China’s southern coastal region is China’s wealthiest, with a GDP per person of nearly 100,000 yuan ($15,000)
do not get much blunter than the one hanging over the sewing machines in Li Zhiguo’s factory: “Work hard here to make money, don’t be disliked by your family”. He proudly holds up one of his products, a red chiffon dress with ruffled sleeves. Dozens more are wrapped up, awaiting shipment.
In the official telling, these efforts have been a triumph. That is partly true. Since the early 2000s growth in the interior has soared. But a shift is now under way. Growth is still strong in the interior. Yet the coastal region, particularly its southern half, is now outpacing much of the rest of China. It is a phenomenon familiar in other countries: the richest areas are pulling further ahead of the poorer ones.
The underlying picture is even more worrying. Fiscal deficits have remained low on the south coast, rising from 2% in 2000 to 3.9% today. In western and central China, deficits have expanded rapidly, from an average of 5.5% to 15.5% . Land sales and transfers from the central government have kept local governments afloat, but will diminish as growth slows.
Plenty of industries on the south coast have also run into trouble, from shipbuilding in Jiangsu to garment-making in Guangdong. But the region’s economy is more diversified, and so more resilient. It is strong in modern services, from software design to wealth management. And it is still an industrial powerhouse. Many of its manufacturers have spent heavily on automation. Its smaller firms have also adapted.
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