The New Shanghai in China’s Interior?

For most of its modern history, Chengdu’s strong regional standing has not been in question. But then, China’s central government chose to develop the province’s primary port on the Yangtze River, Chongqing, to become the state’s prime experimental base inland. At a time when the inland lagged behind the coastal areas in terms of development, Chongqing began to show extraordinary growth rates. This could have dealt a fatal blow to Chengdu’s leading regional position. Instead, enormous interregional competition between the two cities developed. While it sometimes appeared that the rival could be the winner of the game, Chengdu has recently fought back with truly impressive figures, earning it overwhelming positive resonance nationwide and internationally.

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Chengdu on the map

Being a megacity of approximately 10 million urban citizens, Chengdu heavily profits from its position as the capital city of Sichuan – a political unit with a population as big as that of Germany, situated on the upper reaches of the Yangtze. Deng Xiaoping himself gave out the order that market-driven economic dynamisms should climb up China’s largest river, thereby boosting the economic situation inland. Chengdu’s sub-provincial administrative status allows the city government to freely decide on economic issues (something that has proven to be highly beneficial also for other current boomtowns, like Hangzhou or Qingdao). Attracted by the economic boom, millions of migrants are streaming in, and there is plenty of land to be developed on the vast Chengdu Plain. A dozen foreign consulates in the city (USA, Germany, Korea, Singapore, to name just a few) reflect the importance of the city for the global community whose leading companies are flocking in like birds to a feeder.

Chengdu – in fierce competition with its neighbor Chongqing – is the main transportation hub in western China, connected to a range of other booming cities and regions. It is or soon will be connected by high-speed rail to Guiyang, Kunming, Chongqing, Wuhan, Nanjing, Hangzhou, and Shanghai in the south and to Xi’an, Lanzhou, Zhengzhou, Shijiazhuang, and Beijing in the north. As of now, there are no plans for a high-speed connection to Guangdong and Hongkong. Being already favored to a high degree by infrastructural integration and foreign direct investment, it seemingly has not yet been a high priority to link up with Hong Kong’s ever-running money trail. Chengdu is regionally integrated by national highways leading to the north of China via Shaanxi, to Yunnan in the southwest, and up to the Tibetan Plateau. Within Chengdu, busses are still very important transport vehicles, as there are currently only two metro lines in operation, but altogether eighteen lines are planned – showing how necessary infrastructural development is deemed for further economic and social development.

Recently, the city has been aiming for even more international integration, which can seen by the fact that there is already a train in operation that serves Lodz in Poland three times a week. Lying between the main intersections of the „Belt and Road“ initiative, Sichuan’s capital is an integral part of a strongly expanding transportation and logistics network that is directed at better connectivity and economic impulses between the different parts of Asia as well as Europe. Therefore, Chengdu has a crucial position in a greater plan that is unfolding. While the metropolis does not provide direct access to any kind of port, this fact has not hindered it from booming and attracting international investors. Well-established connections to the province’s ports of Yibin und Luzhou seem to be sufficient for the moment. Chengdu has one of the biggest airports in China that could overtake Shenzhen as the mainland’s number four, and it is well-connected to many international airports like Frankfurt, London-Heathrow, San Francisco, Vancouver, Amsterdam, Doha, and Abu Dhabi.

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A view on one of Chengdu’s many new urban development projects

Many international companies which had initially settled on China’s coast have relocated their business or opened new locations inland in Chengdu where they can profit from lower labor costs and the rapidly improving infrastructure. Sound economic foundations, the strong support of the local government, and the availability of a well-educated workforce have made this city a favorable place for innovative enterprises. Not surprisingly, the city is the major educational and scientific center of southwest China, therefore offering a fine base for R&D. Foreign companies investing here are also attracted by Chengdu’s position as a „model city for intellectual property protection“, which poses less of an investment risk to them.

This megacity where the world’s first paper currency had been invented in the 10th century A.D., has become a top global investment destination and an aggressive driver for economic growth in the region. Impressively, more than half of the Fortune 500 enterprises have already settled in Chengdu. (It should be said that in this respect, Chengdu is in fierce and productive competition with Chongqing.) Here is an incomplete list of some of the well-known companies located in Chengdu: GE, Siemens, Microsoft, Intel, IBM, Lenovo, HP, Dell, Xerox, TexasIndustries, Foxconn, Ubisoft, SAP, Citigroup, JPMorgan Chase, BNP Paribas, UFJ, HSBC, Standared Chartered Bank, Henkel, TNT, UPS, DHL, Maersk, Cosco, Sinotrans, FAW Volkswagen, FAW Toyota, Volvo, Accenture, KPMG, PWC, Ernst&Young. As you can see, Chengdu is a top destination for the IT and telecommunications industry, as well as for automotive manufacturing. Due to the massive build-up of the city, real estate has become an important pillar of the local economy. Two particularly prestigious projects were the construction of the stunning „New Century Global Centre“, dubbed „the largest building in the world“ (in terms of square meters), and the remarkable „New Century City Art Center“, designed by Zara Hadid Architects. Chengdu also is an important regional financial center and a main logistic hub in western China.

