Two-speed China

Updated: 2012-08-24 08:25

By Andrew Moody and Hu Haiyan (China Daily)

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Guiyang overdrive

Back in Guiyang, there are major efforts to turn the city into a regional financial center.

Jack Xiao, president of Roomax Consulting, based in Guangzhou, has been hired to market the newly constructed financial district, which opened for business this year.

Bank of China has already agreed to buy a 200-meter-tall tower, and 13 other financial institutions, including another leading State-owned bank, ICBC, have signed agreements to occupy space.

"The leading banks increasingly see Guiyang as a place to have a regional headquarters and to serve even the west of China from here. We are looking also to market the center to financial institutions from the US and Europe later this year," Xiao says.

The potential of the city has certainly been spotted by some of China's traditionally savvy coastal business people.

Investors from Zhejiang and Jiangsu provinces, home to many of China's richest entrepreneurs, are behind the new Guiyang Southwest International Trade City, a vast 10-sq-km wholesale market that will have 36,000 outlets.

"We saw an opportunity here after in-depth research because there was such a coordinated facility here," says Wang Luobao, the 48-year-old deputy general manager from his base in the Renaissance Hotel in the city.

"What we are creating will be a one-stop shop for goods not just from the region but from all over China."

Business potential

A report by Boston Consulting Group, "Big Prizes in Small Places, China's Rapidly Multiplying Pockets of Growth", highlights the business potential of China's inner regions.

It forecasts the number of middle-class and affluent consumers in China who will come from third-tier cities, which predominate in these areas, will more than treble from 27 million households in 2010 to 92 million in 2020.

Waldemar Jap, partner and managing director of BCG, based in Hong Kong, says there is a tendency to see people from inner China as peasants with little spending power.

"Many of them are, in fact, relatively rich since these areas have relatively high per capita incomes. It has to be remembered that many of these inner provinces are not that far from the coastal provinces.

"What we are telling our clients is that they are going to be a key battlefield and a very significant growth driver over the next five years. In some ways they hold the key to the billion consumer market that everyone has been talking about for years."

A major question is how long the marked disparity in growth between the coastal and developing inland regions will continue.

"I think it is quite likely to continue for 10 years or so," says Liu at the EIU.

"A lot of the growth is being driven by investment but this will not continue forever, and for them to continue to grow more fundamental factors such as labor productivity and market reform will have to be addressed."

But for now we will all have to get used to a two-speed China.

(China Daily 08/24/2012 page1)

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