Rising suns

Lesser-known cities will dazzle

China

Although the days of double-digit growth for China are over, if you look closely you can still find areas of ultra-fast development. In 2016, more than ever given the shifting patterns of China’s economy, it will be worth looking at the vast country through the changing fortunes of its cities.

Ten years ago the economies of resource-rich inland and western cities such as Maanshan in Anhui province and Baotou in Inner Mongolia were growing at 20-30% annually, yet they now barely beat the national average of (officially) 7%. North-eastern cities are struggling with tighter credit, excessive property inventories and shifting demography. Liaoning, one of the largest provincial economies in China, grew by only 2.6% in the first half of 2015.

But other cities are rising stars. Places that few outsiders have heard of, such as Guiyang, Xiangyang and Hengyang, will shine brightly in 2016, their economies growing by up to 12%. Coincidentally, in their names they all have the character yang, which means “sun” in Chinese.

As the capital city of the poorest province in China, Guiyang was once known for its reliance on old-fashioned state-owned enterprises. But now it is positioning itself as a centre for “big data”. Its party secretary, Chen Gang, used to serve as party boss of Chaoyang District in Beijing. Shortly after his appointment to Guiyang in 2013, Beijing’s ZhongGuanCun Science Park, China’s Palo Alto, signed an agreement to establish an operation in Guiyang. China’s state-owned telecoms giants have invested in data centres in the city, and private companies such as Alibaba host cloud-computing facilities there. A high-speed rail connection with Guangzhou opened at the end of 2014, cutting the journey time to the economic powerhouse of the Pearl River delta from 22 hours to four.

Hengyang and Xiangyang are classic examples of “industrial transfers”. As China’s coastal cities turn to making higher-value goods, many manufacturers are choosing to move inland and into western regions. Hengyang benefits from investment by Foxconn, an electronics manufacturer. Xiangyang, on the Han river, is well placed to connect Hubei, Henan, Shaanxi and Sichuan provinces. Its industrial park, labour pool, decent infrastructure and support from the local government offer an attractive package for investors.

Many cities will get a boost from rising incomes and consumption. Urumqi, the capital of Xinjiang and one of the largest cities in China’s western interior, will enjoy the fastest income growth in the next five years. In the same period Wuhu in Anhui will be China’s champion for growth in consumer spending, thanks to a strong labour market, and the local automotive and equipment-making industries. In all, 40% of all Chinese prefecture-level cities will have an average disposable income of at least 30,000 yuan (nearly $5,000) by 2016—an important threshold, at which people start to spend on goods other than food and clothes.

These rising suns reflect the shift of China’s pattern of growth: away from export and towards import; from investment to consumption; and from manufacturing to services. The top ten rising cities, as measured by nine indicators ranging from their current size to their likely growth in 2015-19, will collectively have a population of more than 30m in 2016. In these places, China’s boom goes on.

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