China’s New Growth Force: Bohai Economic Rim

T

he economic success of the Pearl River Delta and that of its sister delta, the Yangtze, has encouraged the Central Government to give the green light to developing the Beijing-centered Bohai Economic Rim into another regional powerhouse.

Compared with the Hong Kong-centered Pearl River Delta (PRD) and the Shanghai-led Yangtze River Delta (YRD), the Bohai Economic Rim is still in its infancy. Nevertheless, it has the potential to follow in its sisters' footsteps.

Bohai Economic Rim (BER), which on occasion is called the Greater Beijing Economic Rim, covers 70,000 sq. km -- encompassing Beijing, Tianjin, Tangshan, Baoding, Langfang, Chengde, Qinhuangdao and Shijiazhuang -- and has a population of about 40 million.

Just as Hong Kong has driven the PRD's growth, and Shanghai the YRD's, Beijing is expected to play a similarly leading role in the BER given the capital's phenomenal growth in recent years. The latest Mainland government statistics show that Beijing’s GDP for 2002 grew 10.2 per cent over the previous year. The hosting of the 2008 Olympic Games is expected to sustain -- if not add -- to this incredible growth. However, unlike Hong Kong and Shanghai, Beijing's growth has not run off to benefit surrounding cities, which has diminished the overall economic potency of the region. This could change now that integration of the Bohai Economic Rim is on the Central Government's agenda, but much of its success hinges on businesses' understanding of the investment environment there.

Beijing

In recent years, traditional manufacturing industries in Beijing and Tianjin have been shifting their operations to Hebei -- including Beijing’s Shougang Group which is in the process of relocating 75 per cent of its steel production to Hebei. Such industries account for a sizable percentage of the capital's GDP. In 2001, manufacturing industries accounted for 36 per cent of Beijing’s GDP, and 49 per cent for both Tianjin and Hebei, compared to 60 per cent, 47 per cent and 34 per cent, respectively, for the cities services industries. In 2002, Beijing’s services industries showed strong growth and contributed 66 per cent of its GDP.

Beijing residents are far more aware of political policies than their cousins in coastal cities, and tend to be more conservative. The city has also enforced strict controls on migrants moving to the capital, which has lessened the impact of outside influences on the population.

With WTO membership, the hosting of the 2008 Olympic Games, the development of Zhongguancun Science Park, a more educated workforce and a more service-oriented economy, Beijing increasingly looks to have all the economic characteristics of a successful metropolis. However, inefficiencies in the local government, market mechanism has yet to be improved.

Tianjin

Tianjin, a major manufacturing base and home to one of China's main deep-water ports, is currently a two-hour journey by rail or car from Beijing. That travelling time could well be reduced to 30 minutes if a proposal to build an express rail link to connect up Beijing, Tianjin and Tongshan is approved.

As China’s northern manufacturing centre, Tianjin's export volume almost doubles that of Beijing, driven by multi-national firms such as Motorola and Samsung, which have set up operations in the city. Despite this, Tianjin's urban infrastructure and services industries, especially commercial and logistics services, are in need of substantial improvements.

Hebei

Hebei has long been a strong base for traditional manufacturing and agricultural industries. It is also rich in tourism resources, and given its proximity to Beijing and Tianjin, the city's food and tourism industries offer great potential for investors in these sectors. Official figures show there are 321 Hong Kong businesses operating in Hebei, representing one-third of total foreign investment in the city. However, Hebei’s financial services, basic infrastructure and living conditions lag far behind other major Mainland cities.

Outbound Missions

The Bohai Economic Rim is expected to be a new engine of growth for the Chinese economy over the next decade. To explore its potential, HKGCC is planning an outbound mission next month to visit Beijing’s officials in charge of economic and trade affairs. Another mission later in the year will explore the latest investment trends within the Bohai Economic Rim. We will keep members up to date about these developments.