Economic Situation of the Yangtse Delta Region

1. Yangtse Delta Region Continues to Play the Role of Locomotive

While the world economy is growing slowly, China's economy is still robust. The Yangtse delta region - including Shanghai, Jiangsu and Zhejiang - continues to play a locomotive role in the country's economy.

The GDP of China rose 7.3% to 9'593.3 billion Yuan (1'159 billion USD) in 2001. The growth rate of the Yangtse delta region, in the same period, was more than 10 %, two percentage points higher than China's average. According to local statistic authorities, the GDP of Shanghai reached 495.1 billion Yuan in 2001, an increase of 10.2 %; in Jiangsu, the GDP was 951.5 billion Yuan, an increase of 10.2 % and in Zhejiang 670 billion Yuan, an increase of 10.5 %.

The attached table shows that the momentum of the economic growth in the Yangtse delta region strengthened during the first three months of this year. The growth accelerated to 10.7 % in Jiangsu and 11.4 % in Zhejiang. Although Shanghai had a growth rate of only 9.6 %, considerably lower than the provinces, but still stable and higher than China's average of 7.6 % for the same period.

The aggregated GDP of the delta region climbed to 2'116.5 billion Yuan (255.6 billion USD) in 2001, accounting for 22 % of China's total - a remarkable result compared to its rather low percentages of population (10.9 %) and area (2.2 %).

2. Investment in Public Works: One of the Main Contributors to Growth

TThe national economy was driven first by heavily increased investment in public works, especially in infrastructure. Statistics show that the completed investments in fixed assets grew at a rapid rate of 19.6 % for the whole of the country in the first three months of this year. It was even higher in the delta region for the first three months of 2002: in Shanghai the rate was 21.2%, in Jiangsu 24.9% and in Zhejiang 12.5 % (after a rapid increase of 22.1 % in the year 2001). Within this year, 21 "mega-projects" with a total investment of 50.4 billion Yuan (6.1 billion USD) will be launched in Shanghai, focusing on the fields of traffic facilities and environment protection.

A large scale of highway construction has been undertaken in the delta region. In Shanghai, the highways under construction amount to 160 km. The project of the magnetically-driven railway, linking Metro-Line 2 and Pudong Airport, started in March 2001 and will be completed within two years. In Zhejiang, the government reserved 8.4 billion Yuan in its budget for the year 2001 to prolong its highway for another 143 km. The highway from Shanghai through Hangzhou to Ningbo is being broadened to 6 or 8 lanes, and in Jiangsu, the highway along the Yangtse river is under construction (137 km), with an investment of 5.6 billion Yuan. It will be completed before the end of 2004. These are only the most important examples.


3. Export and Foreign Investment: the Other Two Contributors to Growth

The economic growth of the region , especially in the provinces of Jiangsu and Zhejiang, was further supported by a rapid increase of exports and foreign investments. In 2001, Shanghai exported goods with a value of 27.63 billion USD, an increase of 9 % compared to the previous year; Jiangsu exported 28.88 billion USD, an increase of 12 % and Zhejiang's exports grew 18% to reach an amount of 22.98 billion USD. All the export figures were much higher than China's average growth rate (6.8 %). The region's total export value increased by 12.7 % compared to the previous year, and reached 79.49 billion USD, accounting for 30 % of China' total of 266.16 billion USD. Nonetheless it is important to see that the growth rate of exports went down in the past few years - a "normalisation" of export growth has thus taken place. The export-driven development of the Chinese economy is typical for an industrializing country. Given the size of the People's Republic the export dependency of the country is bound to go down.

The delta region thus holds a leading position in China's foreign trade. In fact, after Guangdong province, Jiangsu and Shanghai ranked second and third in exports (including processing industries) among the provinces of China. Zhejiang is one of the most aggressive trading provinces in China: its export volume was considerably bigger than its imports. In terms of ordinary trade (excluding processing industries), Zhejiang is the biggest exporter in China. Its trade surplus exceeded 11 billion USD in 2000 and 13 billion USD in 2001, accounting respectively for 46 % and 58 % of China's total. A strong contribution to the success of Zhejiang was made by private and collective enterprises, getting more export rights in the last few years. Private and collective enterprises exported goods for 5.48 billion USD in 2001, an increase of 62.6 %. The contribution rate of those enterprises to the export increment of the province amounted to 59.7 %.

