Mr Chongqing

In January 1998 the editor of WiC made his first trip to Chongqing. Accompanying a foreign investor, he wrote a cover story for his then employer Euromoney magazine about the experience. Even before chronic air pollution was a familiar subject in China, the southwestern city had it in spades, earning the nickname “Coketown”.

At that time around 3.7 million Chongqingers lived below the poverty line, and it was clear there were serious unemployment issues. Indeed, a city reliant on dud state-owned firms was struggling to foster private enterprise. We visited one of the city’s top 50 state-owned companies – Chongqing Wire and Cable – entering the factory through a door more suited to a garden shed than an office and met a demoralised manager. His firm had 2,600 staff on the payroll but only 700 of them did any work.

If you had asked that British correspondent – or the Australian-Chinese investor he was accompanying – whether Chongqing would become one of the country’s economic dynamos, the answer would have been no.

WiC’s editor is happy to admit this – in the knowledge that it is just one of the legion of instances where foreigners have been wrong where China is concerned.

Last year Chongqing was the fastest growing large city in China. The municipality (offical population: 29 million) grew 11% in 2015, a figure far above the national average. Its GDP reached Rmb1.57 trillion ($240.5 billion). In US dollar terms the economy of today is 12 times bigger than that of 1998. That is quite a transformation, by any standards.

The case of Chongqing offers some timely evidence that not all news coming from China’s economy is bad or indifferent. Peer beneath the headlines you read in the international press, and it’s plain some places are still doing rather well (Hangzhou is another case in point, see our book Sinopolis, published last week. The provincial capital of Zhejiang experienced 10.2% GDP growth last year).

In fact Chongqing just hosted another visitor in January, albeit one whose visit is a lot more significant than the afore-mentioned January 1998 trip by WiC’s editor.

Who dropped in?

On January 4 President Xi Jinping toured Chongqing. Not only was it (symbolically) his first trip of the year, it was also the first time that Xi had visited the city since he took office.

There was a good reason for that. Xi had avoided Chongqing in the early part of his tenure owing to it being run by his (now jailed) rival Bo Xilai. So the official media was pretty open about the significance of his decision to go there last month. “President Xi paid his first visit since taking office to Chongqing municipality, a city once clouded by the scandal of its high-profile former Party chief, Bo Xilai,” wrote China Daily. “The trip, on the first work day of the new year, highlights the importance of the municipality’s economic performance.”

The three sites Xi visited were also signals of Chongqing’s importance. The first was the Trans-Eurasia Chongqing-Xinjiang-Europe international railway route, which starts in Chongqing and ends 11,179km later in Duisburg. Xi noted that he’d already visited the German city and was happy to have toured the other end of the line too. The train – which takes 16 days to cross the Eurasian land mass (24 days quicker than the sea route to Europe) – was held up as an emblem of Xi’s new Silk Road, or ‘One Belt, One Road’ policy as it is usually designated.

Continuing with this ‘connectivity’ theme, Xi went to Guoyuan Port, which links the now ‘official’ starting point of One Belt, One Road (Chongqing) by river with another economic powerhouse, the Yangtze River Delta.

The China Daily was again ready with the policy signals: “When inspecting Guoyuan Port, Xi said ‘great’ when told the countries along the rail route have all subscribed to the ‘one check for clearance approvals’”. The newspaper called the port a “comprehensive transport hub” accommodating rail, highways and waterways, and home to 16 ship berths that can handle vessels of 5,000 deadweight tonnes.

“This is full of promise,” Xi proclaimed.

His final stopping point was Chongqing BOE Optoelectronic Technology, a maker of ultra high-definition displays and flexible screens. Here Xi declared that Chongqing was leading the way up the industrial value chain, emphasising as part of his visit that a “top priority should be placed on innovation”.

The man behind Chongqing’s success is…

In WiC’s early years of publication Chongqing was inextricably bound up with the personality of Bo. At times Bo’s influence bordered on the bizarre, such as his efforts to revive Maoist songs. He also relished bold action, like his mass arrest of local triads – a move that led some to consider him a benign despot, others to say he was happy to trample over legal process.

