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Economy of “World Factory” Dongguan City Falters

Well-known Chinese news site Sina (NASDAQ: SINA) recently reported that, according to the Dongguan City Bureau of Statistics, the city saw a first half-year GDP growth of 1.5 percent year-over-year. China’s national GDP growth during the same time period was at 5.5 percent, and GDP growth in Canton province (where Dongguan City is located) was 5.0 percent. Dongguan’s growth rate was second to last among major Chinese cities, and it ranked last among cities with an annual GDP of over one trillion yuan.

The Cantonese city of Dongguan, once nicknamed the “World’s Factory,” has manufacturing as the cornerstone of its economy. Last year, the city’s industrial value added reached RMB 624.4 billion (around US$86.7 billion), ninth in the country, and Dongguan ranked third among Chinese cities in manufacturing of computer, communication and other electronic equipment. In this year’s first first half, however, Dongguan’s computer, communication and other electronic equipment manufacturing sector fell by 4.9 percent, and electrical machinery and equipment manufacturing fell by 7.4 percent. The negative growth of these sectors has had a significant impact on Dongguan’s economy.

Take mobile phone production as an example — Dongguan is China’s manufacturing base for mobile phones nationally. Recently, one out of every four smartphones in the world was made in Dongguan. It used to produce 400 million mobile phones a year; production peaked in 2019 and then gradually declined. Last year, the production of mobile phones in Dongguan was only 197.6167 million units, a drop of more than half from the peak.

In the first half of this year, Dongguan’s exports decreased by 9.4 percent. The city’s past rapid growth was the result of globalization — the capital, technology, equipment, and orders driving economic activity in the city all came from abroad. This economic dependency on external factors has become a liability as global trade slumps, directly affecting Dongguan’s economy.

Source: Sina, August 13, 2023