Government's Roleand Regional Industrial Upgrading in China-The Case of Guangdong

As a pilot region of China's open-door policy since 1978, Guangdong's economic growth has benefited greatly from its export-led strategy associated with large volumes of FDI and a high-skilled and low-wage labor force. There has been a consensus that Guangdong needs to go through a regional industrial upgrading to gain technological advantages through introduction of higher value added products. However, although recent development in Guangdong has shown some successful moves towards the direction that fosters innovation, the industrial upgrading in this region is far from complete. This paper reviews the industrial upgrading that has happened in Guangdong since the 1990s. Instead of trying to provide a comprehensive explanation of the major contributing factors to Guangdong's performance in the upgrading of manufacturing industries, this paper primarily focuses on the crucial role played by regional and local governments in promoting the industrial upgrading. The aim is to provide an overview and evaluation of existing public policies for industrial upgrading in the region. The role of regional government in promoting Guangdong's industrial upgrading is elaborated. Particularly, this paper argues that a reasonable balance must be kept between market mechanism and government intervention, as excessive government powers may result in deficiency in resource allocation in the market and corruptions in government agencies.