Highly competitive clusters have formed in Chengdu around the four state-level industrial and university-led scientific parks as well as the twenty-three industrial parks, where there are thousands of foreign, state-owned and privately-owned Chinese companies situated. Taiwan and Singapore have entered close economic ties with Chengdu by engaging in the corresponding „Technology Industrial Development Park“ and the „Hi-Tech Innovation Park“, respectively, and Germany is ambitiously engaged in an industrial park for small and medium enterprises. Chengdu’s government even strives to acquire a national Silicon Valley-like rank by providing innovative start-ups by facilitating cooperation between innovative start-up companies and established enterprises, research institutions, and universities. The city has received its own „New Area“, Tianfu, in 2011, in order to leverage its high-tech orientation. Apart from the „traditional“ strengths in manufacturing, some future cornerstones of Chengdu’s economy will be high-edge branches like mobile interconnectivity, 3D-printing, „new energy“, or bio-medicine. Chengdu also is an important center for exhibitions (e.g. Chengdu Modern Industrial Technology Expo, CMIT; Western China International Economy and Trade Fair, WCIF), aiming to achieve more „market-driven exhibition industry“.

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Changsha’s main shopping mile Chunxi Road in the evening

Last but not least, there is a lot of tourism in Sichuan, making the capital of this province an important stopover. While there has been depopulation and resettlement of the region more than once in history, the „Red Basin“ has developed and kept its own regional characteristics which feel exotic to many people. They come here to enjoy the very spicy food or the omnipresent tea houses where locals like to play mahjong for hours, and they relax by taking a walk around in the relatively green environment the city offers. There are the Giant Panda sanctuaries, monasteries in the mountains, or scenic spots which are best reached from Chengdu. And if you like to see things from a historical point of view, it may be worth mentioning that in 1911 the local anti-foreign, anti-modernist railway protection movement heralded the preparations of the Wuchang uprising, which triggered the overthrow of the Qing emperors. Later, Chengdu was the last city held by the Kuomintang before their retreat to Taiwan, and today there is still a big Mao statue, „guarding“ the city center.

After reading this introduction, you may wonder if there could be any doubt that Chengdu is „the place to be“? Figures are convincing, and it seems that nearly every company of a certain size has to consider establishing itself in Chengdu. So, is Chengdu the „Shanghai of China’s interior“? Well, things are going especially well here, and all forecasts continue rating Chengdu as a rising star. The city also profits from its reputation as one of the metropolises with the highest quality of life in China. Although the weather is subtropically humid and average yearly sunshine as rare as in Northern Europe, in summer Chengdu is not as hot as Chongqing or other cities along the Yangtze River. And in winter, the climate is milder than e.g. in Shanghai, due to the up to 5.000 meter-high mountains in the surroundings which are shielding the city, located at an altitude of 500 meters, from cold northerly winds.

The two cities we shall now compare, Chengdu and Chongqing, have been connected by high-speed rail for many years, and they kind of make up the next core area of China’s economy (being added to the Pearl River Delta, the Yangtze River Delta, and the Bohai Rim Region). Both cities have benefited greatly from the mutual rivalry by showing extremely strong growth rates in GDP as well as a large influx of foreign direct investment and the setting up of international companies. Due to the economic boom, we see huge migration waves of people from the countryside to the cities, and a boom in real estate. There are many differences, though, but, well, does it matter? Chengdu offers many green spaces, while Chongqing is a less relaxed place; Chengdu sits on a plain, partly surrounded by high mountain ranges, while Chongqing stretches over hills and valleys; Chongqing has the Yangtze, whereas from Chengdu you have to go far to reach a port; Chongqing is a directly government-controlled municipality, whereas Chengdu is the capital of populous Sichuan; Chongqing is geographically closer to the center of China, and other provinces and regions are within reach, while the dense high-speed rail network of Chengdu may present especially attractive impulses for regional development.

Chengdu as well as Chongqing are striving for integration within the global economic system, and they are doing particularly well. But while Beijing-controlled Chongqing is more open towards intraregional cooperation, in Chengdu, there is more reluctancy towards the new-born competitor-city that some considered to be the most populous city on earth (which, in fact, it is not). For the officials in Chengdu it may be more beneficial to closely cooperate with a range of smaller cities around Chengdu, in order to gain more positive network effects within their province, and to rather ignore Chongqing. There is no easy answer – not to the question whether Chengdu or Chongqing will be ultimately one step ahead; not to the question whether the two cities will develop together or head into different directions; and not to the question, which city will be better suited for your own investment. It will take time to consider, but when the answer is hard to find, it may be even worthier to come to a conclusion. The choice depends very much on the specific situation of your company; some preferential policies may be especially advantageous for you in this place or the other, or you may find different cooperation partners in the particular industrial park you decide for; and finally, it may help to visit both places and compare the impressions you get.

There can’t be any doubt that Chengdu has been thriving extraordinarily during the last few years. The dimensions of the boom may have even surprised the ones in charge, as can be seen from the current efforts to correct what has been neglected in terms of development in infrastructure. Huge network effects can be reached within a favorable investment environment; clusters of companies in the high-end spectrum of several business branches are arising here regularly. A fourth core region of China’s economy is currently in the process of being established through the competition of Chengdu with its neighbor Chongqing, joining the Pearl River Delta, the Yangtze River Delta, and the Bohai Economic Rim. Especially because it would be all too easy to state „everyone is going here, so we should come here as well“, it is recommended to compare, compare, and – again – compare Chengdu with Chongqing, in order to get the best out of any investment decision, once you have decided on this corner of China as being the best possible for you. Chengdu may well be your best choice, but many factors need to be taken into consideration.

© China Under Construction, 2016