Detroit's decline holds lesson for emerging Chengdu

Updated: 2013-03-28 10:44

By Michael Barris (China Daily)

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Two cities, 7,400 miles apart.

One ascending, the other declining.

Both linked by the auto industry.

One city is Chengdu, in China's Sichuan province. The other is Detroit, in the US state of Michigan.

Once upon a time, Detroit was Chengdu: a fast-growing urban center gearing up to become an auto industry hub, a city where a new vehicle rolled off the assembly line every minute.

Today, Detroit is dying.

Detroit's decline holds lesson for emerging Chengdu

The once-thriving capital of America's auto industry is grappling with an unemployment rate that some have pegged at nearly 50 percent, despite lower official numbers. In the 1950s, the home of General Motors was the fifth-biggest city in the United States, with a population of 1.8 million. Today it ranks 18th, with 700,000 residents.

With government budgets stripped bare, virtually all essential services have been cut back. Skyscrapers stand abandoned. Suburban neighborhoods are nearly empty.

So grim is Detroit's situation that Michigan Governor Rick Snyder recently announced a state takeover of city finances and appointed as manager a corporate bankruptcy expert. A filing by Detroit would be the biggest municipal bankruptcy in US history.

Once upon a time, Chengdu was Detroit.

The Chinese city's economy is growing as automakers such as Germany's Volkswagen AG and Sweden's Volvo, now owned by Zhejiang Geely Holding Group of China, use it as a manufacturing base.

Ten vehicle-manufacturing factories and seven engine plants operate in Chengdu. Four more plants are about to be completed and go into operation by year's end.

In 2012, the Chengdu Economic Development Zone produced 375,000 vehicles, more than double the 2011 output. The city's target for this year is 600,000 vehicles, but the actual production is expected to be 650,000, based on a current annual growth rate of 64 percent. Between 2016 and 2020, the economic development zone plans to make 1.25 million vehicles a year.

Chinese who used to look with envy at Detroit might feel a bit wistful - or even triumphant - at the decline of an American industrial powerhouse as Chengdu comes into its own as an automotive center. But such sentiments would likely come from those unfamiliar with the "background and historical development of the American automobile history", according to Yale Zhang, managing director of Automotive Foresight, an auto-industry consulting firm in Shanghai.

Zhang said Detroit's economic demise has been occurring so gradually, and over such a long period, that its ultimate descent into a state takeover is anticlimactic.

"It has been a long time since downtown Detroit was the center of the automotive industry," Zhang said. "General Motors has its world headquarters there, but there aren't a lot of suppliers in the downtown area. That city has been empty for many, many years. There used to be a huge city there, and now it has become a ghost city."

The curious footnote to this tale of two cities is that some Chinese are taking an interest in Detroit because its depressed land values seem to represent a terrific bargain. recently reported that about 1,000 people called a hotline to join a tour to Detroit following reports that dozens of properties in the city were selling for under $100, and even as low as $1. Another agency said it would soon be launching its first tour to check out properties in New York, Boston and Washington at a cost of 25,000 yuan ($4,000) per person.

The article noted that China's escalating real estate prices in major cities have made it "virtually impossible for many ordinary residents to own their own home, prompting them to check out prospects overseas".

But buyers should beware. As the article also points out, most of the properties for sale in Detroit have been "abandoned or repossessed by banks, which are eager to get rid of them at just about any price to avoid maintenance costs". Most of the empty houses have been "stripped bare by burglars and vandals", a local real estate manager told the Huffington Post.

At any rate, Detroit's demise is a cautionary tale for cities that rely heavily on traditional manufacturing. In the future, cities that combine advanced technologies and systems with manufacturing will be better-equipped to avoid the pitfalls that have swept Detroit toward ruin.

Chengdu, take note.

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