The Development to the West

As manufacturing hubs and economic powerhouses in eastern and southern China go quiet, the country is looking inward for growth.

From Reuters:

Xi'an, circa February, 2006 when I first arrived in China

SHENZHEN, China (Reuters) - Like a spreading ink blot, messy and uneven, economic growth is seeping inland from the coastal provinces that have been in the vanguard of China's phenomenal growth over the past 30 years.

The shift, which has rough parallels to America's westward migration in the 19th century, has the potential to narrow the noxious income gap between China's vast, neglected interior and a relatively well-off seaboard that has hitherto attracted most of the investment by the central government and foreign firms.

...

"Although shrinking global demand will affect consumer confidence in export-oriented coastal regions, the majority of consumers in interior regions will be much less vulnerable to the slowdown in exports and property markets," said Qu Hongbin, chief China economist for HSBC.

...

"The distribution of scores is a reflection of growth potential identified by businesses. Robust development in the past decade was concentrated in the east, leaving large untapped opportunities mainly in the western and central areas," commented Sherman Chan, an economist at Moody's Economy.com in Sydney.

So it is that the fastest-growing part of China has been resource-rich Inner Mongolia. Between 2003 and 2008, the region enjoyed average growth of 19.7 percent a year.

Mainly rural provinces like Inner Mongolia, where agriculture accounts for over 70 percent of total employment, certainly have a lot of ground to make up. The ratio of urban to rural income per person rose in China to a record level of 3.3 in 2007, government figures show.

Worried by the yawning wealth gap, Beijing launched a "Go West" development policy in 1999 that has gathered momentum since President Hu Jintao took power in 2002. Both Hu and Premier Wen Jiabao cut their teeth running poorer inland provinces.

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Growing up in Kansas City in America and living in Xi'an in China, I'm very familiar with how second-tier-ish, land-locked cities operate.

During the recent good times of globalization, they're not quite as heady as more coastal cities. But during the downturn, they don't have as much to lose as the places whose growth had been based on unsustainable circumstances.

To illustrate this point in America, I'm posting a chart I saw the other day from Mainstreet.com that ranked the "happiest states in America" right now during the credit crisis. The states that top the list might be a bit surprising to those who think every person living in "fly-over America" dreams of one day going to the big city:

So while the interior of America didn't grow like some of the other parts of the country during the boom years, it turns out that its economy and its people weren't as addicted to the irresponsible practices that people in other parts of the country got drunk upon during the roaring 00's.

I don't have any neat charts or graphs for China in this regard, but the principle is the same.

Xi'an is a massive city that is growing incredibly quickly by western standards. But compared to the break-neck pace of growth in other parts of China, Xi'an's growth is relatively "sustainable" by Chinese standards.

Xi'an's housing/apartment prices never got out-of-control like coastal cities' (although Xi'an's commercial real estate got a bit crazy) and it's manufacturing isn't as based upon export as other coastal factory hubs'.

When studying abroad in the Netherlands in 2003, I remember meeting some American hippie at the hostel I was at when visiting Amsterdam. He was from New York City. During the course of our conversation when I told him I was from Kansas City, he said, "Kansas City, Jesus. What is it like living there?" I didn't really know how to respond to this ridiculous question. It reeked of the "I don't understand how people don't live in NYC" kind of thinking. I don't remember what my answer to the question was, but I'm sure it was rather condescending and mocking in tone.

While this whole post has been ragging on huge cities and the runaway growth they've enjoyed over the past decade, one day, I would like to get out of living in second-tier cities. I see the value of living in major cities.

Going forward, Qian and I are very open about where we'll spend our lives. In America, places in the west like Seattle, Portland, Denver, or places in California all sound interesting to us. And in the future when/if we come back to China to live (who knows in which country we'll spend most of our time), I'd like to spend some time in Shanghai or Beijing or maybe even Chongqing.

No, I'm not opposed to big cities. But I do get a bit defensive about cities in the interior of both the US and China. While they may not be as exciting, as fast-paced, or as great economically (during good times), there is definite value in the way life is lived in these places.