Opinion
Growth fueled by urban investment
By Dan Steinbock (China Daily)
Updated: 2010-02-25 14:07
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The Chinese economy was fragmented until the late 1970s, when the reform began, boosting economic integration internally and externally.
Take, for instance, the growth story of Shanghai. In 1992, Deng Xiaoping declared that Shanghai would be "the head of the dragon", pulling the country into the future. The development of Pudong was intended to restore not only Shanghai's past grandeur, but also its historical role in the Yangtze River Delta (YRD) region and, more broadly, for China.
As Shanghai implemented economic reform, it sparked the birth of Lujiazui, China's Wall Street, and huge development in shipping and trade - which will be evident to the estimated 70 million tourists who will soon attend the 2010 Shanghai World Expo.
The expansion of these gigantic cities has been fast, disruptive and unprecedented in world history. It has also been accompanied by rapid price increases. But they have occurred primarily in the first-tier cities. Markets cannot easily price what they have never witnessed before.
It was China's 11th Five-Year Plan (2006-10) that first called for greater efforts to rebalance China's development patterns. The quest for a harmonious society has been energizing efforts to reduce regional and income disparities. Today, growth is also reaching China's central and western regions. For example, Chongqing had 2.5 million inhabitants in 1980. Today, its urban area has 5 million people and the municipality more than 31 million people. The world's greatest megacity, Tokyo, has only a few million more.
Recently, Chongqing was promoted as a national central city. It is the only municipality under direct central government control in the central and western regions. But it has a group of powerful cities around it.
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China's development depends on the rapid growth of these megacities. It is driven by high levels of fixed asset investment and foreign direct investment, their role as trade hubs, rapid restructuring, and high levels of per capita consumption in comparison to other cities.
In fact, China's growth is driven primarily by three economically dominant regions: the YRD and PRD regions, and the Beijing-Tianjin corridor.
For instance, the PRD region is seeking economic integration with Hong Kong and Guangdong to develop a world-class PRD megapolis. In turn, this quest is energizing efforts at the merger of Shenzhen, the mainland's IT center, and Hong Kong, the world's financial center.
In the next 30 years, the GDP of the PRD megapolis could exceed $2.7 trillion on the basis of the current exchange rates. By the end of the 2030s, the PRD region's GDP would be comparable to that of the New York metropolitan area, while its per capita GDP is expected to reach the 2005 level of the London metropolitan area - that is, about $45,000.
Ultimately, China's new regional development is not just about the restoration of the historical glory of the great coastal urban centers. It is driven by these megacities as they serve as growth engines for the neighboring regions. It is history in the making.
The author is the research director of International Business at the India, China and America Institute.
