Chongqing: China’s biggest experiment in economic reform

The rapid development and urbanization of China’s biggest city, Chongqing, shows how the country’s leaders are trying to revive slowing economic growth. Will the experiment work? 

Chongqing, China (dpa) – The presenter waved his hand over a sprawling scale model, pointing out technology research centres and sparkling entertainment complexes surrounded by towering clusters of high-rise apartments.

Now an expanse of subtropical vegetation on the outskirts of the Chongqing metropolis, developers hope Shuangfu New City will become a futuristic mega city.

The painstakingly detailed model of Shuangfu is a mark of how keen authorities in south-western China are to grasp the economic growth that seems to be eluding other parts of the country.

The world’s most populous nation and second-largest economy is facing a daunting challenge of maintaining economic growth as its population ages. China’s economy grew by 6.9 per cent in 2015, the weakest in a quarter century.

While economists have raised doubts about the official statistics, Chongqing’s 10.2 per cent gross domestic product (GDP) increase in 2015 made it the fastest-growing of all China’s provinces and municipalities.

Chongqing has a population of nearly the same size as California. More than 32 million people are packed into 82,400 square kilometres.

The city and neighbouring Sichuan province are key focal points in Beijing’s push to develop its relatively poorer western regions. The government is investing billions to develop the area into a trade and transportation hub, as well as to help rural residents find work and settle in urban areas.

The European Union is China’s largest trading partner, and a network of expanding rail routes to Europe have helped to promote the economies of inland cities like Chongqing.

In 2011, the Yuxinou railway to Duisburg, Germany from Chongqing was launched, which cut transportation to Europe from 36 days by container ship to about 12 days, via Kazakhstan, Russia, Belarus and Poland.

Officials are calling the 11,179-kilometre freight route a shining example of how its “New Silk Road” can strengthen China’s markets abroad.

Chongqing is also serving as a model for another economic goal of the leadership in Beijing: rebalancing the economy toward a growth model driven by domestic consumption and innovation.

That is proving difficult elsewhere in the country, but Chongqing has a mushrooming middle class that supports various service industries, which made up about 48 per cent of local GDP last year.

The city’s massive urbanization effort had encouraged millions of rural residents relocate to over the past decade, with housing subsidies and compensation for lost farmland.

“The quality of life here has made a big change for the better starting from around 10 years ago,” said Li Jiwei, a worker at Guoyuan Port on the Yangtze River who lives just outside the city limits.

While many former farmers toil on assembly lines, those factories are increasingly producing laptops, automobiles, and other high-tech products, partnering with global brands like Ford, General Motors and HP.

Chongqing does not rely on production of coal, steel or lower-end products, which has led to problems such as heavy pollution and overcapacity in many other places in China.

But the economic prospects may not be as rosy as the official statistics imply.

“Glaring discrepancies in the GDP data that Chongqing has reported suggest … its economy is likely not as booming as the government is claiming,” said Christopher Balding, associate professor at the Peking University HSBC Business School.

“But Chongqing is definitely receiving a lot of government investment and avoiding problems facing other parts of China, such as dependence on commodities and global trade issues,” he said.

Balding and other experts say Beijing should focus on other reforms in addition to building infrastructure in major cities for long-term growth.

“Chongqing has such a solid reputation as a region that’s committed to improving infrastructure, [however] transparency of local regulations is also extremely important. We can’t afford for this issue to be a barrier to attracting foreign investment in Chongqing,” said Robin Niethammer, chair of the Southwest Chapter of the European Chamber of Commerce.

The Communist Party of China’s 13th five-year plan, released in March, sets an ambitious annual growth rate of 6.5 per cent until 2020.

“The first step is to set good policy but that is the easy part,” said Lu Xiaozhong, president of the state-owned Minsheng Shipping Co Ltd, the largest integrated logistics group in China.

“Shutting down factories to address overcapacity is easy, but how about the ordinary people? The government needs to give financial support to laid-off workers, boost the development of emerging industries and encourage innovation,” Lu told dpa.

“There is concern that implementation will be left to local administrators, and that the regions requiring the most help will have the lowest amounts of money to invest in re-skilling the workforce,” cautioned an analysis by McKinsey.

It is too soon to tell how the Chongqing experiment will turn out. If it fails, former rural residents may become disenfranchised with no way back, after their fields have been paved over with concrete.

“Farm? What farm? My home is long gone, but I make more money here than I did before and my hours are more reasonable,” said Chen, an assembly worker at a motorcycle factory in one of Chongqing’s newly urbanized areas.

Another factory worker said she is confident her son would have a better life.

“I did not finish middle school but my child is in university. I don’t know about how the economy is doing but I think that is progress.”

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