While China's asset bubble is causing wide concerns, Chongqing, the municipality in the country's less developed southwest, has attracted a lot of attention these days for its high growth without relying on housing market. Societal innovations, along with a focus on strategic emerging industries and the real economy and newly created processing trade patterns, are the key to Chongqing’s outstanding economic growth, according to Pan Helin, a post-doctoral fellow in applied economics at the Chinese Academy of Fiscal Sciences, writing in
The Beijing News newspaper.
The southwestern metropolis saw its economy grow by 10.7 percent in the first three quarters of 2016, ranking first among provinces and provincial-level cities in China. The city has been the fastest-growing province since 2014.
As for the lessons from the city's success, the expert argued, “First of all, Chongqing has worked to wean dependence on real estate industry and industries with excess capacity, and endeavored to develop strategic emerging industries and the real economy, with industrial growth the anchor of GDP.”
Elsewhere, excess-capacity industries and real estate devour large amounts of credit that could have been utilized by the real economy, while at the same time impairing the motivation of local governments to develop the economy, according to Pan.
“In the past several years, the municipal government [of Chongqing] hasn’t directed resources to excess-capacity industries and its determination to control housing prices is also evident,” Pan said. “The city has even set up funds to guide finance in support of strategic emerging industries and the real economy, which is commendable.”
Moreover, the city has created new processing trade models, instead of following the experience of east China’s coastal areas indiscriminately. As a result, industrial transfer and upgrading have become the major force driving economic growth instead of drifting elsewhere, according to Pan.
Chongqing has created and developed a large-scale processing trade by extending the industrial chain to keep the better part of the value chain there, and by forming industrial clusters, especially producer service industries and manufacturing industries, noted Pan.
The most important lesson lies in societal innovations. The innovations in equity transaction in particular, such as the “Land Quota” system (a practice adopted by Chongqing to get more urban construction land quota by putting idle rural construction land on sale at an open market, not by government's land expropriation), have created new driving forces for its GDP growth, Pan said.
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