However, 23 percent of the surveyed European companies in South China said they are operating in China to serve the European market.

"However, Guangdong does not need to emulate Beijing or Shanghai and transform itself into a financial center or be the headquarters for multinational companies," Desmonts said.

"Guangdong has set up a solid supply chain for manufacturing and a well-developed logistics network. This is something that the regions with lower labor costs cannot emulate. So the province must play up to its strengths and upgrade its economy to smart manufacturing for the domestic market."

South China should also take advantage of its geographical location to further enhance cooperation with Hong Kong and Macao through the China (Guangdong) Pilot Free Trade Zone and actively participate in the 21st Century Maritime Silk Road initiative, said Alberto Vettoretti, chairman of the South China Chapter of the European chamber.

Besides the rising cost caused by the appreciation of the yuan, the European companies in South China are also facing hurdles related to intellectual property rights protection, visa processing time, the efficiency of customs verification, inconsistent implementation of policies across different cities and market access for European small and medium-sized enterprises.

"To achieve the economic upgrade, Guangdong and the South China region as a whole need to improve upon the flows of people, goods and services and information," Vettoretti said.