Foshan, long one of China's most dependable industrial cities, has recorded another quarter of contraction, exposing deep structural weaknesses as neighboring Dongguan accelerates. With recent statistics locking the roster of China's "trillion‑yuan" cities at 29, the contest to be Guangdong's third economic engine has narrowed to a margin of just CNY 397.15 billion by the end of 2025 — the smallest gap since 2006.
The numbers from Foshan are stark. Its nominal GDP fell by CNY 72.83 billion year‑on‑year, a decline of 0.55%, marking a second episode of negative growth after a contraction in the first quarter of 2024. Industrial activity, the city's lifeblood, weakened: in 2024 Foshan's industrial output above designated scale slipped 1.9%, with large firms down 9.3% while small and micro enterprises grew. Export performance has suffered even more dramatically. Total trade fell sharply in 2024 and continued to slide into 2025; export values that once topped CNY 3.8 trillion contracted by double digits in 2024 and by single digits in 2025.
The proximate cause is an overconcentration in labour‑intensive, property‑linked manufacturing. Foshan's economy is dominated by a broad home‑and‑building goods ecosystem — furniture, lighting, ceramics, aluminum profiles, home appliances and related inputs — sectors that together account for roughly 60% of local manufacturing and more than half of exports. Those ties to China's cyclical property sector are now a liability: residential investment fell sharply (residential investment down over 24% in 2025), new‑home transactions hit decade lows, and construction‑related supply chains have shrunk accordingly.
Global headwinds have amplified those local weaknesses. Weak global demand, geopolitical frictions and the ongoing reshaping of supply chains penalize low‑technology, high‑labour exports. Profitability is thin: major sectors in Foshan report margins below 5%, leaving little buffer for firms when orders evaporate. By contrast, Dongguan has been pivoting faster into higher‑value electronics, advanced manufacturing and new consumer niches such as "chao‑wan" (designer toys) and related IP, delivering stronger industrial growth, surging high‑tech output and double‑digit growth in parts of its trade and investment figures.
Both cities have long histories as manufacturing powerhouses and now face the same fundamental constraint: their firms sit near the bottom of the global value chain. Both have initiated aggressive industrial policies to move up the so‑called smile curve, but their strategies differ in speed and emphasis. Foshan has rolled out plans since 2022 to build innovation‑led manufacturing parks and to encourage service‑oriented manufacturing, and in 2025 it signed nearly CNY 2 trillion in projects, a majority in advanced manufacturing sectors. Dongguan has been more direct and tactical: a clear "8+4" industry framework, targeted subsidies and funds, a high‑profile push into AI‑enabled terminals and a cultural industrial policy backing the chao‑wan and anime cluster with dedicated financial support.
The short‑term arithmetic favours Dongguan. In 2025 its industrial added value grew around 4%, new investment in advanced manufacturing and high‑tech sectors accelerated, and exports rose by solid percentages, while Foshan continued to report tepid industrial growth and falling trade volumes. Yet meaningful upgrading of industrial bases is inherently slow — likely a multi‑year, even decade‑long process — and outcomes will depend on the quality of investment, the ability to attract talent, upgrades in R&D capacity, and how well each city converts policy pledges into durable clusters.
For the wider Chinese economy the contest between Foshan and Dongguan matters because both are archetypes of export‑oriented, manufacturing cities that powered China’s decades of growth. Their trajectories will shape employment, local government revenues and the resilience of the Pearl River Delta’s supply chains. Whoever seizes the higher‑value niches — and can weather the short‑term pain of restructuring — will help determine whether the Bay Area remains a global manufacturing hub or becomes a zone of incremental decline for labour‑intensive industries.