China: growth potential in Guizhou province
Published 13 October 2014
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This article is no longer current. Please refer to Overseas Business Risk - China
Summary
After decades of stagnation, China’s least developed province has become one of the fastest growing. The driving force is political as well as economic: new leaders are working hard to attract investment, and experience in Eastern provinces as their growth model. But will it work?
Detail
China’s least developed province is catching up
South West China’s landlocked Guizhou emerged as China’s fastest growing province in 2013 after years of lagging behind. Seven years ago it had the lowest GDP per capita in the country and was 30th out of 32 in terms of growth rate. In the first half of 2014 it was second fastest, trailing behind Chongqing’s 10.9% by a mere 0.1%.
The Guizhou of Old: Alcohol, Tobacco, Weapons and Coal
For years Guizhou’s economy relied upon coal, tobacco and production of Moutai, China’s most famous brand of spirit. These three items and the energy sector still account for 66% of Guizhou’s large-scale industries. Guizhou Academy of Social Sciences links sluggish historical growth to the abundance of coal: “It’s so easy to make money from selling coal—plentiful and easily extracted—that people don’t care about investing in more sophisticated businesses.”
Arms and aerospace enterprises, are probably the most advanced in Guizhou’s economy. But while they provide jobs and boost GDP, their suppliers and customers are generally outside of the province so they don’t have much knock-on effect to the rest of the economy.
Now Under New Management
Growth took off in 2010I with new leaders overseeing Guizhou’s own “great leap forward”: investment to develop 111 new industrial zones is expected to provide around half of the province’s GDP target of 1 trillion RMB in 2015. Other leaders transferred from the East have used previous experience to bring in IT businesses. To date, China Mobile, China Telecom and China Unicom have established data centres in Guiyang. The new leaders are s also pushing the “Big Data” sector, which China Daily estimates will generate 100 call centres and 700,000 jobs in Guizhou by 2020.
Big Data: Big Ideas, Big Challenges
Local observers believe that just as Western companies outsource call-centres to India, Guizhou can become China’s centre for IT customer service. The province’s stable temperatures and cheap electricity would also suit IT companies. However, Big Data requires expertise which local universities are unable to provide, and none of Guizhou’s 88 universities have a reputation for training IT workers.
Environment Loses Out
At Guizhou’s request the UK was a strong presence at the Guiyang Eco-Forum, a platform to engage with senior leadership and use project funds to share UK expertise on clean coal. Local leaders believe that clean environment, ethnic diversity and improved infrastructure will attract tourists as well as professionals to Guizhou.. But break-neck development is endangering the environment as well. As a Chevening Scholar at the Environmental Protection Bureau put it: “The Party Secretary asked us to maintain two bottom lines: economic growth and the environment. I don’t think they are compatible.” Land appropriations of questionable legality also appear to be a big problem.
Comment
To compete in Big Data and other high-tech industries Guizhou must draw in workers and customers from more developed regions – no easy task. Even if Guizhou does become the ‘IT office of China’ the very fact that these industries are not location-sensitive also limits knock-on benefits to the province.
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