But in spite of his downfall it would be unfair to write off Bo’s contribution to Chongqing completely, just as it is hard to airbrush his presence from Dalian, another successful city that he ran. Unquestionably, his hard-charging ambition helped to drive projects through in Chongqing and lure foreign investment to the city. That said, it is equally true that the quieter man behind Chongqing’s success was Huang Qifan. And it was notable that Huang was front and centre in most of the photo opportunities when Xi graced the city with his presidential visit.

Uber-technocrat Huang was moved to the city in 2001 – not that long after WiC’s editor had first witnessed its shortcomings. He arrived from Shanghai, where he had played a key role in transforming the farmland of Pudong into a major financial centre (Huang was deputy secretary general of the Shanghai municipal government). He was initially installed as deputy mayor of Chongqing, and later in 2009 was promoted deputy Party secretary and in 2010 to mayor.

As such, Huang has had planning and administrative oversight over the city’s development for 15 years. That is an unusually long time for a bureaucrat to spend in one place – perhaps an indication of how the importance of Chongqing’s transformation was viewed. And despite Bo’s fall on corruption charges, Huang has never been tainted with any implication of graft himself.

Indeed, over recent weeks the local media has been speculating that Huang is set for promotion – the theory being that he would run a new super financial regulator. Nothing has come of this so far. Instead, an alternate view is forming – that with Xi prescribing that Chongqing is an example other cities should look to, it is more important to keep Huang in the municipality (for our first major profile of Chongqing, see WiC77).

A well regarded guy?

Before Huang arrived in Chongqing, he had already built a strong reputation in Shanghai, then a city far better known by overseas investors. For example, he had a hand in getting Hong Kong developer Vincent Lo to build Shanghai’s famous Xintiandi entertainment area.

After he was relocated west as deputy mayor in 2001, Huang again persuaded Lo’s Shui On Group to invest. The result is Lo’s Chongqing Tiandi, which sits on 128 hectares of riverside property, and incorporates a 440-metre skyscraper, an exhibition centre and hotel, as well as the obligatory mix of commercial and residential development. (The full project won’t be completed until 2018.)

Huang’s tenure in Chongqing is now being viewed as a case study for economic reform. “He is definitely an expert in economic management,” one local official told China Economic Weekly. Another told Time Weekly: “In the time he has been in Chongqing he has cooperated with six Party secretaries [i.e. his immediate bosses] and proved he can still make the right decision, especially in some dangerous times. He is an official who is always focused on working.”

What has Huang achieved?

In Chongqing’s 2016 Government Work Report the municipality was instructed to “play a bigger role” in China’s “opening-up” during the Thirteenth Five-Year Plan. The 21CN Business Herald also notes that for the first time, the government’s work report defined the city as “an international logistics hub”.

At the heart of the strategy is Chongqing’s location at the confluence of China’s longest river and as the One Belt, One Road terminus on the 16-day railway journey to Europe. 21CN notes that the train line is set to boost the city further, with reductions in cross-border formalities set to reduce the travel time to 12 days.

Huang was a cheerleader for the railway project, notes 21CN, because of the opportunities he saw it lending to Chongqing’s car and technology industries – two of his sectoral priorities. Having lured HP to the city to make laptops, Huang went to Beijing in August 2010 with the US firm’s worldwide supply chain boss Tony Prophet. They lobbied the General Administration of Customs to schedule regular train trips to Germany to facilitate computer exports. The first such rail journey happened in March 2011.

If anyone doubted the viability of the line, they have been convinced otherwise. Last year there were 257 Chongqing-Duisburg train trips; that figure is expected to reach 350 this year and over 700 by 2020.

Other PC manufacturers, such as Acer, have joined HP in Chongqing, creating a tech cluster that includes foundries. Last year these firms produced 130 million laptops, or roughly a third of global output. 21CN points out that since 2008, Chongqing’s computer manufacturers have grown their revenues to Rmb800 billion, an amount equivalent to the city’s entire industrial output in 2008. Crediting Huang, the newspaper said his policies “built a laptop industry out of nothing”.

Cars are another focus, whether conventional or electric. There are 10 major carmakers in the municipality including Hyundai, GM’s joint venture with SAIC and Ford’s JV with Chang’an Auto. There is also a local champion in Hongda. With a thousand components factories in the supply chain, the auto industry contributes roughly Rmb500 billion to local GDP.

