Guangdong in crisis, the new engine of the Chinese economy now runs on the Yangtze
Data on the performance in the first quarter of 2026 confirm the difficulties of China’s southern coastal province, which was the laboratory of the reforms initiated by Deng Xiaoping but is now suffering from the downsizing of Hong Kong and the crisis of the manufacturing sector. Jiangsu and Zhejiang are currently leading the country, with Hangzhou emerging as China's artificial intelligence hub. Meanwhile, differences between the various parts of the country are growing.
Milan (AsiaNews) – For 40 years, those who wanted to understand where the Chinese economy was heading looked south, to Guangdong, the province that is the country's main economic engine. However, provincial data for the first quarter of 2026 suggest a shifting internal economic profile.
Out of 31 provinces, municipalities, and autonomous regions in mainland China, 16 recorded growth below the national average of 5 per cent, compared to ten the previous year.
The slowdown is widespread, but varies across the country, highlighting a gradual shift in the country's economic centre of gravity from the southern coastal provinces to those in the Yangtze Delta.
Guangdong’s decline, Jiangnan’s rise
Guangdong was the testing ground for the economic reforms launched by Deng Xiaoping in the late 1970s. Twenty years ago, it ranked first among Chinese provinces in GDP per capita, with nine of its cities in the top 25 for the same indicator.
Today, only three remain. Shenzhen, which led the national ranking in 2005, has fallen to sixth place, Guangzhou (Canton) went from eighth to twenty-second, while Zhuhai has fallen from third to sixteenth.
The main factor that had previously fuelled their rise, proximity to Hong Kong (and Macau), has lost momentum with the former British colony gradually losing economic influence over time.
Guangdong continues to host large innovative companies such as Huawei, Tencent, and BYD, but the most advanced startup ecosystem has now been consolidated elsewhere.
A less visible but significant limitation also weighs on the province, namely the absence of local universities from the top ten in the national ranking.
Guangdong's traditional manufacturing districts have been particularly hit hard. Foshan – for years one of China's main production centres for furniture, ceramics, and household appliances – saw growth stagnate at 0.2 per cent in 2025, caught between two converging trends.
On the one hand, the real estate crisis has dried up demand for construction materials and furnishings; on the other, US tariffs have hit low-value-added exports. The consequences are visible locally.
Many factories have closed, and numerous migrant workers who returned to the rural towns and villages for the Lunar New Year have not come back because their jobs have vanished. Meanwhile, in large furniture showrooms, empty spaces stretch across entire floors.
Jiangsu and Zhejiang, the two provinces that stretch along the southern bank of the Yangtze, in a region historically known as Jiangnan, are moving in the opposite direction.
Jiangsu has taken first place among Chinese provinces in terms of GDP per capita, Zhejiang has climbed to third, while Guangdong has slipped to fourth.
The shift is even more evident when examining individual cities. In 20 years, Suzhou has risen from twenty-fifth to seventh place, Wuxi from eleventh to fifth, and Nanjing from thirty-first to eleventh. Today, Jiangsu has seven cities among the country's top 25, and Zhejiang 4.
This shift is reflected in the priorities of the new five-year plan, released in March, which identifies this area as the hub of strategic industries.
Hangzhou, the capital of Zhejiang, has established itself as China's leading hub for artificial intelligence (AI) and robotics, thanks in part to the growth of companies like DeepSeek and Unitree, which developed around the Alibaba ecosystem.
In the biopharmaceutical sector, a giant like WuXi Biologics has consolidated a presence spread across Hangzhou, Suzhou, and Wuxi.
The growing gap between the two high-tech areas can be explained in part by the presence of leading academic institutions.
The Economist reported that Zhejiang University's role in transforming Hangzhou into a startup hub is reminiscent of Stanford's role in the development of Silicon Valley.
Both Zhejiang University and Nanjing University consistently rank among the country's top ten, along with several universities in Shanghai and neighbouring Anhui province.
Troubled provinces and data
Comparing Guangdong with the Yangtze River region is not enough to explain what is happening. Difficulties are also emerging in other parts of the country, a sign of an increasingly fragmented China.
In northeastern China, Liaoning has been in decline for some time, closing the first quarter this year with 2.8 per cent growth, well below the annual target of 4.5 per cent, with a 20 per cent drop in fixed investment and essentially stagnant retail sales.
Hunan, in central China, stalled at 3 per cent growth, with declining consumption, a situation often summed up on Chinese social media with a recurring joke that Hunan had become "the Liaoning of central China”.
Shaanxi is also going through a rough patch. The province, heavily dependent on the automotive industry, saw vehicle production halve in the first quarter, to the point where it was surpassed by Jiangxi in terms of GDP.
To fully understand these numbers, we must consider a problem that has plagued the Chinese economy for a long time. Many local officials have systematically inflated economic statistics for decades, attempting to further their own careers, so much so that the combined provincial GDP figures regularly exceeded the national figure.
In 2025, China’s National Bureau of Statistics sanctioned several provinces for data manipulation, and last January, Xi Jinping asked local officials to review their evaluation criteria, in an attempt to break the cycle summed up by the ironic expression “numbers produce officials, and officials produce numbers.”
The following month, the Communist Party launched a five-month internal campaign aimed at discouraging a political culture focused exclusively on numbers and growth targets. The deterioration in local data may therefore be partly due to a less artificially optimistic representation of reality.
A multi-speed country
Beijing's decision to lower its growth target below 5 per cent for the first time in over 30 years, setting it between 4.5 per cent and 5 per cent, is a sign of the awareness that the country is entering a different phase, marked by more moderate growth rates than in the past.
This shift comes as the Chinese economy simultaneously faces a shrinking real estate sector, the burden of local debt, and the need to rethink entire industrial districts.
China appears increasingly internally differentiated. Some technology hubs continue to thrive, while vast areas still struggle to identify new growth drivers.
The image of a compact and uniform country, still prevalent outside its borders, risks masking deep transformations that will increasingly impact Beijing's policy choices in the coming years.
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12/02/2016 15:14
26/01/2023 17:10
