City Report: Chongqing

Tuesday, December 12, 2006 20:39

Located in southwest China in the confluence of the upper reaches of the Yangtze River and the Jialing River, Chongqing has the largest jurisdiction area (40 districts and counties) and population in China.

Chongqing has been the focus of much attention in China recently as it is one of the primary “Go West” cities of focus, it has the largest urban population in China, and it has been very successful at attracting foreign direct investment in the last few years.

Growth for the last 5 years has been double digit for Chongqing, and this has led to a significant rise in disposable income and consumption on a per capita basis.

Following this trend is one of China’s strongest auto markets, an expanding and liquid real estate market, and a general improvement in the overall standard of living for residents. Thus, for Chongqing, one of China’s four furnaces, the city is showing promise not only for manufacturers, but also for retailers.

As the West continues to develop, Chongqing along with Chengdu and Kunming will grow in size and strength. Being in the middle of the most populas area of China, and with the desire of the Government to bridge the income gap, Chongqing will continue to be the recipient of national, local, and international attention.

Economic Overview:
As links between the western and eastern areas of China, Chongqing and Chengdu are the central focal points of the central Government’s effort to bring east coast prosperity to the inland. With China’s largest urban population, Chongqing is therefore in the grips of the economic, political, and social changes that come with modernization.

As one of the old industrial bases in China, three pillar industries have taken shape in Chongqing:

  • the machine-building industry (primarily for automobile and motorcycle manufacturing);
  • the chemical industry emphasizing natural gas and pharmaceutical chemistries;
  • the metallurgical industry with high quality steel and aluminum materials.

Chongqing is one of China’s four major automobile manufacturing bases with one of the 10 largest iron and steel production centers, and one of the three aluminum production bases. The automotive, chemical, and tourism industries will be leading avenues for future development.

Chongqing Macro

As seen in the graph above the policies have been successful; Chongqing has maintained double digit growth for the last 5 years and has expanded 90% overall since 1996. Average residents have seen an improvement in their livelihoods as their disposable income rose from 5,042RMB/year in 1996 to 8,094 RMB/year in 2003.

Foreign Presence:
The Chinese Central Government launched the Great Western Investment Strategy (also called “Go West” Program) in January 2000. Program goals are to boost the underdeveloped economy in the west and promote sustained national economic growth for the common prosperity of all citizens. Major focuses of this strategy include: accelerate infrastructure development; protect and improve the environment; develop regional industries with local characteristics; develop science, technology, and education; and improve the overall investment environment for the region.

To date, Chongqing has established trade relations with over 140 countries and regions. There are already 26 corporations among the top 500 in the world that have settled in Chongqing; 29 wholly owned entities and 3,700 joint ventures are listed.Chongqing in 2004 had contracted and utilized FDI over 600M USD, the highest amount for any of the non-coastal cities. Chongqing FDI

As a guideline to investment, Chongqing is encouraging investment in the following areas:

  • Biotech and pharmaceutical
  • Automotive
  • Chemical processing
  • Agriculture

The investment is the result of 281 contracts, the highest for Chongqing in the previous 10 years, and appears to be a sign of the “Go West” policy’s success. With Chongqing recently receiving more and more press coverage and more and more foreign managers are visiting Chongqing, this trend in FDI can only be expected to continue along its upward path.

Like Shanghai was to east China in the ’90s and Guangzhou/Shenzhen to southeast China in the ’80s, Chongqing is expected to play the leading role for a rapid development of western China in the current decade. Western China is the county’s top economic priority. Largely ignored by Western businesses until recently, Chongqing’s economy was limited to regional operations because exporting was not viable due to high transport costs. The “Go West” policy in 2000 and improvements in China’s western market conditions stimulated interest starting in 2001 and 2002.

As a sign of Chongqing’s growth and success, in 2003 the World Bank ranked Chongqing the 5th most competitive city in China, an amazing achievement considering the lack of a strong export market for goods produced in Chongqing and the investment other East coast cities have received.

With the “Go West” policy providing continued support for Chongqing and other Western cities, the resulting growth in the industrial base, and the continued growth in the consumer sector, Chongqing will rise alongside Chengdu to become a regional powerhouse in the West.

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2 Responses to “City Report: Chongqing”

  1. All Roads Lead To China » Impications of a Containerized Yangtze River says:

    January 15th, 2007 at 9:24 am

    […] In the last week, I have found a lot of data and I am crunching it now. There is a lot of investment, river traffic is up (one report showed 25% growth on river containerization), foreign and domestic companies announcements are signaling the rolling up container operators along the river, and executive who once wondered where Nanjing was are starting to recognize the names of second tier cities like Wuhan, Yichang, and Chongqing. […]

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    May 23rd, 2007 at 8:59 pm

    […] tuned for our next installment Chongqing (Macro-profile here). If you are interested in learning more about Chengdu’s investment climate or zones, please […]