Taizhou offers miniature example the transformation of China's economy

City offers a small example of steps taken and obstacles faced in transforming mainland economy

PUBLISHED : Monday, 20 January, 2014, 11:57pm
UPDATED : Tuesday, 21 January, 2014, 1:24am

Zou Jianqing's property businesses once boomed in Taizhou , a coastal city in Zhejiang . Now he wonders if he can sustain his ventures in the next decade because government policies have cooled real estate demand.

Erecting five-star hotels and modern shopping malls is one of his options, as the city aims to lure more investors from the outside while increasingly rich local residents are wanting more high-end brands.

Taizhou, on the country's east coast, is already home to one of the nation's most ambitious private entrepreneurs, Li Shufu, who led Geely Auto to acquire Volvo Car in 2010. Zou is one of many entrepreneurs hoping to further transform this city.

He has been working with Yintai Group, a retail conglomerate, to pour billions of yuan in capital into a shopping centre in the popular old district of Jiaojiang. The partnership is building a 300-metre-high Sheraton Hotel in a commercial complex in Wenling that is scheduled to open next year.

Taizhou offers a miniature example of the bold steps transforming the mainland economy but also highlights the problems businesses and workers face.

Beijing has urged provincial authorities in Taizhou and throughout the country to boost consumption, increase industrial productivity, cut pollution and register more migrants as city dwellers.

But after yesterday's announcement that gross domestic product growth last year remained at the lowest rate since 1999, many economists said local officials may have to bolster their budgets by selling land and spurring infrastructure projects while cleaning polluted rivers, cutting debt, and increasing industrial competition - changes in Taizhou and elsewhere that are expected to stall growth in the coming years.

"The government needs to strike a balance between stable growth, containing financial and fiscal risks, and adjusting the economic structure," Barclays Capital said in a research note.

National Bureau of Statistics chief Ma Jiantang said the strategies of urbanisation, industrialisation, developing information technology and agricultural modernisation would over time spur "huge demand for investment" and also boost consumption and efficiency.

How Taizhou and other local authorities carry out these reforms will be crucial to the country's economic transformation, experts say.

Historically a centre for fruit production, fish farming and manufacturing, Taizhou has in recent years broadened its business base to include the manufacturing of pharmaceuticals, cars and motorcycles, plastic moulding, home appliances and sewing machines.

Lin Dinggang, chief of the Taizhou Economic and Information Commission, said in an interview that the municipal government is hoping to add bigger and stronger industrial companies while ridding itself of polluters that include chemical, paper-making, and smelting plants.

"In the past, due to flexibility in the way private companies operate and relative shortage of supply in the market, Taizhou's businesses had enjoyed earning easy money," he said.

However, as the domestic and overseas outlooks prove more challenging, "local companies are now suffering from excessive capacity in almost every industry, as well as rising resource and labour costs. Restructuring their businesses has become a must," Lin said.

This applies to both manufacturers and small businesses in the city.

Zhu Lifen, a native of Fujian province, says business at her Taizhou flower shop has been unstable. Sales to customers who patronised a nearby karaoke club had greatly helped, but they slumped by a third in the past year because entertainment establishments lost business when the government cracked down on officials who used public money for entertainment. At the same time, the flower shop's monthly rent kept rising, she said.

Zhu said she can't afford to buy a home in a city she has lived in for 10 years, even though making such an investment would make her daughter eligible to attend a public school.

On a positive note, Taizhou's urban income grew 10 per cent per person last year, above the national average of 9.7 per cent.

That's encouraging to Zou, who hopes that a rising class of wealthier residents will bring in cash at his new shopping malls to offset the declining demand for homes he built.

But he worries about rising competition.

New commercial complexes that would include Marriott, Sofitel and Hilton hotels have already been approved.

Zou said he would be cautious before rolling out too many high-end products at his malls because of the limited spending of local shoppers.

"Shopping malls like Yintai are needed in every city like Taizhou," he said. "But they would need to be positioned realistically to target the masses."