While Huang and his colleagues have targeted higher-value industries for growth, he has been disciplined at avoiding most of the dirtier, overcapacity industries too. For example, in the same timeframe that China’s annual steel output rose from 100 million tonnes to 1 billion tonnes, Chongqing’s steel production has stayed steady at 6 million tonnes, according to iFeng.com.

The same is true of coal: over the past eight years China’s national output has risen from 2 billion tonnes to 5 billion tonnes, but the coal mined in Chongqing has held constant at 40 million tonnes.

Older industrial plants have also been mothballed, Huang told media, as Chongqing sought to improve its air quality. “All coal-fired boilers use natural gas instead and the transformation to CNG (Compressed Natural Gas) has been implemented for nearly 30,000 buses and taxis,” Huang says, adding that 150,000 older vehicles have been taken off the city’s roads.

Another of his achievements was to treat the now troubled peer-to-peer lending industry warily. In fact, this week the Chongqing Daily reports the mayor says P2P loans should be banned because of their risk to the financial system.

Huang is banking that Chongqing will reach his targeted 10% annual GDP growth over the next five years thanks to the One Belt, One Road policy and increasing urbanisation.

As per the former: that means taking advantage of the Yangtze, a river with freight volumes that have ranked first globally for inland rivers for nine consecutive years.

But there is air transport too. In 2010 Chongqing’s Jiangbei International Airport had the capacity to fly 14 million passengers a year; the addition of new terminals has seen that rise to 45 million. Another sign of its improving connectivity along the new Silk Road: Air China will launch a direct flight to Dubai on April 2. And to increase air freight volumes, a cooperation deal has been inked with Singapore’s Changi Airport.

Rapidly urbanising too…

Another of the growth dynamics at the heart of the Chongqing model is urbanisation. When Chongqing was hived off administratively from Sichuan province in the late 1990s, it was transformed from a city to a municipality, on a par administratively with Shanghai, Tianjin and Beijing. This gave the city a sizeable hinterland. Estimates vary on the specifics of the municipality’s population, but officially it is 30 million, more if migrant labour is included. What is not contested is the increasing tilt away from an agrarian population to an urban one. When we wrote our Talking Point about Chongqing municipality in 2010, the urban population of the city itself was 12 million. As of last year it was 18.38 million, according to CQnews.net, a reliable local data source.

That means that Chongqing has its increased its urban residents by 50% in five years. The target is to increase that number further to 22 million by 2018.

How has this been achieved?

WiC has written extensively about the hukou (see WiC51), which can be loosely translated as ‘household registration ID’. It is a system that ties residents to their place of birth, making it more difficult for them to up sticks permanently and work elsewhere. If a migrant leaves home to work in a distant city, he or she loses the benefits of being a citizen in his hukou-identified locality. The migrant’s children cannot go to the local school and his family isn’t eligible to use city hospitals or receive local welfare payments.

In an interview with Caijing, Mayor Huang once referred to these urban benefits as “the five pieces of clothing”. And he has been trying to extend them to outsiders who move to Chongqing. That is to say, he offered newcomers a ‘city’ hukou. In exchange they gave up what Huang termed as their “three pieces of rural clothing”. These are their land contracts, farm management rights and rural homesteads. In return, they get a payment of about Rmb100,000 ($14,733), while the government then got the rural land which could be used for redevelopment.

Website Ifeng describes his introduction of land coupons as one of Huang’s “practical, people-friendly policies”. In late 2008 a land exchange institute was established to trade these coupons. Not unlike the principle of trading carbon credits, they compensate villagers for land which can then be sold to property developers who want to build on farmland nearer Chongqing city.

Ifeng reckons that over the past eight years Chongqing has traded 11.3 million hectares of land coupons worth Rmb34 billion. Through these transactions, rural households have benefited from Chongqing’s property boom – Ifeng describes the scheme as an equitable way to share wealth with poorer farmers and bring their income levels closer to urban averages.

Urbanisation (and richer farmers) have boosted consumption.

Huang himself may still be at the helm to see his 2020 targets reached. That’s because a policy change last year extended the retirement age for officials like him to 67 or 68. His impact in Chongqing is already significant. No matter when he steps down – or gets promoted to a new role (such as the earlier mentioned idea he’ll steward a super-financial regulator) – Huang will rank as the government official who has done most to transform the city. Joe Stilwell – a top US general who lived there during the Second World War – once dismissed Chongqing as “a big pile of manure”. No more…

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