Hangzhou Paradox?

Hangzhou, the capital of Zhejiang province, seems to be the city with the wind in its sails. Launched in digital, it benefits from the Alibaba Group and Ant Financial. The municipality has put many measures to attract talent and aims to transform the Venice of the China into a city of the information economy and artificial intelligence. Among Chinese cities, Hangzhou attracts the most population. At first glance, the GAWC ranking, which examines cities according to their integration in the world, mainly economic criteria – finance, advertising, law, accounting, and management – is astonishing. It moves Hangzhou down from 75th place in 2019 to 90th in 2020, behind Chengdu (59th), Tianjin (77th), and Nanjing (87th). Zhengzhou moved up from 157th to 116th place. The research bureau Trigger Trend describes the reasons for this decline.

Low internationalization

Let’s take a look at the head offices of major companies: Beijing has 58 Fortune 500 companies. Shanghai is home to 653 regional headquarters of multinationals; it is the city with the largest number of foreign organizations in China. Shenzhen and Guangzhou have had policies to attract head offices for a long time. Starting in 2018, Chengdu, Xi’an, Chongqing, Qingdao, Wuhan, and Nanjing have also introduced such measures. Hangzhou only in June became active in this area. The decline in the rankings is mainly due to this delay.

Next to Shanghai, Hangzhou cannot be a transportation center.

Last year, Hangzhou Xiaoshan Airport was ranked 10th in China in terms of passenger flow, far behind not only Beijing-Shanghai-Canton-Shenzhen airport but also Chengdu, Chongqing, Kunming, and Xi’an airports. Since 2017, Hangzhou remains in 10th place without making any progress.
As for the high-speed rail network, Hangzhou is weak. In recent years, Xi’an, Zhengzhou, and Hefei have been at the heart of real railway nodes. From these cities, one can go in many directions, unlike Hangzhou. The Hongqiao station in Shanghai is a truly national center while Hangzhou has remained provincial. The road presents the same picture.  The influence of Shanghai erases that of Hangzhou.

Hangzhou digital city

Digital and…?

Last year, Hangzhou’s population growth was the highest in China (see the article here). In the first half of this year, Hangzhou’s total GDP surpassed Nanjing, Tianjin, and other cities, ranking in the national top 10 in the first six months of 2020.
Hangzhou’s asset, the digital economy, is booming. The added value of the digital economy accounts for 24.8% of GDP. Hangzhou is also preparing to become the “first city in the country for the digital economy.”The digital economy is a beautiful facade, but the real economy is still experiencing turbulence. Students in humanities or literary subjects are faced with a real desert. Those in the sciences, outside the Alibaba group, have little choice.
Apart from public companies and some real estate groups, few jobs offer to pay a real estate loan. Large companies do not abound, which limits the possibilities of evolution.

Real estate prices and inadequate infrastructure

Housing prices in Hangzhou are close to those of first-tier cities without having the same level of infrastructure. Public transportation is lagging far behind. This year, the operating mileage of Hangzhou’s subway reached 206 kilometers. In terms of operating mileage and subway density, Hangzhou cannot compete with Shenzhen, which has 383 km with an area eight times smaller. The city is slightly larger than Beijing, which has 699 km with few lines and low coverage.

Company size

The Alibaba Group is ranked first on Zhejiang’s top 100 companies in 2019, with a turnover of 376.844 billion yuan in 2019. Geely, a car manufacturer, in second place, has 328.521 billion yuan, and the famous Hikvision, 49.837 billion yuan.
As for Shenzhen: Huawei is ranked second on the list of Guangdong’s top 100 companies in 2019, with revenues of 721.2 billion yuan in 2018, almost double that of Alibaba. Tencent ranks 11th and also has 316.94 billion yuan.

Investment in research

Hangzhou’s R&D investment in 2018 was 46.4 billion yuan, placing it in 7th place, far behind its competitors, see table. They represented 3.43% of GDP. In comparison, Shenzhen was at 4.8% and Guangzhou at 2.63%.

After the industrial upgrade in the early years, Shenzhen has a very comprehensive smartphone manufacturing industry and a global production base for smartphones. Hangzhou, except for Ali, has not developed such an integrated base. Besides, Hangzhou’s investment in research in 2018 was 3.43% of GDP. In comparison, Shenzhen was at 4.8% and Guangzhou at 2.63%. Concerning these data, Hangzhou is, therefore, up to the task. Compared to the Beijing-Shanghai-Canton-Shenzhen group, the relatively low internationalization is not surprising. How can we play on an equal footing with the capital, the financial center, and two bridgeheads in the first decades of the country’s opening up and development? Shanghai’s proximity has its advantages, but it cannot compete with its neighbor as a transit point. The authorities are very aware of this and are working hard to capitalize on the Alibaba/Ant advantage.

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China, railway, the winners, the losers

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Source : 悬了?世界排名剧烈下滑,暴露了杭州最大的短板

15 September 2020

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