Insight - Chengdu: a new gate opens way to old China
This insight by Jeff Turner, Trade Commissioner to Chengdu
Signs of an impending slowdown in China are unsettling for Australian exporters, but the immense economic changes they foreshadow will bring opportunities as well as risks. China is moving away from an economic model based mainly on exports to one that promotes sustainable growth through domestic spending.
Hundreds of millions of Chinese have entered the middle class and their spending patterns will reshape China's economy, cities and lifestyle. They will also alter China's trading patterns, including imports from Australia. That is why Austrade recently appointed its first trade commissioner for southwest China, based in Chengdu, the centre of China's inland boom.
Walking down the old back streets and broad new pedestrian malls after my arrival here last week to take up the post, I knew we had chosen the right place. Capital of Sichuan province, Chengdu is dynamic yet refined, an increasingly prosperous industrial powerhouse that hasn't lost sight of its traditional identity. Nowhere are China's national aspirations closer to realisation than here, where thoughtful city planning has accompanied economic expansion to create a lifestyle which is the envy of China's coastal cities. As China's leaders move from a 'growth at all costs' model to a greater focus on quality of life, Chengdu is leading the way.
Australia can provide many of the things it will need – quality education, health and aged care services, green building and urban design, clean energy technologies and safe, high quality food, to name a few – but we must establish a presence first. That's where Austrade comes in. While China's government has been encouraging its domestic enterprises to 'go West' for many years, Australian firms have often overlooked the region in favour of more established destinations along the coast. My role is to help turn that around and, luckily, it isn't hard to mount a compelling case.
While growth has indeed moderated in China's eastern provinces, inland provinces such as Sichuan, Gansu, Yunnan, Qinghai and Shaanxi recorded GDP growth of more than 12 per cent last year. Chengdu ranks the eighth largest contributor to GDP among China's cities, with an economy worth $135 billion last year. Sichuan's overall contribution to China's GDP was $397 billion, close to the entire GDP of Thailand.
In 2011, Fortune magazine chose Chengdu as the world's best emerging city for business and it boasts 238 of the world's top 500 companies. It is estimated that a fifth of the world's computers are manufactured here. Manufacturing is crucial to the city's economy, comprising 53 per cent of all industry, but services are also significant, making up 34 per cent. More than all this, however, Chengdu is emerging as a transnational transport, distribution and logistics hub linking China with Central, South and Southeast Asia, the Middle East and Europe. The 'new silk highways' radiating in all directions consist of road and rail routes to everywhere from Thailand to Turkey, Kazakhstan, Iran and Russia, with plans to establish highway links to India.
Some Australian companies have already recognised the region's potential. ANZ, for example, has chosen Chengdu as a base for its Chinese language support centre, recognising the city's sound investment environment and skills base. The Goodman Group, a leader in the development of warehousing, logistics and industrial parks, already has a substantial presence and last week held a ground-breaking ceremony for its new 72,000sqm logistics centre. A second similar centre is planned.
The expanding position of Chengdu as a regional hub for transport and logistics services and the increasing number of multinational firms establishing operations and production in the city will mean opportunities for Australian firms. It will help, for example, to secure value and efficiencies for their own products as they develop through the production chain, as well as supporting services for other companies as the infrastructure continues to develop.
Meanwhile, Sichuan companies, mainly privately owned enterprises, have invested more than $1.5bn in Australian mining, agribusiness and R&D, an amount that represents one third of the province's total overseas investment. In many ways, Chengdu's re-emergence as a global city should come as no surprise. The richness of the city's long history rivals the world's most ancient cities: it was a trading hub even before the original Silk Route.
Of his visit to Chengdu in the late 13th century, Marco Polo reportedly remarked: "The multitude of vessels that navigate this river is so vast that no one who should read or hear the tale would believe it. The quantities of merchandise also which merchants carry up and down this river are past all belief."
If Marco Polo were to visit Chengdu today, his impression would be of a multitude of LED-lit skyscrapers, hectares of pedestrian shopping malls crowded by new generations of affluent and selective young consumers.
The quantities of merchandise still surpass all belief and there is a buzz in this city and a confidence that Chengdu's time has come. Growth may be moderating on the coast, but the momentum continues here as the centre of China's economic gravity moves inexorably westward. Having worked in and around China for most of my career, I was already acquainted with Chengdu's good food, urbane and civilised approach to life. What struck me on my return was how little of that had changed.
Chengdu today boasts many of the things other Chinese cities have - modern buildings and infrastructure, shopping malls, suburbs of new apartment developments - but it has also maintained its distinction as a liveable city. In doing so it has prioritised the things China's emerging middle class increasingly wants, things Australia is also well positioned to help supply: quality education, a healthy environment, access to safe food, and well-designed urban infrastructure.
What's more, Australia now has its own silk road to Chengdu with direct flights from Melbourne.