Amid an industrial upgrade and economic transition, the Guangdong economy is facing five big challenges, ranging from soaring operating costs to higher taxes, according to a report released Monday by Guangdong Social Sciences Academy and a provincial research center.

After relying on manufacturing for more than a decade, Guangdong has lost its competitive edge due to soaring operating costs, said the report.

Guangdong manufacturers usually have to give 20 to 40 percent of their profits to foreign intellectual property rights holders, the report said. This outdated industrial model is restricting economic growth and the province has to turn to high-tech industries for further growth, according to the report.

The new corporate tax law, which was introduced at the start of this year and has unified income tax rates for domestic and foreign companies at 25 percent, also has had an adverse influence on the province??s economy as its development has been tied to foreign investment, the report said.

Soaring rents and material and labor costs, together with the rising yuan, have combined to lower the competitive strength of the province??s manufacturers, according to the report.

With Hong Kong and Macao nearby, many foreign-invested companies choose to base their headquarters, accounting departments, research and development facilities, and logistics services centers in Hong Kong and other overseas cities, thus depriving the province of some of the investment gains that should have been reaped by Guangdong, the report said.

Guangdong also lags behind many major mainland regions like Beijing, Shanghai, Jiangsu and Zhejiang provinces in investment environment, resources and economic and social environment, the report said.

Editor: Yan