Thursday, 1 January 2009
Guangdong Economy Hit by Beijing’s Policies, says Governor
Guangdong Governor Huang Huahua has admitted publicly for the first time that the provincial economy has been battered by central government policies restricting the export manufacturing industry, according to mainland media reports yesterday.
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Guangdong Economy Hit by Beijing’s Policies, says Governor
Ivan Zhai
1 January 2009
Guangdong Governor Huang Huahua has admitted publicly for the first time that the provincial economy has been battered by central government policies restricting the export manufacturing industry, according to mainland media reports yesterday.
Mr. Huang told the Guangdong People’s Political Consultative Conference Standing Committee on Tuesday that Guangdong was the first province to feel the direct impact of Beijing’s efforts to cool the then overheating economy, and the policies began to bite as early as the first half of 2007, Guangzhou-based New Express reported.
Addressing a governors’ panel in Beijing in July, Mr. Huang said he had told Premier Wen Jiabao that “any further policies restricting exports will strike a damaging blow to Guangdong’s manufacturing industry”, according to the report, which was pulled from all major mainland news websites yesterday.
The policies included a series of cuts in export tax rebates and limits on the number of small and medium-sized export-oriented factories allowed to operate in the province.
With about 48,000 factories, or more than 40 per cent of the national total, Guangdong could lose US$151.3 billion, or about 37.5 per cent of its total export earnings, and up to 13 million jobs if Beijing continued with the macro restrictions, Mr. Huang told the panel.
According to yesterday’s report, he said in July that “to upgrade the processing trade industry is good for long-term development but it needs at least three to five years and cannot be rushed”.
Mr. Huang told the provincial conference standing committee that he felt uneasy about commenting on existing national policies.
“But if I didn’t speak out, I would feel guilty to Guangdong people,” he said.
However, Mr. Wen reacted warmly to his comments and said the central government would adjust the export policies to cushion the impact, the governor said.
Mr. Huang, 61, a Guangdong native and member of the Hakka ethnic group, has been widely regarded by Guangdong officials, businesspeople and analysts as representing “local interest groups”.
His published speech was a clear contrast to Guangdong party secretary Wang Yang’s previously stated goal of moving out of or upgrading low-end manufacturing.
After taking the position in late 2007, Mr. Wang threw his weight behind Beijing’s effort to move away from resource-intensive and low-end manufacturing in Guangdong, but the changes were blamed for a large number of factory closures in the province, even before the financial crisis erupted in mid-September.
According to the Guangdong Statistics Bureau, big businesses’ profits grew by 45.9 per cent in the first three quarters of 2007 but shrank by 3.1 per cent in the corresponding period last year.
Meanwhile, the provincial Small and Medium Enterprise Bureau reported that more than 7,000 factories closed over the same time.
But even up to early last month, Mr. Wang was still backing the changes, saying in an article published in the overseas edition of the People’s Daily that Guangdong would keep pushing to upgrade its industrial base even though many labour-intensive factories were collapsing.
Mr. Huang on Tuesday also reported the draft of his annual work report. He set 8.5 per cent as the target for gross domestic product growth in 2009 and forecast that export growth might be zero.
He revealed that Guangdong businesses had lost up to 50 per cent of their overseas orders and the rest that had orders were finding it hard to get bank loans, The Southern Metropolis News reported.
“The first half of [2009] will be the hardest time for Guangdong and it might be better in the second half,” he was quoted as saying.
Though Guangdong officials have repeatedly denied reports of waves of factory closures, Mr. Huang said unemployment was expected to increase from 2.6 per cent in the first three quarters of 2008 to 4 per cent for the whole of 2009.
Looking ahead to this year, Mr. Huang said Guangdong’s top priority would be to expand domestic demand, including re-extending the May Labour Day holiday from one day to seven days. Hastening the industrial upgrade was only second on the draft to-do list.
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