Dongguan’s Thorny Path of Transformation

Dongguan is a city in Guangdong. It is not as famous as Shenzhen and Guangzhou， but it is called the “World Plant”. New York Times once described Dongguan like this： “you might not have heard of this city， but its 10-million population is filling your wardrobes. Just remember one thing： 40% of the shoes sold in the U.S. are made in Dongguan”.

But now， this city is losing its title as the “World Plant”. In recent years， the increasing cost in raw materials， labor force and the appreciation of RMB has pushed the operating cost of enterprises of Dongguan onto an ascending route. The global depression reduced the number of orders for them. And in order to maintain the clients， these enterprises had to keep their prices unchanged. All these led to the decreasing profits of enterprises.

In 2012， a well established shoe manufacturer only received one third of orders it did in 2011 and the profits dropped by 30%.

Zhai Suoling， board chairman of Dongguan Guangsheng Hardware & Plastics Co.， Ltd， said that his enterprise is now facing the decreasing number of orders and dropping profits. As the vice president of the Association of Taiwanese Investors in Donguaun， he had enough authority to say that this is only a single case.

Zhao Weinan， secretary-general of the Association of Taiwanese Investors in Donguaun， said that some Taiwanese businessmen were reducing their investment in Dongguan and moving their plants to Southwest China， Vietnam and Cambodia. Some of the enterprises are not willing to leave， but not moving means no chance to survive.

Ji Daosi， a columnist also worried about the development pattern of Dongguan. In his opinion， this pattern based on low-cost manufacturing was once popular in Hong Kong and Taiwan but eventually moved out of these places. “What fate is waiting for Dongguan in the future？” he asked.

Transformation

“In recent years， Dongguan went through the international financial crisis and underwent the pains of transformation.” In 2012， Xu Jiahua， the CPC chief of Dongguan， said that the government of Dongguan wanted to agglomerate the power of all businessmen from Dongguan in the world to drive the transformation of Dongguan to help this city survive the financial crisis.

In the past ten years， the processing trade was always the engine for the GDP growth of Dongguan. 80% of its industrial output was created by processing trade enterprises. The net exports of these enterprises contributed over 40% of the GDP growth. Now， the weak international market kept impairing this engine. In the first half of 2012， Dongguan only had 2.5% GDP growth rate， the lowest in Guangdong Province.endprint

The government of Dongguan believed that new competitiveness is the solution to the current crisis. The solution is made up of details as follows： a）， reducing the burden for collective public management and public services to ensure that more income is used to pay the debts； and b）， driving the collective development of land and the development of senior property， such as the hi-tech parks and big projects to increase the income of rents.

A source close to the agricultural department of Dongguan said that the collective economy in the rural areas of Dongguan is mainly based on the investment in and leasing of

the property. Dongguan is going to make use of its advantages of the low cost and stable income of the property economy to push the transformation of property leasing from low class to high class step by step. This transformation could have brought the economy of Dongguan to a new stage and provided this city with more opportunities.

Decentralization

Prof. Lin Jiang with the department of economics at the University of Sun Yat-sun， said that Donggguan must start from two points： the top-level design and the bottom-level design.

For the top-level design， the government should put efforts into the changes of the entire situation of Dongguan. It needs to both introduce big projects to stabilize the economy and take measures to accelerate the development of private enterprises. In addition， it needs to promote the transformation of the processing and manufacturing industries of Dongguan.

As for the bottom-level design， the village-scale economy should be vitalized， making villages of Dongguan the most important part and support for the economy of Dongguan. The land problem is the priority of all factors.

Prof. Lin Jiang also pointed out the government must talk the peasants into selling their land and recruit the land into the scope of state-owned assets. The governments of towns and villages must think of reasonable ways to make villagers sell their land and recruit these villagers into shareholding companies. To do this， Dongguan needs to import a lot of talents.

On the other hand， Prof. Lin believed that Dongguan government should decentralize its authority actively， allowing the governments of towns to have the right of planning the economic resources. Only in that way the economy of towns and the city can be truly integrated， along with the organic combination between economic rights and obligations.endprint

Now Dongguan has 32 towns， which administrate hundreds of villages. Nobody would tell which town or district is the most important for Dongguan. Each town has its own characteristics and importance. As Prof. Lin said， Dongguan is a city made up of 32 miniDongguans.

A governmental official that claimed to be visiting two enterprises every day shared his experiences. One day， he pointed at a company opposite the street and asked a firefighter stationed next to this company “what company it is”. The firefighter answered：“Yesterday it was a textile manufacturer. I do not know what it is today.”

Because of this， this governmental official exclaimed the quickness or the establishment， replacement and collapse of enterprises in China. It also meant that the government had to deal with such a large amount of tasks， which is important to be done efficiently.

“I go to every two enterprises every day and I could only visit 730 enterprises in a year without one days rest. There are at least 6，500 enterprises in Backstreet Town. How can we deal with this？” he said.

In his opinion， the government should decentralize the rights instead of having more powers together within one or two departments.

Similar words were heard dozens of years before， when Henry Kissinger wrote in his On China： Mao Zedong told Richard Nixon that China was to learn from the U.S. government to decentralize the rights and duties to 50 states. The central government could not do all things and the activeness of the regional governments should be motivated…

The municipal government of Dongguan has already known the importance of decentralizing the rights and duties. In 2012， a governmental official said in the 2nd forum of “Everybody Talks on Social Construction” that many governmental departments were not willing to let go of the rights. “Not to （decentralize the right） could harm us. Things could not be done well and social organizations have no space for development.”endprint