October 13, 2015 12:00 pm JST
Milken Institute report
Best and worst performing cities in China
KEN MORIYASU, Nikkei staff writer
The New Century Global Center in Chengdu is said to be the world's largest shopping mall. (Photo by Masahiro Okoshi)
TOKYO -- There was a time when China was growing fast virtually everywhere. Comparing the performance of cities did not make much sense because economic development was dramatically guided by government policies, rather than strengths unique to any particular region.
But that is changing, says U.S. think tank Milken Institute. The growth momentum of the Chinese economy has been on a downward trend since 2010, and the key economic drivers that powered China's miracle expansion -- a heavy reliance on manufacturing, massive government-driven fixed investment and rapid housing construction -- have lost some of their luster. Burdened by large debts and fiscal constraints, local governments are no longer able to lead investment like they used to.
Against this backdrop, Milken has released their first "Best-Performing Cities China" report, comparing 266 cities in China based on actual economic performance rather than projected success.
Milken ranked Chengdu, the capital of Sichuan province, as the "unrivaled" number one among major cities, citing its human capital, focus on high-tech and improved transportation networks.
Chengdu made the top 10 in seven out of nine categories: one-year job growth, five-year job growth, one-year wage growth, five-year wage growth, five-year gross regional product per capita growth, three-year foreign direct investment growth and foreign direct investment as a ratio of gross regional product.
Long a cradle of military manufacturing, the city has established industries in high-end aerospace and aircraft design. Chengdu also hosts half of the Fortune 500 companies, including IBM, Intel and Microsoft.
New approach heralds change
For the past 30 years, regional economies in China were bolstered by government-led urbanization, industrial clustering and infrastructure investment. However, "the recent slowdown of China's economy suggests that a new approach centering on technology, private investment and consumption will replace the aforementioned strategy," the report said.
Second on the ranking was Shanghai, which was boosted by the development of the Free Trade Zone and the linkage between the Shanghai and Hong Kong stock exchanges, which has facilitated the flow of capital in both Chinese and global markets, the report said.
The next cities in the ranking were Tianjin, Dalian, Nanjing, Hefei, Xiamen, Changchun, Chongqing and Shenzhen.
Notably missing from the top end of the list were cities such as Dongguan, Guangdong Province, and Wenzhou, Zhejiang Province, both symbols of China's astronomic growth over the past three decades.
Dongguan, also known as "the world's factory," has been assembling a vast array of IT components, electrical appliances, toys, jeans and sneakers, mobilizing an army of migrant workers. It ranked 120th.
Wenzhou -- known as the "birthplace of China's private economy" -- is famous for its hundreds of thousands of merchants who export food, tea, timber, paper and plastic goods. Located on the vibrant east coast of China, it was the gate for "Made in China" products to sail to all corners of the world. It placed 181st in the Milken ranking.
"Regions that rely heavily on labor intensive production or geography are weak," said the report's co-author Perry Wong, managing director of research at the Milken Institute. As the Chinese leadership tries to steer the economy from an export-driven model to one that will have an emphasis on the environment, domestic market development and high technologies, "the next stage of economic development in China will bring rapid changes to the regional landscapes to which people in China and the rest of the world are accustomed," the report said.
That trend is likely to accelerate after the launch of the new five-year plan, covering 2016 to 2020, the first such plan under the Xi Jinping reign, which is expected to focus on the "new normal" of slower growth. This new plan is to be discussed at a Communist Party plenum scheduled for this month.
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