The Functional and Sectoral Division of Labour between Hong Kong and the Pearl River Delta: From Complementarities in Production to Competition in Producer Services?

Abstract

This study examines whether regional upgrading has affected the traditional division of labour between Hong Kong and the Pearl River Delta, as exemplified in the ‘front shop–back factory’ model. The location choices and investment characteristics of foreign multinational enterprises are used to derive the current status of sectoral and functional specialisation across the region and to explore the alleged competition over foreign direct investments in service functions. The results show that the complementary roles of Hong Kong and the Pearl River Delta, in terms of sectoral and functional specialisation, remain largely intact. However, Guangzhou and Shenzhen appear to compete with Hong Kong by advancing their own distinctive roles as attractive locations for low-end service functions.