China – a two-speed economy
Along with the slow opening of the Chinese economy, the traditional financial centres of the Chinese East coast will start to lose ground. One of the most promising rising stars is Chongching, a city of 33 million inhabitants located in the Midwestern region of China.
According to Amy Y. Zhuang, senior analyst in Nordea Markets' global research team at their Copenhagen office, Chongching is not only in the focus of the Chinese government, but also of local manufacturers. “All the companies I met with during my China trip have either already moved their production west to Chongching or are seriously considering doing so. Chongching is going to be the next Shanghai.” As a result, the city will also establish a financial centre. “In terms of financial development it will soon dethrone Beijing, but reaching Shanghai’s level will take some years”, Mrs Zhuang said during a conference on the Chinese economic outlook at Nordea Luxembourg.
Cities in Midwest China have recently emerged as high-growth locations and attractive places to work. Currently, 150 million square meters of buildings and traffic infrastructure are under construction in Chongching, offering attractive new apartments and workplaces for the growing Chinese population.
A striking sign for the two-speed growth in China is the economic outlook of the 31 provinces. All Western provinces are expecting double-digit growth, even up to 14%, while growth in the Eastern provinces seems to be past its zenith. Local authorities in Chongching anticipate a growth of 4%, driven only by investments, whereas in Shanghai, consumption is still the main driver for growth. A full 60% of the Chinese household consumption comes from the East coast. The two cities also differ in annual wages, for instance. In Shanghai, the average annual salary is 40,000 Yuan, while in Chongching it is only 22,000 Yuan.
Nevertheless, the Chinese market represents an enormous purchasing power. More and more European automotive brands are entering this market, despite the fact that a single car number plate costs 80,000 Yuan (roughly 10,000 Euros), twice the annual salary of a high wage earner.
Mrs Zhuang points out that despite these positive trends, the government will have to target the different regions with adapted economic policies. “It doesn’t make sense to have one national policy trying to target everything. There is very clear evidence that this kind of national policy doesn’t work for everybody.” She also emphasized that corruption will be China’s main obstacle in the future. EA