretty well. The question now is, where do we go from here? What's our future, and how do we get there?" Zhu was quick to acknowledge that "we've paid a heavy price for rapid growth." Intense development was crucial in the 1980s and '90s, he explained, "because China was so poor." But now, "we cannot ignore social, political, and cultural progress. If these are neglected—particularly social imbalances and environmental pollution—we will be blameworthy. We have a duty to our country and our children. To continue in the future as we have in the past would be irresponsible." In practice, Zhu said, this means that "our central concern must be the people's welfare, their standard of living." In 2008, Guangzhou spent 69% of its budget on medical welfare, pensions, unemployment, and other initiatives, such as providing culture to rural communities. "We strive to give rural and urban residents equal opportunities," he emphasized. "pollution is unacceptably high"Zhu stressed that the city's model for economic development has changed. "We used to say that without industry, a city cannot become rich, so cities pushed industrialization," he said. "We cannot deny that industrialization is the foundation of growth, but today, at least in Guangzhou, industrialization cannot sustain growth. We have too much manufacturing; even with treatment, pollution is unacceptably high." Instead, Guangzhou will eschew heavy manufacturing and encourage industries that rely more on innovation than investment, such as biomedical and electronics, as well as service-sector industries such as finance, technology, and tourism. "We'll change 'Made in Guangzhou' to 'Created in Guangzhou,' " Zhu asserts. "We need more intellectual property, more of our own brands." Guangzhou's service sector is already relatively well-developed, accounting for 59% of GDP in 2008—second only to Beijing; manufacturing amounts to 39%. Zhu still sees a role for manufacturing, provided the factories are clean and companies rely more on creativity than capital. "We will support companies at the high end of the value chain and use industrial parks as a driving force," Secretary Zhu explained. "Companies that pollute or cannot transform will be phased out. We're transferring manufacturing companies to the city's outskirts and service firms to the city's center. There'll be no chimneys in the city!" One business seeking to upgrade is Guangzhou Automobile Industry Group, China's fourth-largest car manufacturer, which targets 600,000 units a year in its joint ventures with Honda and Toyota. When I visited, executives stressed that the company is committed to "self-reliant R&D and own-brand business," with plans to launch its own-brand "rationally priced, good-quality" passenger vehicle and to focus on environmental protection, fuel economy, and safety. To help foster creativity, Guangzhou has established the Guangzhou Higher Education Mega Center. Organized by Zhongshan University, the local school that is one of China's top research institutions, this unprecedented academic center, already in operation, has a planned area of 16.6 square miles (including an entire island in the Pearl River), with campuses of 10 provincial universities. It anticipates 200,000 students, 20,000 teachers, and 50,000 staff when it reaches full capacity. from petrochemical complex to wetlandsLike Guangdong Secretary Wang, Zhu sees the Pearl River, which winds through Guangzhou on its way to the sea, as a symbol of the city's vision to transform its development model and improve its environmental health. "When I was young, we could swim in the river," Zhu says. "But later, at its most polluted, it was black and smelly." Now, after preliminary treatment, the water quality is improving, Zhu reports, "but it'll be years before we can swim in it again." In 2009 and 2010, he says, Guangzhou will invest almost $6 billion in treating the river. "Otherwise we'd be destroying our heritage—our ancestors have lived here for over 2000 years," Zhu notes, emphasizing that "without clean water and air, sustainable development is meaningless." Zhu describes the government's commitment, for example, to protecting Guangzhou's wetlands. Nansha Wetland Park, home to thousands of diverse bird species, abuts the city's expanding port and major enterprises, including steel, petrochemicals, and shipbuilding. A full 50% of the land in the Nansha district will soon be covered with forest or grass, incorporating wetland reserves, mangroves, and coastal forests. For years the city has planned to build a multibillion-dollar petrochemical complex—a joint venture of Kuwait Petroleum and state-owned Sinopec (Asia's largest refiner)—in Nansha. Now, though, the government is requiring that the joint venture relocate the plant. (Several less central, less environmentally sensitive sites are being considered.) Individual stories personify Guangdong's (and China's) dramatic transformation. In the mid-1980s, in still-poor, agrarian Dongguan, a low-level government worker had a second child and was fired for violating the rigid one-child-per-family policy. Unemployed and desperate, he was forced to do odd jobs servicing private companies that were just springing up in the area. When Dongguan became the core of Guangdong's manufacturing engine, he became a millionaire; his four-person family owns three cars. Now here's what's most telling: His older daughter, Kelly, worldly wise and fluent in English, earned a master's degree from the prestigious London School of Economics. After graduation she chose to eschew attractive opportunities in England and returned to Dongguan to work for the local government. A career within the official system, Kelly told me, offers her the best opportunities for personal development and social contribution. She is confident, she said, in Secretary Wang Yang's grand vision for transforming Guangdong. Just a few years ago, Wang's vision would have seemed farfetched—and Kelly's confidence, well, inconceivable.
Dr. Kuhn, an international investment banker and corporate strategist, is a longtime adviser to the Chinese government. He is the author of How China's Leaders Think: The Inside Story of China's Reform and What This Means for the Future (new from John Wiley), which features exclusive conversations with China's senior political leaders, current and future, and with leaders in diverse areas of Chinese society.

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