Chengdu Falling Behind Chongqing.  Wuhan Struggling.

 

 

GDP Comparison

 

In terms of GDP, the study revealed a rough grouping of the cities into Three Tiers:  In Tier One, Guangzhou stands alone. In Tier Two are Chongqing and Hangzhou.  The remaining cities occupy Tier Three.

 

As is clear from the graph below, for overall economic power−GDP−as well as growth momentum, Guangzhou is the leader of the field.  Guangzhou's 2003 GDP of  Rmb 347 billion (US$42 billion) is roughly 50% higher than that of the second largest Chongqing (Rmb 225 billion), and twice that of most of the other locations. 

 

 

	Source: Official city reports

FDI Comparison

 

In terms of overall FDI, the candidate cities divide into Four Tiers. 

 

As with GDP, Guangzhou stands alone in Tier One, with cumulative FDI of roughly US$29 billion in realized (already paid in) FDI.   Both massive cumulative realized and prospective FDI (please see below for some projects), clearly continue to distinguish Guangzhou.  Different from much of the 1980s and 1990s, much of new FDI (and domestic investment) in Guangzhou is coming in big industrial projects and infrastructure.  

 

Tier Two FDI cities are Dalian and Qingdao, with cumulative realized FDI of roughly US$19 billion and US$16 billion, respectively.   In Tier Two Dalian is clearly the leader over Qingdao, and is likely to continue as such, and to increase its lead, in the future.  Dalian has proven a congenial location for a variety of investors, particularly the Japanese majors, and is diversifying sources of FDI.

 

The three cities that were selected largely for ”reference” in this study−Nanjing, Hangzhou, and Ningbo−interestingly fall into a clear Third Tier in terms of FDI.  In the group, the leader is the more industrialized provincial capital, Nanjing, followed by the port city and petroleum refining base of Ningbo, and the light industrial and service center, Hangzhou.

 

The Fourth and lowest FDI Tier is occupied by the interior cities, Wuhan, Chongqing, and Chengdu.  Among the group, Wuhan and Chongqing are in rough equivalence at about US$3.5 billion of realized FDI.  Chengdu is greatly the laggard at US$1.3 billion.  The writer's view is that among these cities, Chongqing has the FDI momentum (powered by a clear industrial development strategy−see below) and will substantially outpace Wuhan and Chengdu in the future.   Chengdu, lacking a strategy and many objective requirements, is likely to fall further behind its peers.

 

 

	Source: Official city reports

 

 

Foreign Trade Comparison

 

Graph 4 provides data for foreign trade (import/export) volumes and growth rates in 2003. 

 

As with GDP (and for many of the same reasons) we observe that, in terms of foreign trade, the cities essentially inhabit Three Tiers.

 

Tier One is the occupied exclusively by Guangzhou, whose 2003 trade totaled a massive US$ 35 billion.  Tier Two is shared by all the coastal cities and Nanjing, whose foreign trade totals range from US$15 billion (Nanjing) to US$19 billion (Ningbo).  The three interior cities, Wuhan, Chongqing, and Chengdu, fall into a distinctly laggard Third Tier, with trade levels of US$3 billion.  The foreign trade volume of the Third Tier cities is less than 10% of the volume of Guangzhou and roughly 1/5 to 1/6 the volume of the Tier Two cities.

 

Graph 4 also provides YoY growth rates.  2003 was a spectacular year for trade growth throughout China.  The highest rate was achieved by Ningbo, based on large increases in both exports and raw materials imports.  Dalian's 20% increase, though relatively low, is still  respectable. Guangzhou's 25% increase against its large base is evidence of the momentum of that economy.  The 45% increase for Chongqing suggests that its economy is quickly becoming more trade oriented, and contrasted favorably with the 21% rate of Chengdu.

	Source: City DOFTECs

Figures for individual cities are provided in Table 1.

Table 1.  Trade Data for Candidate Cities

	US$ billions   2003				Jan - Oct 2004
	Ex/Imp	Exports	Imports	YoY growth (Ex/Imp %)	Ex/Imp	Exports	Imports	YoY growth (Ex/Imp %)
Guangzhou	35.0	18.0	17.0	25.1	36.0	17.2	18.9	26.7
Dalian	16.0	8.3	7.7	19.6	16.3	8.3	8.0	17.6
Qingdao	18.0	10.4	7.6	26.4	21.8	12.6	9.2	31.1
Wuhan	3.1	1.5	1.6	42.3	3.3	1.5	1.9	28.7
Chongqing	2.6	1.6	1.0	44.6	2.9			56.8
Chengdu	2.5	1.4	1.2	21.2	2.6	1.4	1.2	32.5
Nanjing	14.7	7.7	7.0	46.0	16.9	8.4	8.5	43.6
Hangzhou	18.2	11.0	7.3	39.2	19.8	12.0	7.8	32.6
Ningbo	19.0	12.1	6.9	53.3	20.9	13.4	7.5	37.5
National	851	438.4	412.6	37.1	926.5	468.7	457.8	35.8

 

　　　　Source:  City DOFTECs, Ministry of Commerce

 

 

Conclusion

                       

Getting information on the economies of China's larger cities is easy.   Cities officials in the local DOFTECs (市对外经济贸易合作局) are usually well prepared with statistics and presentations to encourage foreigner to trade with and invest in the city.  Of course, each city claims that it is the most attractive investment location in China.

 

But of course this is not true.  There are clearly big differences in the investment environments and trade opportunities among Chinese cities. 

 

For the writer, comparing Wuhan, Chengdu, and Chongqing, it is Chongqing that comes out ahead.  Since becoming a province-level administrative unit in the mid-1990s, Chongqing has made massive investments in infrastructure, including bridges, roads, and rail and air transport facilities.  More importantly, policies have encouraged the development of private companies, particularly in the key motorcycle and automotive industries.  Foreign investors have increasingly chosen Chongqing as the key manufacturing base in western China.

 

Compared with Chongqing, both Chengdu and Wuhan have, in my opinion, fallen behind.  Neither has a very clear or compelling development (industry) strategy.   Chengdu claims that they will focus on IT industries and new materials.  Wuhan hopes to compete more successfully in the automotive sector, as well as IT and telecommunications.   Few foreign firms, except for retailers like Walmart, are now interested in investing in Chengdu.   One wonders about the wisdom of Toyota's small investment in a minivan assembly plant.  Wuhan, now the base of the Dong Feng automotive group, has received investments by the French PSA Group, as well as Nissan and Honda.  But both Honda and Nissan are choosing Guangzhou for their largest plants, and are actually seeing to move the Dong Feng JVs to Guangzhou.

 

Thus, if it comes to an investment decision between Chongqing, Chengdu, and Wuhan, I am generally inclined to look at Chongqing first.  Of course, when it comes to investing in China in general, the record shows that the greatest momentum and successful track record, is with the cities on China's coast.