Chongqing

VIBRANT POWERHOUSE ON THE UPPER YANGTZE RIVER


Designed by the State Council to become the prime economic powerhouse of China’s interior, Chongqing has been showing breakneck growth over the past decade, hence practically opening up and driving forward the development of the country’s vast western regions. This future megacity is a core manufacturing hotspot, reachable by ocean-fit container vessels via the Yangtze River. Chongqing is also on the way to become a top financial center. Under the direct control of the central government, local transition here is serving the broader plan to interconnect China more intensively than ever with the outside world.

Chongqing’s rise began quite suddenly as a wartime capital in the 1930ies, housing refugees from more developed regions who brought with them dismantled machinery in order to set up a functional defense industry. Since those days, when remote location, frequent fog, and a mountainous environment shielded China’s government from the raids by the adversary, heavy industry was this „mountain city’s“ prime pillar. It was Deng Xiaoping, who came from a place not far from this town, who had the far-reaching vision that China’s high growth rate should lead to a sustainable development by moving inland from Shanghai, upstream the Yangtze River. The year Deng died, in 1997, Chongqing was administratively elevated to become the first inland „directly controlled municipality“, joining the coastal, well-developed cities of Beijing, Tianjin and Shanghai in this respect. More and more preferential policies were launched in the following years, triggering a modern urban success story of a kind rarely seen before.

Chongqing has emerged as the pure embodiment of a landlocked East Asian metropolis undertaking its high-fly. Endued with a unique geographical location, its center, Jiefangbei, is located high up a steep hill, above the junction of the Yangtze River with a major contributary, the Jialing River. This specific tongue of land houses a dense accumulation of impressive skyscrapers with significant names like „World Trade Center“ and „World Financial Center“. They look down at myriads of vessels and cruisers which are heading east towards the world’s biggest dam (Three Gorges Dam), one of the main agglomeration areas globally (Yangtze River Delta), and the world’s biggest port (Shanghai). Here, you may be offered a glimpse of what China is aiming for in the future. There are currently about 9 million citizens in „Chongqing proper“, and in the high-speed race against its local competitor, Chengdu, more and more people are flocking in, fuelling the thriving real estate market and satisfying the demands of international companies for a growing workforce in the industrial parks. A full 20 million people are expected to live in this city once the buildup has been completed.

Strong local investments into infrastructure are still on the rise, positioning Chongqing – according to its excellent geographical location – within the fast-growing transportation network of China’s interior. The State Council  administratively broke off Chongqing from Sichuan province, accurately envisioning the advantage of combining the relative closeness to other parts of the Eurasian landmass with improved indirect access to the ocean. Crucially sitting on the upper reaches of the Yangtze River, goods can be shipped from this most important inland port of China to all over the world. International high-speed trains for passengers and cargo are expected to lead into nearly all directions possible (Singapore, Thailand, India, Turkey, Egypt, and Kazakhstan among them). A train to Germany’s Ruhr valley and on to Antwerp and Rotterdam is already in operation. International cargo airplanes fly to some core regions of the world economy, including the destinations New York, Frankfurt, Moscow, Abu Dhabi, Chicago, Delhi, Amsterdam, and Sydney. Passenger air traffic may be lagging behind, ranking only on the 7th place of mainland Chinese cities, but more than just a few international connections have already been established (Helsinki, Rome, Doha, Cairo, and, of course, a long list of East and South East Asian cities). As a part of the „Western Triangle Economic Zone“, there are major national high-speed trains in operation or under construction, leading to Chengdu and Xi’an, but also to Wuhan, Shanghai, Guiyang, and Lanzhou. In town, there are currently four metro lines (more than in any other city in the country’s interior provinces), and further fourteen lines have been planned. These figures highlight the fact that Chongqing began to boom somewhat earlier than Chengdu. Currently, both cities are striving for a similar level of population, GDP, and infrastructural development, hence competing fiercely for the leadership in regional development.

For many years, Chongqing’s economy grew at close to 15 per cent; in line with the country’s overall trend, growth rates slowed somewhat (to about 11 percent in 2014, which is higher than for Chengdu). The already dominant, well-developed secondary sector grew strongest. The two main pillars of the local industry, electronics and automotive manufacturing, contributed more than half to Chongqing’s economic growth. About a quarter of the world’s computer notebooks are being produced in this town. Companies making autos, motorbikes, or industrial parts have abundantly settled here, manufacturing for Ford, Honda, Suzuki, Yamaha, BMW, or Mazda. There has also been considerable growth in the financial service industry that can be seen as the city’s strongest branch in the tertiary sector. A range of business clusters has formed around the city’s industrial parks and central business districts. Heavy industry is still vital, as can be seen in iron and steel, aluminum, and chemical production. Natural resources are being processed in Chongqing (beside huge natural gas reservoirs near the city, a pipeline from Myanmar is delivering more gas and crude oil). The local economy may continue to rise in branches like retail and e-commerce, exhibitions, energy conversation, and, definitely, cloud computing. Moreover, some emerging industries are forecast to attain strategic importance, like shale gas exploitation, robotics, new-energy automobiles, photovoltaic, LED, and the internet of things, driving scientific research and development.

