Trends in China’s Economic Rise
Since 1979, China’s economic reform has seen what some have named “the China Miracle,” an average of almost 10% GDP growth per year with 800 million Chinese people lifted out of poverty. There were many factors involved in this. One key factor was the development of Special Economic Zones (SEZ) and Economic and Technical Development Areas that received foreign direct investment and international trade. These SEZs and development areas tended to be in urban areas along the eastern coast. Thus, over this forty-year time span in China there has been a major shift of migrant workers from rural to urban areas, specifically to the eastern coast where economic development has been the most dynamic.
3 Major Megalopolises
This economic development along the eastern coast of China has brought about the rise of three of China’s biggest mega-cities: Beijing (north), Shanghai (east), and Guangzhou (south). These cities along with the surrounding areas are being developed into megalopolises with around 100 million people being connected by infrastructure that allows for a one-hour commuting region. Together, the three regions are home to more than half of China’s listed companies and act as the main economic drivers of the Middle Kingdom.
Bohai Economic Rim (Greater Beijing)
The Bohai Economic Rim (named after the Bohai Sea which it borders) is also referred to as the Jing-Jin-Ji Metropolitan Region (Beijing-Tianjin-Hebei, with Ji being an alternative name for the Hebei province) and the Capital Economic Zone. Beijing and Tianjin are the major cities of this region.
In 2014, China embarked on a strategy to integrate Beijing with nearby Tianjin and the surrounding Hebei province, in part to reduce the capital’s traffic jams and pollution problems. Some heavy manufacturing and logistic businesses have been relocated out of the city, while the capital’s functions as China’s political, educational and cultural center have been emphasized.
One of the key aspects of that plan is the development of Xiong’an New Area in Hebei province, 100 kilometers southwest of Beijing. A master-planned, “city of the future,” Xiong’an will be China’s latest special economic zone and is expected to be both a technology hub as well as the new home to many of China’s state-owned enterprises and research and development centers currently headquartered in Beijing. The special economic zone is expected to diversify Hebei’s economy, which in the past has accounted for nearly 40% of China’s steel production.
A new high-speed rail line connecting Beijing to Xiong’an is set to open before the end of 2020, reducing travel times to less than one hour. The new rail line will include a stop at Beijing’s brand-new Daxing Airport, located in the south of the city near the new development area and poised to become the world’s largest airport when at full capacity.
Yangtze River Delta (Greater Shanghai)
The Yangtze River Delta is home to Shanghai, the one-time “Paris of the East” and China’s most international city. The nearby provinces of Jiangsu, Zhejiang and Anhui are also part of this powerhouse economic region, home to well-known cities Nanjing, Hangzhou and Suzhou.
The scale of the megalopolises is immense. The Yangtze River Delta, for example, spans 27 cities and is home to more than 163 million people, a population greater than all but seven of the world’s most populated countries. In 2018, the region accounted for 39% of China’s foreign direct investment and 20% of the country’s GDP.
Like its efforts in the north with the development of Xiong’an, the Chinese central government has also promoted growth and integration plans for the Yangtze River Delta, the most centrally located of the three megalopolises. President Xi Jinping unveiled a national policy of economic growth through regional integration in November of 2018. Unlike in the Jing-Jin-Ji region, however, the development plans focus more on integrating the region’s cities through infrastructure development such as high-speed railways (10 projects planned or being built in 2020) rather than the construction of a new master-planned area like that of Xiong’an.
Pearl River Delta (Greater Guangzhou)
The Pearl River Delta (PRD), also known as the Guangdong-Hong Kong-Macau Greater Bay Area (GBA), is made up of 9 cities in Guangdong and two special administrative regions in South China: Hong Kong and Macau.
Long a center of manufacturing for the export market, the region has been called the “world’s factory floor.” In recent years, it has also emerged as a hub of technology and innovation, led by the rapid development of Shenzhen from a fishing village of 30,000 in the 1980s to a modern city that is home to 12.5 million people and Chinese tech giants Huawei, Tencent, DJI and ZTE.
The region also hosts the headquarters of 20 of the world’s 500 largest companies, in industries as diverse as automobiles, home appliances, real estate, internet, and finance.
As with the other two megalopolises, China’s central government released a plan in 2019 for the southernmost of the three regions. The Great Bay Area plan even earned a mention in drafts of China’s most recent “Five-Year Plan,” the important national guidance document that lays out Beijing’s policy goals and priorities for the country.
Which region in China is right for you?
PRI is a premier management & consulting company with over 30 years of experience doing business in China. PRI has held equity in and managed more than 28 mid-sized manufacturing companies in nearly every part of the country, with offices and/or manufacturing facilities currently in each of the three megalopolis regions.
Recognizing China’s vast size and the importance of the cultural and business differences between its various regions is key to success in the Middle Kingdom. In this COVID-19 season, not many people are staying at their current level or strategy in China – they are either getting out or doubling down. It is critical that at this time you do a re-analysis of your whole effort toward China and that you do it with someone with strategic planning experience helping others on the ground. It is important to sit back and ask: “What do we want to do?” and “What can we do?” To schedule your free consultation with PRI’s experienced team of consultants and managers, write to Jonathan Kendrick at firstname.lastname@example.org