“The economic crisis is not over yet,” Mayor Huang Qifan said at the World Cities Summit in Singapore last Tuesday (29th June 2010). “Europe and the US are probably facing another crisis. How Chongqing can sustain economic growth in an unstable global environment is my number one priority.”
Chongqing’s economy grew by 14.3 per cent in 2009, to RMB652.8 billion (US$96 billion). But it still lags the economic powerhouses on the eastern coast (Shanghai’s GDP in 2009 was US$218 billion, growing by 8.2 per cent), and its GDP per capita (US$3300) is below China’s national average.
The sustainability of Chongqing’s economic growth will depend to a large extent on domestic consumption, Huang reckons. An “environment for domestic consumption” is being created in two key ways.
Learning from Singapore
The first is a subsidised public housing project designed to “free up more money for people to consume and drive the economy”. The project will include elements borrowed from Singapore’s Housing Development Board model, which Huang was in town to study.
“Historically, China has taken a one-track approach to public housing: leasing properties at a low rental rate,” Huang noted. “This is fine in principle. But the system has enjoyed limit success and will struggle to cope with rising demand.”
Fifty-four per cent of Chongqing citizens live in urban areas. Chongqing’s population density (809 inhabitants per square kilometre), though higher than China’s average, is lower than in Beijing, Shanghai or Guangzhou. However, high urban-to-rural migration rates (1300 people move into the city every day) are increasing the need for low-cost housing.
Chongqing’s public housing project, which has attracted keen interest from local government leaders across China, launches this year. Like the Singaporean HDB model, a large part of the public housing system will be commercialised, enabling middle-income Chinese to buy their houses. Low-earners can lease their homes at a minimum rent.
“We are deploying a two-track system,” Huang explained. “The 60-70 per cent of citizens who can now afford to buy their own house can now buy government houses, and the 30-40 per cent of low-income residents can rent at a minimum fee.”
Revenue generated from the sale of public housing will, along with bank loans, taxes and public financing, help fund a RMB70 billion (US$10 billion) construction effort.
“Starting from this year on, we intend to build 10 million square metres of public housing,” Huang said. “We have already hit the 1 million-mark this year, and we will add another 2.5 million square metres in the second half of 2010.”
Bridging the divide
To narrow the wealth gap between urban dwellers and rural migrants, and to further boost local consumption, housing grants and incentives for starting new businesses will be granted to those new to the city.
“Rural people have not been granted the same privileges as city dwellers. That is set to change,” said the Mayor. “We want people to help themselves rather than rely on the government. The economy could benefit by RMB30 billion (US$4 billion) a year as a result.”
Under a new start-up incentive scheme, an investment of RMB100,000 (US$15,000) in a new business will be aided by a RMB50,000 (US$7400) tax-free government grant.
“We are pursuing the Reagan-Thatcher model of the 1980s,” Huang explained. “During a time of economic crisis, we think that people should be given money so that they will spend it. If business is good, employment will be low and people will be better off.”
Emerging industries such as IT will be incentivised to bring about change to an industrial landscape that is still dominated by automotive, light industry, and petrochemicals.
“The financial crisis has dealt a cruel blow to the electronics industry as a whole. But notebook manufacturing and communications technology are exceptions, and we are pleased to have HP and Cisco set up operations here. These industries will be Chongqing’s shining diamonds,” Huang said.
In 2008, 160 million notebooks were in purchased globally. In 2009, that figure rose to 200 million. Huang predicts the 2008 number to have doubled by 2012 - to 320 million. “The same growth is being seen in communications technology,” he noted.
Emerging sectors could help tilt the balance of Chongqing’s economy. “Over the next five years we want to maintain a 50-50 split between industry and services/agriculture. But from 2015 to 2020, we want to see industry’s share to fall to 40 per cent, agriculture’s to five per cent and the rest made up by the the services industry.”
So far, so good...
The Chongqing Municipality’s economic development strategy is paying off so far. The economy is growing at a rate of 17.6 per cent in 2010, up from 14.3 per cent last year.
“Chongqing has a vibrant economy. I believe we are well positioned to weather the global financial crisis,” Huang concluded.
Fifth-eight year-old Huang has served as Mayor and Vice Secretary to the Chongqing Municipal Committee of the Communist Party since December 2009, before which he was Vice Mayor for an eight-year stint.
Huang started working life in 1968 at a Shanghai coking plant. He joined the Communist Party in 1976.