The central government’s focus on Chongqing has proverbially moved mountains in the „mountain city“. Exactly thirteen years after the creation of the Chongqing municipality, the State Council decided to grant Chongqing its own New Area, Liangjiang. In contrast to the former ones in Shanghai-Pudong and Tianjin-Binhai, it also incorporates „old“, that is urban built-up, areas. The creation of Liangjiang exactly 13 years after the adminstrative creation of the Chongqing municipality represented a highlight of economic policy planning, putting together industrial and technology parks for advanced manufacturing with an export processing zone and the first inland free-trade zone as well as the Jiangbeizui Central Business District (CBD). This zone is logically complemented by the city center’s own CBD, Jiefangbei, which is located on the opposite riverside and shows off with impressive multi-level department stores and frontstreet luxury boutiques. And recently, urban development in the vibrant Shapingba district has also made big progress.

More than half of Fortune-500 companies are now to be found in Chongqing. But, while it seems that nothing can really stop this city from high-speed growth, it has to be stated that currently Chongqing relies heavily on its strengths in manufacturing, and on the extensive money lending for infrastructural buildup. High debts are the other side of the coin of the so-called „Chongqing model“. It is characterized by state intervention aiming for pro-developmental reform, and it combines the existence of strong state-owned companies with the development of dynamic international industrial zones. Strong public investment contributes to the very high growth level of the local economy. The central government is striving to prepare Chongqing for walking up the value chain into high technology and knowledge-intensive industry. Yet, the GDP per capita is still below national average, and Chongqing’s rise as a manufacturing center for relocating international companies is not expected to end soon.

From the beginning, the goals of the State Council for Chongqing were clear-cut: The city should „serve west China by opening to the outside world while depending on the economy of the Yangtze River region.“ This was accomplished by combining the overall goal of the „Go West initiative“ with a comprehensive urban/rural reform, and in a manner that built on the experiences of the former SEZs and New Areas. The measures, especially the building of Liangjiang, have been tremendously successful. It’s not only that half of Fortune-500 enterprises can already be found in Chongqing. The economic boom has since passed on to many more cities in China’s western region – so much so that it seemed wise to slow down some of the initial verve concerning Chongqing and rather put more effort into intraregional diversification. For many companies, in the past few years the question has been whether to extend their business inland or to completely relocate from the coastal cities. They came here (as well as to Chengdu) from the Pearl River Delta and the Yangtze River Delta. But should Chongqing still be the preferred option today? Let us compare Chongqing, which had a lot of government support and is situated on the upper reaches of the Yangtze, with a city of comparable size, Wuhan, which is on the middle reaches of the same river, between Shanghai and Sichuan, between Beijing and Hongkong, and closer to many main cities of the country, but has not received such strong support.

The main question we have to answer is: What will be the future intention of the government’s economic policy concerning these two cities? Frankly speaking, Chonqing has already achieved the goals for which it had originally been supported so strongly. Here, China’s central government showed in earnest that it was willing to direct all means necessary to successfully initiate and proceed with its „Go West initiative“. After the pioneer towns Shenzhen and Shanghai, „Chongqing proper“ has played the role of an urban model city, destined to reshape the Chinese economic reform process. At the time, Chongqing had to be strongly supported to become an urban hotspot. It’s administrative area was designed to be as big as Austria’s, and contained 30 million people. Many of them were destined to move to Chongqing proper from an area within the so-called „one-hour economic circle“ around the city. The manifold measures that had boosted Chongqing’s developmental pace were high-edge some years ago, but now they seem kind of outdated, as more and more cities in China’s Western regions are turning into thriving poles of growth. They implement New Areas, grant convincing preferential policies, invest massively in urban infrastructure, attract huge sums of FDI, and connect to an impressive, fast-expanding national transportation network.

Wuhan, instead, although it has been a major urban agglomeration for a long time, seems to be kind of left behind in terms of central governmental support. Situated directly in the middle of the four contemporary core economic regions of China (Pearl River Delta, Yangtze River Delta, Bohai Rim Region, Western Triangle Zone), Wuhan has been growing so moderately that it almost seems suspicious. The truth is, Wuhan’s growth rate is not at the forefront, but between that of cities being behind and ahead. In China’s reform era, this city has neither been a backwater nor a pioneer, but it truly is one of China’s most populous cities and one of those one with a considerably high GDP. Anyhow, the big boom may yet come, or it may not come. Chongqing, on the other hand, has been experiencing a big state-initiated boom, and this boom has lasted now for over a decade. We assess this as a pro-argument: Time is still ripe to come here and join the established preferential policies, to produce high-edge innovation products, or to form a cluster with others. You don’t need to bet on this location, it does not need to prove its importance. But, as always, careful planning is the key to success.

Originally an „invisible city“ on the maps of international investors, Chongqing became an illuminated metropolis full of opportunities, glowing in the center of China’s economic miracle for many years. China’s government certainly surprised many skeptics by the determination of its support for this landlocked, mountainous city on the Yangtze River. They had focused on Chongqing because of its pivotal geographical location for opening up the Western regions. While the goal of China’s „Go West initiative“ is in the process of being achieved, Chongqing is now booming in fierce local competition with its neighbor Chengdu. But the municipality still offers opportunities in the secondary sector and, increasingly, in financial services. It is ideal for those who are prepared to move inland to compete in the global challenge by joining local clusters with innovative products. The rise of Chongqing is not over yet; it is still bound to grow in size and importance within China and within the world.

© China Under Construction, 2016