China economy

Four cities played outsize role in Chinese economy

Shanghai, Beijing, Shenzhen and Guangzhou generated an eighth of national output last year, fuelling concerns the government isn’t spreading out resources

PUBLISHED : Tuesday, 23 January, 2018, 6:02am
UPDATED : Tuesday, 23 January, 2018, 12:22pm

Nearly an eighth of China’s economic output was generated by just four cities last year, data from local authorities shows, adding fuel to the debate over the risks of relying on a handful of metropolises to drive national growth.

Shanghai, Beijing, Shenzhen and Guangzhou contributed a combined 10 trillion yuan (US$1.56 trillion) to output in 2017, according to the data. Yet that economic heft rests on a sliver of the population, with the four accounting for just 5 per cent of China’s 1.38 billion people.

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China has been trying to limit population growth in some of its biggest cities and limit the knock-on effect on housing prices and strain on social services such as schooling. In Beijing, which has set a population cap of 23 million for 2020, authorities have ramped up a campaign to drive out migrant workers in “low-end” businesses, while exiling heavy industries to surrounding cities.

Shanghai has also been trying to contain its expansion, setting out a population cap of no more than 25 million by 2035. Yet the financial hub saw its gross domestic product hit 3 trillion yuan last year – the first regional economy to hit that threshold. Per capita GDP in the four cites was more than double the national average and close to the level of Portugal’s.

At the same time, economic growth in the four remains steady, with Shenzhen climbing at 8.8 per cent, Beijing at 6.7 per cent and Shanghai at 6.9 per cent, against a national increase of 6.9 per cent in 2017, according to the statistics bureau.

The four cities recorded a per capita disposable income far higher than the rest of the country’s. In Shanghai, the amount was 58,988 yuan, more than double the national average at 25,974 yuan.

The four cities are also home to a significant proportion of the nation’s wealthiest individuals. Of the 400 people ranked in last year’s China rich List, 65 come from Beijing, followed by 48 in Shanghai and 43 in Shenzhen.

But experts are divided over whether the central government should allow resources to concentrate in a few big cities or pursue a more decentralised policy for growth.

Lu Ming, professor of economics at Shanghai Jiao Tong University, is critical of Beijing’s push to downsize. In his book Great State Needs Bigger City, he argues that big cities should continue to expand and accommodate migrants by improving social services.

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In seeking to bring the living standard in western urban centres in line with what coastal cities enjoy, the government should avoid using subsidised industrial parks and the creation of new towns. Rather, policymakers should allow local market forces to dictate how cities should grow.

Louis Kuijs, head of Asia economics at consultancy Oxford Economics, warned that growing big cities could worsen traffic, increase crime and shrink living space.

“That doesn’t mean that people should not migrate, but anything that the government can do to increase the attractiveness of smaller cities ... could be helpful because there are alternatives,” Kuijs said.

“We know economic activity is boosted by glomeration, but it cannot go too far. At some point, things like congestion take over and dominate the picture.”