China’s cities are shaping China and impacting the World

In 2014, Nobel Prize-winning economist Joseph Stiglitz said that two significant forces would shape global prosperity in the 21st century:
1. U.S. technological innovation
2. urbanization in China.

The Brookings Institute has an updated look at 103 cities in China that are the global top 300 in terms of PPP GDP.

The Economist has a look at how China is turning into 19 super-regions. The population of China’s cities has quintupled over the past 40 years and has reached 813 million. By 2030 roughly one in five of the world’s city-dwellers will be Chinese. (Over 1 billion in urban areas)

China has a new urban plan. The new plan calls for 19 clusters in all, which would account for nine-tenths of economic activity.

Five city clusters about two to four times bigger than Tokyo

The biggest existing city cluster in the world is greater Tokyo, home to some 40 milloin people. The Yangzi delta will be almost four times as big, with 150 million people. The average population of the five biggest clusters that China hopes to develop is 110 million. Part of the reason is that the physical area of most of the Chinese clusters will also be bigger. The most prosperous, the Pearl delta, is expected to cover 42,000 square kilometers, about the same as the Netherlands.

High Speed Connections

The Jingjinji region around Beijing has five high-speed train lines today. By 2020 there should be 12 more intercity lines, and another nine by 2030.

In advanced countries, the doubling of a city’s population can increase productivity by 2-5%, according to the Organisation for Economic Co-operation and Development.

Alain Bertaud of New York University says that, if integrated well, China’s city clusters could, thanks to their size, achieve levels of productivity never seen in other countries. He says it would be comparable to the differences between England and the rest of the world during the Industrial Revolution.

Evidence about economic gains from clustering in China is promising, if limited. Counties enjoy a 6% boost in productivity from being tied into the Yangzi super-region.

The main concern for those trying to lead productive lives across the vast super-regions is more mundane: how easy it is to get from A to B. The government classifies clusters as “one-hour economic zones” or “two-hour economic zones”, depending on the time it takes to cross the cluster by high-speed rail. But it often takes longer to get to train stations within cities than to travel by train between cities. People can spend four hours a day commuting within Shanghai.

It seems clear that China will continue to leverage technology to enable faster commuting within city regions.
* more high-speed rail lines
* robotic buses
* robotic cars and ridesharing with high-speed roads and tunnels
* ultra-fast elevators without cables to commute from skyscraper to skyscraper and to speed the last 300 meters

China will do what takes to get the potential 50% GDP boost from truly efficient one-hour connections.

In 2014, China accounted for fewer than 50 metro areas within the top 300 cities based on purchasing power parity (PPP) GDP. With 2016 data, China’s has 103 metros areas in the global top 300 which is more than North America and Western Europe combined. There was corrected PPP GDP calculations that boosted China’s PPP by about 30-40%.

Two Chinese Giants, Beijing and Shanghai, are economically dominant, together housing 26 million workers and generating over $1.6 trillion in real output.

Anchor Cities are 14 other metro areas that generated at least $200 billion in real output. They make up a quarter of the nation’s GDP in 2016, including nine provincial-level municipalities or provincial capitals (Tianjin, Chongqing, Zhengzhou, Nanjing, Hangzhou, Guangzhou, Wuhan, Changsha, Chengdu) and five coastal cities that are home to some of the world’s busiest container ports (Qingdao, Suzhou, Wuxi, Ningbo, Shenzhen).

Rust Belt contains six metro areas (Harbin, Daqing, Changchun, Jilin, Shenyang, Dalian) in Northeast China, struggling to counter the decline of the nation’s coal and steel industry.

China’s has 81 mid-sized metro areas (average employment of 1.6 million and average GDP of $106.9 billion)—based on their industrial structure:

In 24 metro areas, services account for a higher share of the economy than industry. Brookings categorize these as Service Cities.

In 57 metro areas, industry accounts for a higher share of the economy than services. Brookings categorize these as Industry Cities.

Cities like Fuzhou, Xiamen, Wenzhou—the three Service Cities that ranked among the top 10 on the Economic Performance Index—have benefited largely from booming financial services and e-commerce, despite their heavy reliance on manufacturing less than a decade ago. On the other hand, Zhanjiang—the only Service City ranked in the bottom 10—has been unable to find a new growth industry to counteract the decline of its industrial base.

A closer look at the Pearl River Delta—a region of nine cities and 60 million people—exemplifies this dynamic. Once the “factory of the world,” the Pearl River Delta (PRD) region is in the midst of a dramatic economic transition. In some parts of the region, cities are thriving. Guangzhou leads the nation in cross-border e-commerce, and Shenzhen has emerged as the Silicon Valley of China. At the same time, in other corners of the region’s cities—such as Dongguan, Foshan, Jiangmen, Zhongshan, and Zhuhai—are experiencing slow growth or decline as they struggle to evolve their economies away from competing on low costs towards new product innovation. The losses in these cities have been gains for cheaper nearby cities such as Huizhou and Zhaoqing, which are still rooted in industry. Like China itself, the PRD is not a monolith, and whether its economy will remain rooted in the past or embrace a high-tech rebirth remains to be seen.