Huizhou is building a new industrial park in its Huiyang district that will be generating 100 billion yuan in output within the next 5-8 years, local media reported the city’s government as saying. Clustered on the district’s Sanhe street, it will actually be a collection of buildings and production facilities: Huiyang Xiangling Intelligent Science and Technology Industrial Area, Huaxia-Shunze Information Industry Cluster Area, and Wandong Wisdom Valley Industrial Area.
Zhuhai got a boost last year from the final stages of construction of the Hengqin Railway Station, which is due to open soon, but its economy has also been doing surprisingly well thanks to growth in tech manufacturing and services, latest preliminary data shows.
The city’s leadership announced this week GDP growth of 6.8%, putting Zhuhai tied with Foshan and behind only Dongguan and Shenzhen (+7% each) among the GBA’s fastest-growing cities.
Shenzhen’s mayor, Chen Rugui, sees no cause for concern in the city’s recent economic slowdown, pointing out that quality is more important than quantity. Industrial upgrading is causing some challenges as traditional industries either become more valuable through infusions of technology, or move out of the city, yet the mayor is upbeat about the future.
Shenzhen will see fixed-asset investment continue to grow strongly in 2020, the city government says, with projects under way budgeted to cost around 177 billion yuan, 23% more than 2019.
Infrastructure will be a big part of this, including 12 rail transit projects under construction. Others include the redevelopment of Binhai Avenue in Nanshan, where the futuristic Shenzhen Bay Headquarters Base is being built, and the establishment of a National Science Center in the Guangming “Science City” district.
The official signing of the US-China trade deal comes two weeks after the launch of China’s new Foreign Investment Law. We asked the American Chamber of Commerce in South China, based in Guangzhou, for their views on both the FIL, US-China relations, and the outlook for their business in 2020.
Now that 2020 is 15 days old, and the US and China have a deal (sort of) on trade, it might be time to shake off the New Year’s hangover and knuckle down to understanding the opportunities available to investors in the world’s 11th-largest economy.
A good way to start would be to read the Foreign Investment Law, which went into effect on January 1. It brings in some major changes in how foreign investors are treated, offering increased protections. For new investors, it makes it a lot easier to incorporate and navigate the bureaucratic minefields, although it is still important to understand the different company structures available to foreigners, which can vary depending on the industry. It also opens new sectors of the economy to foreign investment and, particularly, opens the Belt and Road Initiative to foreign capital.
Guangdong Governor Ma Xingrui has declared the province broke through the 10 trillion yuan GDP mark in 2019, equating to growth of roughly 6.3%. However, he clearly sees challenges in the year ahead, as growth is forecast to subside further to 6.0% in 2020.
The coming year will likely be a time of fiscal prudence for Guangdong, as the provincial government has decided to rein in growth of public spending in 2020: expenditures will grow by the same rate as what is projected for revenues, around 4%. This is down sharply from last year’s 10% spending growth, while revenues are projected to fall only slightly from last year’s 4.5% growth.
Such restraint will result in public spending of 1.8 trillion yuan, around 500 billion yuan more than projected revenues, which is nothing to sneeze at. This being China, by far the single biggest line item, of 221.17 billion yuan, will be spent on the all-encompassing masterplan of “One Core, One Belt and One Zone” for the region’s development, i.e., no elaboration is necessary. However, looking more closely, certain sectors are still being prioritized and will be allowed to eat at the public trough more voraciously this year.
When Shenzhen announced a sharp drop in GDP growth after Q3 last year, we, like many others, were stumped as to why it had happened. The only logical explanation was a sudden drop in industrial output, which was attributable partly to the trade war damping demand for exports and also to industrial upgrading, which had seen a hollowing out of the city’s traditional economic structure.
What we missed, however, was a much simpler explanation: inflation. Nominal GDP had continued to grow strongly, but prices of goods and services rose more sharply than had been expected. This was a major reason for Shenzhen’s GDP growth falling from 7.4% at the end of Q2 to 6.6% at the end of Q3.
It is also a major reason, obviously, for the recovery in Q4, as Shenzhen ended the year back above 7%.
We don’t blame ourselves too much for this oversight, however. The city government had not flagged it for anyone, for obvious reason: Shenzhen, like the rest of the country, was engaged in quelling panic about a surge in pork prices after a major cull of the country’s hogs due to swine flu.
The crisis seems to be subsiding, judging by latest CPI data, which show that pork prices fell 4.4% in December over November. However, the city’s inflation rate is still high at 4.9%. That is clearly because of a nearly 17% rise in average food prices overall in 2019; non-food prices grew just 2%.
Read more from Shenzhen Daily (in Chinese)
We wrote last week about Foshan’s mayor being so excited at the story he had to tell regarding 2019 that he couldn’t wait for the official release of GDP data to announce Foshan had joined the trillion-yuan club. We didn’t know then just how excited he was, because he didn’t give a detailed figure. Over the weekend, he did: 1.08 trillion yuan, to be precise. That represents a sharp 8.6% growth in nominal GDP in 2019, which very nearly pushed Foshan past Dongguan for the title of fastest-growing GBA city in 2019.
Nearly, but not quite. Dongguan is estimated to have grown 7.0% in real terms, slightly faster than Foshan’s 6.8% real growth rate. So did Shenzhen – 7% – although neither city has released full details of their GDP data like Foshan’s mayor did.