China's coastal economies are fighting a grim battle to adapt to changes and to generate new business opportunities at a time when overseas trade is weakening and much of the fiscal stimulus is going to the interior provinces.

These coastal provinces and cities used to be the powerhouses of the country's rapid economic growth in the past 20 years.

But with the financial crisis sweeping across the world, it is now easy to see the difficulty they are in, as their gross domestic product (GDP) records declined compared with the rest of the country in the first quarter of the year.

Stumbling champions

In the first quarter of this year, in terms of year-on-year growth, Shanghai, the largest business city in the country, found itself placed second from bottom (3.1 percent) of all the Chinese mainland provinces - better only than Shanxi Province (minus 8.1 percent), an energy-producing province that suffered from a major fall in product prices.

Zhejiang Province, once regarded as China's cradle of private enterprise and boasting perhaps of the largest cluster of small and medium-sized private companies in the country, fell to the third position from bottom (3.3 percent).

Guangdong Province, the largest province in China in terms of economic strength (in both GDP and foreign trade), was only slightly better (5.8 percent), and ranked sixth from the bottom.

The three regions' GDP fell below the national average of 6.1 percent, with only Beijing's performance matching the national standards.

Shanghai and Zhejiang also showed larger declines from their growth records in the same period last year (Shanghai minus 8.4 percentage points and Zhejiang minus 8.5 percentage points) than most other provinces.

With the central government trying to maintain the economy's growth by extending huge fiscal stimulus to projects such as expressways and bridges, mostly in the poorer central and western regions, areas in the relatively developed eastern and southeastern regions would have to be more creative in evolving a future business model.

Take Shanghai, for instance. Fixed assets investment (FAI) grew only 1.7 percent in the first quarter from the same period last year, in a stark contrast with the 34.3 percent growth in the provinces of Central China.

In Guangdong, although FAI showed a more decent expansion of 12.7 percent over last year it still remained far below the national average of 28.6 percent.

Lack of services

The main problem for China's coastal cities and provinces is the lack of overseas orders. But on a deeper level, the pain in adjustment comes from a prolonged imbalance between the strong manufacturing and weak services. It is only now that these regions, especially the cities, are trying to work out their own strategies to effectively boost the growth of their services industry.

In fact, although both the Yangtze and the Pearl Delta have developed so much as to be comparable to the economies of Taiwan and Hong Kong, in terms of GDP and in manufacturing diversity, the local service industry has only commanded a markedly smaller share. In most of the mainland coastal economies, services account for less than 50 percent of the GDP, much lower than in Taiwan more than 20 years ago.

In the developed countries of the world, this proportion is often more than 70 percent of the entire economy.