Industrial upgrading remains a big challenge for Dongguan, dubbed one of the world's leading manufacturing centers, as the southern Chinese city has witnessed slower economic growth in the last three years amid the global economic downturn, the city's mayor said.

Yuan Baocheng, mayor of Dongguan, said the city has set a GDP growth target of only 7 percent this year, given that it still faces major pressure in industrial upgrading.

"It is more like climbing a mountain. We have started upgrading industries since the global financial crisis in 2008, but there is still a long way to reach the top of the mountain," Yuan said during the annual session of the National People's Congress.

The city's economic growth target this year is even lower than the national one, which was set at 7.5 percent in Premier Wen Jiabao's Government Work Report.

Dongguan's GDP grew by 6.1 percent year-on-year to reach 501 billion yuan ($80.5 billion) in 2012. The city had the lowest economic growth rate in Guangdong province.

Located in the heart of the Pearl River Delta region, Dongguan has relied heavily on the overseas market for economic growth over the past two decades thanks to establishment of a large number of export-oriented businesses in the city.

However, the city's GDP growth rate dropped from 10.3 percent in 2010 to 6.1 percent in 2012 due to increasing pressure from the global economic downturn. "We have yet to see a turning point for economic growth," Yuan told China Daily.

As the city boasts a number of processing trade businesses, which traditionally rely on low cost and labor intensive production, authorities in Dongguan have attached great importance to industrial upgrading in the processing sector.

More than 4,000 processing enterprises in Dongguan have been transferred to foreign-funded and private businesses, Yuan said.

Also, foreign-funded enterprises have set up 670 research and development institutions in Dongguan.

After years of efforts in industrial upgrading, Yuan is confident that the city's economy will see a rebound in the near future since exports have recovered steadily and a large number of key projects have been introduced.

Dongguan's foreign trade accounts for 4.3 percent of the country's total, making it one of China's four largest cities in foreign trade volume, Yuan said. "With the steady recovery of the global economy, the foreign trade situation will be better this year," Yuan said.

Sources in the local government said that the city's exports increased 15 percent year-on-year, and its imports increased by 13 percent in the first two months. "Also, those foreign-funded enterprises will see a growing demand in the domestic market," Yuan said.

Meanwhile, the city introduced 81 key projects worth a total of 197.2 billion yuan last year, most of which are engaged in strategically emerging industries. Yuan said the city will focus on developing an ecologically friendly economy along with the industrial upgrading.

In the past few years, authorities in Dongguan have ordered about 640 businesses to suspend operations due to pollution concerns and rejected administrative approval for some 2,500 enterprises.

"We are determined to facilitate industrial upgrading and develop environmentally friendly business," Yuan said.

Dongguan's industrial upgrading strategy is well in line with the central government's policy to change the growth model and speed up structural adjustments of industry.

"We must accelerate the transformation and upgrading of traditional industries, energetically develop new and high-tech industries and raise product quality and competitiveness," Premier Wen said in the report at the opening of the annual NPC session.

Dongguan's strategically emerging industries realized an industrial output value of 105.4 billion yuan last year, a year-on-year increase of 20.6 percent.