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Eye-popping growth with no let-up in sight
CHENGDU, capital of Sichuan Province and a poster city of China's "Go West" policy, reported double-digit growth in the first quarter despite prevailing slackness in the Chinese economy.
Chengdu is the fourth Chinese city, after Shanghai, Hong Kong and Beijing, to host the Fortune Global Forum.
Fortune, indeed, has smiled on the city. In the first quarter, Chengdu's gross domestic product expanded 10.5 percent from a year earlier to 215.1 billion yuan (US$34.7 billion), according to the Chengdu Statistics Bureau. That exceeded GDP growth of 7.7 percent nationwide and 10.2 percent in Sichuan Province.
"Cities in western China are maintaining pretty resilient growth momentum," said Shi Lei, an economics professor at Fudan University. "Looking into the future, they may become engines of growth when export-oriented coastal cities encounter more headwinds from shrinking external demand."
The national government, since 1999, has adopted sweeping initiatives to push economic development from the wealthy eastern coast to inland and western areas. China's new leadership is expected to unveil a new round of economic reforms later this year, and analysts said western areas like Chengdu stand to be big beneficiaries.
Policy changes may include a redefinition of tax-sharing with provincial and local governments, clarification of land ownership transfer and decentralization of administrative controls.
Chengdu's growth in the first quarter was led by a 13.7 percent expansion of its manufacturing sector amid advances in information technology, aerospace, solar panels, biomedicine, green technologies, advanced industrial materials and automobiles.
Chengdu's output of vehicles nearly doubled in the January-March period, the fastest among major industries in the city, thanks to buoyant demand in inland China. Information technology expanded 30.1 percent, the result of more investment from industry giants like Intel, Dell, Lenovo and Texas Instruments.
Among all provincial capitals, Chengdu's municipal manufacturing sector was the strongest in terms of the growth rate, the Chengdu Statistics Bureau said.
The resilience of the city's economy came against the backdrop of weaker growth nationwide in China. National GDP slowed to 7.7 percent in the first quarter from 7.9 percent in the previous three months.
It was a "disappointing March followed by a moderately weak April," said Stephen Green, an economist at Standard Chartered Bank. "There are few signs of renewed dynamism."
He lowered his 2013 China's growth forecast to 7.7 percent from 8.3 percent.
In Chengdu, fixed-asset investment expanded 17.2 percent in the first quarter, weaker than the national average of 20.9 percent. Retail sales rose 13 percent, slightly better than the 12.4 percent nationwide.
Disposable income of urban residents in Chengdu edged up 8.5 percent, unexpectedly slower than the national average of 9.9 percent increase.
"Inland areas of China still lag behind in consumption and investment," said Fudan's Shi. "In Sichuan, things will be more complicated because of the earthquake that struck the city of Ya'an in April, but there still is huge potential in Sichuan for future development."
In part, analysts said that the next round of economic reforms, expected to be presented at the Third Plenum of the Central Committee of the Party this autumn, may provide policies that will benefit western areas.
In addition to addressing tax-sharing, land ownership and decentralized administrative controls, the reforms may focus on reducing red tape, narrowing the gap between rich and poor, and streamlining the household registration system.
"Overall, the reforms should result in less government intervention in economic activity, more equal income distribution, a more balanced economic structure and accelerated industrial upgrading," said Huang Yiping, an economist at Barclays.
For interior areas, where farmers are still in the majority, resolution of land-ownership issues will allow more farmers to sell their properties in areas of advancing urbanization, Huang said.
Consumer spending is key to economic growth in Chengdu and the region, Huang said. Policies need to unleash pent-up demand.
The new national economic package is also expected to stress green growth and environmental protection. Cities in central and western China, Shi said, may find it harder to secure growth by exploiting nature, as the coastal pioneers did.
Chris Leung, a senior economist at DBS China, said inland areas stand to gain from Chinese government efforts to rebalance the economy,
"The idea of reform is to put China's economy on a more sustainable and balanced growth path," he said. "Meanwhile, urbanization will create corresponding demand for all sorts of goods and primary commodities."
Leung added that slower growth in China is only "temporary" and that the new emphasis on green development and environmental protection will lead to more sustainable development in China's interior.
The Fortune Global Forum, which brings together world leaders in business, economics and government, has cast its vote of confidence in Chengdu's future. The three-day forum that starts June 6 allows the city to showcase its achievements and its potential before the eyes of the world.