2021-12-05-牛津经济研究院-China_City_growth_rates_to_return_to_trend—but_with_some_short-term_worries_6页_269kb

China Cities and Regions Outlook Summary

Core Content

The report outlines the short- and medium-term economic outlook for China's cities and regions, highlighting both challenges and opportunities. It emphasizes that while the short-term growth outlook has weakened due to various headwinds, the medium-term trajectory is expected to shift towards innovation-led development.

Main Points

Short-Term Outlook (2022)

• GDP Growth: China's cities are expected to see lower GDP growth in 2022 compared to 2021, primarily due to a natural slowdown after the strong recovery in 2021.
• Headwinds:
  • Covid-19 Restrictions: The zero-tolerance policy has kept infection rates low but resulted in intermittent lockdowns that hinder consumer sectors like retail, hospitality, and recreation.
  • Property Sector Slowdown: Tightening regulatory and credit policies have led to a decline in housing prices and construction activity, creating a new challenge for economic growth.
• Consumer Services Sectors: Cities with large consumer services sectors, such as Qingdao, are particularly vulnerable to the negative impacts of lockdowns.
• Employment Trends: Some cities, including Dalian and Tianjin, may not see employment return to pre-pandemic levels due to demographic declines.

Medium-Term Outlook (2022-2026)

• Innovation-Led Development: China's 14th Five-Year Plan prioritizes innovation and industrial modernisation, which will benefit cities with strong technology and digital service sectors.
• High-Growth Cities:
  • Shenzhen: Expected to lead in GDP and employment growth due to its strengths in high-tech manufacturing and information & communications.
  • Changsha and Chengdu: Projected to grow faster than Shenzhen, though not as rapidly in absolute terms.
  • Guangzhou and Zhuhai: Also expected to benefit from the Greater Bay Area's focus on technology and innovation.
• Guiyang: A tier two city in Guizhou province, Guiyang is forecast to experience the fastest GDP and employment growth, becoming a hub for data centres.
• Regional Disparities: Cities in the north and north-east, such as Dalian and Shenyang, are likely to lag behind due to poor demographics and declining importance of heavy industry.

Divergence Between Megacities

• Beijing vs. Shanghai: Beijing is expected to outperform Shanghai in 2022 due to its stronger exposure to IT and finance services, while Shanghai faces greater challenges from its reliance on industry and real estate.
• Tourism Impact: Both cities will continue to experience sub-par tourism levels, with Shanghai being more affected due to its higher international tourist inflow.

Key Information

• Growth Trends: City GDP growth is expected to ease back towards trend levels by 2026, though some cities will continue to underperform.
• Sector Performance:
  • Consumer and Housing Sectors: Create downside pressures, especially in 2022.
  • Technology and Innovation Sectors: Expected to drive growth over the medium-term.
• Data Sources: The report uses data from the China National Bureau of Statistics and Oxford Economics.
• Modeling: Forecasts are based on the Oxford Economics' China Regional Model and are consistent with the global economic outlook.

Charts Overview

• Chart 1: Shows a return to trend GDP growth for Chinese cities starting from 2022.
• Chart 2: Depicts a decline in residential house prices across Chinese cities in 2021, with housing starts also falling.
• Chart 3: Highlights the expected protracted return of international tourism, with Shanghai likely to see a slower recovery.
• Chart 4: Indicates that professional, scientific & technical services, and information & communications will be key contributors to GDP growth from 2022 to 2026.

Employment Outlook

• Employment Trends: Employment levels in major cities are expected to vary significantly. Some cities, like Shenzhen, will see strong employment growth, while others, such as Dalian and Shenyang, will experience a decline.
• Demographics: Cities in the north and north-east will continue to face demographic challenges, impacting their long-term growth prospects.

Conclusion

The short-term outlook for China's cities is marked by challenges, including the impact of the property sector slowdown and ongoing lockdowns. However, the medium-term outlook is more optimistic, with a shift towards innovation and technology driving growth. This transition will benefit certain cities, particularly those in the south and east, while others, especially in the north and north-east, may struggle with declining populations and the diminishing role of heavy industry.