- Report finds small cities in the country’s central and west provinces surging ahead but weakening conditions could signal slowdown ahead
Nearly two decades after China introduced a strategy aimed at boosting the economies of its central and western regions, a new report shows growth momentum has finally started to move from the eastern seaboard to the inner provinces.
California think tank the Milken Institute is due to release its annual report on best-performing cities in China on Wednesday and co-author Perry Wong, the institute's managing director of research, said small cities in central and western regions were benefiting from the country's investment drive in mass transport.
The ranking, which considers third-tier cities in a separate category from first and second tier ones, incorporates nine indicators, including one-year and five-year job and wage growth, gross regional product per capita growth and foreign direct investment. Wong said the results therefore did not show which city was best performing in terms of a direct comparison on GDP.
In the case of Chengdu, capital of the southwestern province of Sichuan " and China's best performing city, according to the report " the Chengdu-Europe Express Rail had been especially beneficial for the city's development.
"Overall increases in investment and enhancing the high-speed rail, both in intra-province and inter-province links, are increasing interest in building manufacturing and technology parks in Sichuan," the report said.
"This result of seeing small cities in the central region becoming middle to middle-top half tier, or even one of the top in fastest growing cities, shows that the economic power of growth has finally been pushed from the east coast of the country to the central and central west," Wong said.
"(The cities) charm some foreign investors and European companies. I think they are betting on the future that the transportation corridor in the western part of China is going to work all the way to Europe."
China introduced its Western Development strategy in the early 1990s to narrow economic disparities between its eastern economic powerhouse and the country's west.
Wong said research showed the improved performance of cities in the region was due to the central government's focus on developing the transportation network there under the Belt and Road Initiative " China's plan to push for global influence through multi-billion-yuan infrastructure investments in Eurasia and Africa.
The good economic news for central and western China was tempered by current weakening conditions which may slow the gains outlined in the report, which is based on official economic numbers up to 2017. Since then, China's economy has in the past year recorded its greatest slowdown in recent decades.
In addition, the central government's target growth rate for China's GDP to next March is 6 to 6.5 per cent, also a markdown from previous years. The outlook is further complicated by the simmering US-China trade war, which Wong named as a major factor threatening to drag on growth in some cities.
China's railway spending plummets as Beijing struggles to sustain momentum
"Though it is doubtful that the actions of the US government will derail China's plan, the blacklist and trade ban could set roadblocks ahead, which could slow progress. Regions such as Shenzhen, Suzhou and other areas with a heavy technology presence might anticipate a negative economic impact in the short term," the report said.
In addition, the ongoing unrest in Hong Kong " one of the most developed economies in China " has raised questions over the central government's plans for the Greater Bay Area, which incorporates Hong Kong, Macau, Shenzhen and eight other neighbouring cities in Guangdong province and is intended to be a future economic engine for the southeastern region.
"I do not think the central government's long term view for the Greater Bay Area would change, even given the current economic and political situation in Hong Kong," Wong said. "It would take a decade or even longer for the area to be developed properly."
Wong said Hong Kong's role as a window for foreign capital to flow in and out of the city was still crucial and hardly replaceable, and that further economic integration with mainland China would ultimately benefit the city.
"I have faith in Hong Kong, I do not believe the city will go beyond the ability to repair itself because of the protests," he said.
Hong Kong has been embroiled in its biggest political turmoil since the handover from Britain to China in 1997. Protests began in June over a now-shelved extradition bill which would have opened the door to send people from Hong Kong to the mainland for criminal trials.
The protests have now evolved into calls for genuine universal suffrage and investigations into claims of excessive force by police.
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