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The Trillion Club

China is home to 16 cities with an economic output of one trillion yuan. But as more seek ‘trillion yuan’ status, competition to attract resources has some upcoming cities literally redrawing the battle lines to gain an edge

By NewsChina Updated Sept.1

After the GDP of Ningbo, Zhejiang Province and Zhengzhou, Henan Province surpassed one trillion yuan (US$156b) in 2018, China became home to 16 cities in the “trillion club,” and many more are racing to join. 

“We aim to elevate Fuzhou to the trillion club in two or three years through industrial upgrading to push the city’s overall strength to a new level,” said Wang Ning, Party chief of Fuzhou, capital of Fujian Province in southeast China.  

Fuzhou has a GDP in excess of 800 billion yuan (US$117b) and the city has its sights set on club membership. As competition heats up, the lure of “trillion yuan club” status has become a new force in shaping city development. 

Grandiose Goal
“The trillion yuan club symbolizes a city’s influence and stage of development. Economically speaking, there is little difference between 900 billion (US$130b) yuan and one trillion yuan (US$156b), but it has a symbolic meaning,” said Hu Gang, a professor at Jinan University and director of the Research Association of Southern Chinese Cities. 

In the past, the trillion yuan mark was used to describe the economic scale of provinces, not cities. However, with China’s rapid economic growth over the past three decades, some Chinese cities have higher GDPs than some small countries. 

In 2006, Shanghai became the first city on the Chinese mainland where total economic output exceeded one trillion yuan (US$156b). Two years later, Beijing was the second city to join the club, followed by Guangzhou in 2010. Shenzhen, Tianjin, Suzhou, Chongqing and Wuhan passed the milestone in 2011, and Chengdu joined the list in 2014. In 2015, Hangzhou became a new member, while Nanjing and Qingdao joined the club in 2016. 

Hu said there are dozens of cities in China with a GDP of 800 billion yuan (US$117b). If these cities maintain economic growth of at least 7 percent, they will join the club soon. “They are lining up to cross the threshold,” he said. 

Chen Yao, secretary general of the China Association of Regional Economy, explained the number of trillion yuan cities reflects a nation’s overall economic status. “The development of a country hinges on the development of its cities, and cities are major driving forces of economic development. The expanding city scale reflects an improvement in the overall strength of a country,” he told NewsChina. 

The increased number of cities with one trillion yuan in GDP also reflects China’s growing urbanization. According to the National Bureau of Statistics, China’s urbanization rate reached 59.58 percent in 2018. 

Hu Gang told our reporter that the economic centers in China lay entirely in cities and the economic proportion of cities plays an increasingly important role year-on-year. He said China has entered a phase where dozens of first- and second-tier cities are driving the economic growth of the country. 

“China has passed the province-centric development period and entered the city-centric period. China’s major cities are developing very fast with highly concentrated populations and industries,” he said. “Competition between cities has also spurred economic growth.”  

Development Imbalancetitle
In the opinion of Zhang Keyun, a professor at the School of Economics, Renmin University of China, economic zones in the Pearl River Delta and Yangtze River Delta, areas surrounding the Bohai Sea in northeast China, and the cities of Chengdu and Chongqing, are the nation’s economic centers, and will remain so in the long term.  

In recent years, China’s three major city clusters – Beijing-Tianjin-Hebei (also known as Jingjinji), the Yangtze River Delta and the Pearl River Delta – generated 36 percent of China’s GDP growth with 2.8 percent of the country’s total area and 18 percent of the population. According to the 17th report on the competitiveness of Chinese cities released by the Chinese Academy of Social Sciences in June, China’s urbanization was driven by small cities in the preliminary period, big cities in the medium period and city clusters afterwards. Among the 16 cities in the trillion club, 11 cities are located in these three city clusters. 

“Competition between countries is largely reflected in competition between cities, and it will eventually evolve into that between city clusters. Under such a pattern, metropolitan cities will play a leading role, speeding up the race between cities to join the trillion club,” Peng Peng, deputy director of the Association of Institutional Reform in Guangdong Province, told our reporter. 

Cities in coastal China have over the years been China’s economic centers, but cities in central and western areas are rapidly catching up thanks to the country’s preferential policies. “In recent years, several provinces with the fastest economic growth rate were all located in western China. Central China boasted the fastest investment growth rate because of regional advantages in transportation and markets,” Chen Yao told our reporter. 

Among the 16 members of the trillion club, none are located in northeastern China, a region known as the country’s rust belt. “This reflects the sluggish economy of the region where city sizes are relatively small and have limited capabilities to drive economic growth,” Zhang Keyun said. “It is the main reason for the inability of the northeastern region to break through the dilemma.” 

Chen argued that from the perspective of development economics, northeastern provinces face challenges in adjusting their economic, industrial, product and demand structures. “Quite a few cities in northeastern China have good infrastructure but the city structure remains unchanged, which causes economic recession, population outflow and retreat of enterprises and investors,” he said. 

Challenges Ahead
In recent years, most cities in the trillion club increased their economic aggregate through seeking investment, adjusting industrial structure and attracting talent. Tertiary industry has become the pillar of all cities with a GDP of one trillion yuan (US$156b).  

For instance, Qingdao in Shandong Province, Zhengzhou in Henan Province, and Changsha in Hunan Province used to rely heavily on the manufacturing sector. Nowadays, these cities have undergone economic restructuring to develop e-commerce, big data, cloud computing, bio-pharmacy and internet industries. 

“Domestic industrial structure has experienced significant change. Capital-intensive industry, technology-intensive industry and the finance sector have significantly driven the economic growth of cities,” Hu said.  

The adjustment of administrative divisions also contributed to the growing number of cities in the trillion club. In January 2019, the State Council approved the city of Laiwu to become a district under the jurisdiction of Jinan, capital of Shandong Province. Over the years, Jinan ranked third in the province behind Qingdao and Yantai. After the administrative adjustment, Jinan’s GDP is 100 billion yuan (US$14.5b) higher than Yantai and reached 886 billion yuan (US$129b) overnight. This case is not unique. In 2017, Xi’an in northwestern China’s Shaanxi Province took charge of the Xixian New Area, whose GDP was added to that of Xi’an. 

Peng Zhimin, director of the Yangtze Valley Economic Institute, Hubei Academy of Social Sciences, told NewsChina that improving a city’s image by adjusting administrative divisions is the simplest way to increase competitiveness, calling it the equivalent of a “free ride.” Peng added that some cities increased their economic strength at the cost of others, but from the perspective of a larger region, there is no significant change. 

“It’s true that the administrative division of some cities has constrained urban development and adjustment is a good solution to boosting economic growth. It is, however, not a proper way to increase the competitiveness of cities,” he said. “The best way is to accelerate economic efficiency and quality, and optimize the division of work between cities.” 

Zhang Baotong, director of the Shaanxi Provincial Urban Economic Research Association, disagrees, saying that administrative division adjustments fit cities in western and central China. “Many counties in eastern and southern China are economically stronger than cities in western China. The central and western regions can only rely on building up key cities to drive overall economic growth,” he told our reporter. 

Zhang cited the merging of Chengdu and Wenjiang in Sichuan Province in the 1980s as an example. Chengdu became a mega-city overnight, attracting foreign banks, top-500 enterprises and State-owned enterprises. 

Chen Yao believes the mind-set that GDP growth is the only metric for city competitiveness should be discarded and that per capita GDP should be the standard for comparison between cities. “We should look at overall GDP growth and not just the total amount,” he said.