Xi’an started to economically boom quite late due to its geographical location inland, but this position is now paying off. Although the capital of Shaanxi province has spearheaded the economic and social development in its own region, it has long lagged behind the growth rates of other Chinese cities. The Go West initiative did not really initiate a firework of change here. Since then, projects of a larger scope, like the building of a regional development zone and the incorporation into the „western triangle“ with Chongqing and Chengdu, have helped to get Xi’an on the move. It is a city of high strategic importance, potentially a catalyst for high-value synergies of northwest, southwest and northern central China. Not only the country’s government, but many investors worldwide will have to observe what is happening in this place.
Xi’an is the most populous city in northwest China with currently about six million urban citizens, and it is the fourth biggest metropolis of all of China’s interior provinces. Since the Chongqing administration proposed a „Western Triangle Zone“, heavy infrastructural buildup in the region is under way, creating a better investment environment for companies and thereby initiating high growth rates. Having a history of about 3.000 years – serving as the Chinese capital of 13 dynasties for 1.200 years – Xi’an is well-known to many people around the world. It now aims to combine its standing as a hotspot in tourism with a catching-up process in high-tech manufacturing.
The city is in fact destined to increase greatly in importance, as can be seen from its proposed 17 metro lines. That is about as many as are planned in Chengdu or Chongqing, cities which are forecast to grow to nearly 20 million people. Only two of these lines are already in operation. The international airport of Shaanxi’s capital is serving the main cities of China and many in East and South East Asia, as well as Paris, San Francisco, Moscow, Rome, Helsinki, Almaty, and the Maledives. There are several major highways crossing the city, and a high-speed railway network is being established connecting Xi’an with Chengdu, Lanzhou, Zhengzhou, Wuhan, and Beijing. As a starting point of the New Silk Road, there will be cargo trains leaving for the west, via Kazakhstan and Russia.
Xi’an’s economy grew well above national average, showing 10 per cent plus in 2014, which was the second-highest growth of sub-provincial cities in China. While the tertiary sector makes up for a higher percentage of local GDP than the secondary sector, the pillars of the economy include tourism, financial services, aerospace technology, software development, machinery, military and electronic equipment, automotive industry, petrochemical and chemical industry, biopharmaceuticals, and food and beverages. The availability of several noted centers of education and science benefits the local high-tech R&D, providing a well-trained workforce. In the future, Xi’an aims to bolster its standing as a base for high-tech industries and advanced manufacturing in the northwestern region. Next to being an important trade and logistics hub, Xi’an has also established a fine reputation for holding congresses and exhibitions, e.g. the Euro-Asian Economic Forum in 2015.
Since Xi’an committed itself to grow in size and become a megacity, its future importance is being more seriously than ever supported by the central government. The city had been struggling for higher economic growth for a while, but now it is receiving much more political support for its effort to become a stronger engine of growth in the country’s interior. In this context it is important to mention the integration of Xi’an with Xianyang (a city next to it) into the Xi-Xian New Area. This incorporation will make possible the creation of new industrial and urban areas in the huge space between the two cities. As Xi’an was proclaimed the starting point of the „Silk Road Economic Belt“ by China’s president Xi Jinping in 2013, city’s logistics parks will closely cooperate with the coastal ports of Shanghai, Tianjin, Qingdao, and Ningo, making for „the largest inland port“ and the logistics center of northwestern China.
Xi’an offers a very attractive combination of cheap but skilled labor force and the cooperation with important universities in the region. It has become a main driver in the country’s aviation and aerospace industry. The local ETDZ (provided with an export processing zone) produces electrical and electronical equipment, advanced materials, and food and beverages. Xian’s well-known High-tech Industry Development Zone is meanwhile engaged in IT, automotive industry, advanced manufacturing and bio-pharmaceuticals. Its newly built Software New Town is focusing on e-commerce and software. The forming of industry clusters has already started. And since with Samsung one of the great international players is investing heavily in the local semiconductor production, Xi’an also decided to add a comprehensive bonded zone.
Being on the radar of national and international tourism ever since China opened up, Xi’an is connecting to its history when it once more aims to become a „world city“. It was the capital of Qin Shi Huang, the „first emperor“ of China, whose tomb rests beneath an earthen pyramid-shaped mausoleum, guarded by the Terracotta Army. The well-preserved city wall, the two wild goose pagodas, and the bell and drum tower, as well as the rich local food culture, especially within the Muslim quarter, are other well-known sights of the city that attract more than 100 million tourists annually.
For good reason, Xi’an was joined with Chongqing and Chengdu into a powerful “economic triangle”. Although Xi’an definitely belongs geographically and culturally to the dry northern part of the country, being separated from the humid south by massive mountain ranges, this cooperation is making sense. Since the Central Government decided to name Xi’an the starting point of a new Silk Road, there seems to be a lot of drive behind the recent measures in upgrading the city which is now growing well above the national average. Still, isn’t it suspicious that Xi’an needed such a long time befor it initiated high growth, even compared to other cities in the western half of China, like Chongqing and Chengdu. Chongqing is situated directly on the Yangtze and obtained a lot of government support; therefore it had much better preconditions to become a well-functioning inland port. Chengdu did not receive as much support from the central government, but even though it lies inland and far from any navigable river, it has economically and demographically grown in a tremendous and unexpectedly strong way. So, let’s compare Xi’an with these two cities to find out what its growth perspectives do really mean.
Xi’an started to boom quite late – what does that mean for businesses? Inland cities of China usually have relied on high governmental support to initiate growth, build up infrastructure and be able to grant preferential policies to investors. This, however, does not mean that an inland location is less attractive for investments. The pattern of growth in China has depended on the specific circumstances of China’s economic, social and political situation, and it has followed a strategy of gradual modernization of different regions by trial and error. Sometimes incentives prove to be perfectly right to initiate local growth, and sometimes they don’t. Then it will take new incentives to attract investors. Logically, investors are looking for high opportunities coupled with a limitation of risks. Therefore, many investors preferred to invest in the Pearl River Delta before Shanghai could offer immense preferential policies to them. Then, many investors would have chosen to stay in the Yangtze Delta and not go inland, until there were overwhelming offers from the upper Yangtze region. By now, Chengdu and Chongqing seem to be most attractive in China’s interior for relocation. Therefore, it needs strong incentives to promote Xi’an, which is happening right now. The point is that China’s southwest is already on the right track to development, whereas the northwest has yet to be put on a similar high-speed track of success. Because it is viewed as crucial for the wellbeing of the whole nation, the northwest has become a focal point for the Chinese government. Its opening up is imminent and can be expected to add to the list of China’s growing number of success stories. Here, Xi’an is playing an immense role, as it will contribute to open up the hinterland, showing best practice and helping to trigger high economic growth all around.
On the verge of becoming one of inland China’s few megacities, Xi’an is destined for a long and strong economic boom. Its role in the government’s strategy is to open up the less-developed northwestern region. This is the true engine behind such a monumental project like the New Eurasian landbridge. Xi’an combines the strength of its geographical location with the favorable policies of its New Area and a high tech development zone that collaborates well with the city’s advanced educational and scientific institutions. The „planning of the boom“ has now reached a level that is ripe for sustainable success.
© China Under Construction, 2016