A similar situation was also shown in the delta's foreign investment. The region saw an accelerating influx of foreign direct investment since last year. The total foreign investment in terms of actually utilised value was 13'952 million USD in 2001, accounting for 30 % of China's total ( 46'800 million USD). The foreign investment in Shanghai reached 4'392 million USD in 2001 in terms of actually used amounts, an increase of 39 %; in Jiangsu 7'350 million USD, an increase of 11.5 % and in Zhejiang 2'210 million USD, an increase of 37.1 %. In China as a whole, the increase was "only" 14.9 % for the same period. Foreign investment in terms of actually utilised amounts continued to increase rapidly in the region during the first three months of this year: in Shanghai it grew by 14.5 %, in Jiangsu by 60.2 % and in Zhejiang 45 %, compared to 27.5 % for the whole nation.


4. Economic Integration: a Tendency in the Delta Region

Local protectionism still exists in China. In many areas it became even stronger in the last few years. In the delta area, however, a tendency for integration is growing, due to economic development, increased common interests and the strong power of the central government in Beijing. Modern highway networks and telecommunication possibilities grow rapidly in the area and support the general trend. Seeking closer economic cooperation, the Mayor of Shanghai and the Governors of Jiangsu and Zhejiang met for a two-day forum in Yangzhou in April 2002.

Nowadays, the local authorities in the delta region are making efforts not only to attract foreign capital, but also to lure investment from other provinces. Recently, mutual investments grew considerably stronger. Shanghai, in particular due to its special position as economic, financial, transport, logistics and information centre, is the biggest importer of net capital. During the first three months of this year, the investment from other provinces in Shanghai totalled 9.8 billion Yuan (in more 1300 projects), a rise of 25 % compared to the same period of last year. Among the main investors were enterprises from Beijing, Zhejiang, Jiangsu and Liaoning. Some enterprises start to move their headquarters to Shanghai.

Investment from other provinces is also increasing in Jiangsu, due to its good location, especially in the southern part of Jiangsu, where the famous "new markets" like Suzhou and Wuxi are located.
The fact that Zhejiang as the biggest net capital exporter has been noticed by the Chinese media. The people of Zhejiang became rich through their business activities all over the country and the world. They have accumulated enormous wealth, concentrated mostly in private hands. A considerable amount of the capital is re-invested in their home places - it accounted for ca. 70% of the total investment in the province, but an important part of private funds were still idle, estimated at about 350 billion Yuan, ten percent being in the hands of Wenzhou people alone.


5. The Challenges: Still Serious

Generally speaking, the economic situation in the delta region will remain dynamic and stable in the near future. The year's GDP growth target of 7 %, set by the central government for the whole of China, and a double-digit increase for the delta region provinces will be realized.

To accelerate the economic growth, Chinese governments, central and local, continued to pursue an pro-active monetary and fiscal policy. They took measures to stimulate investment, consumption and exports. In February 2002, the Chinese central bank lowered its interest rate for the eighth time since 1996 ( the last change took place in September 1999). The benchmark one-year interest rate of fixed bank deposits was reduced by a 0.27 percentage point to 1.98 percent. China issued 150 billion Yuan (18.1 billion USD) in government bonds last year, so that the total volume of the outstanding long-term bonds since 1998 increased to 510 billion Yuan (61.6 billion USD). Huge investments in infrastructural construction will thus be continued. Beijing winning the bid to host the 2008 Olympic Games will also add fuel to the country's economy in the coming years.

But the challenges are still there. The Chinese government is facing not only the slowdown in the world economy (especially in the markets of the United States and Japan), strongly reducing demand from abroad and slowing export growth in recent months but also slower growth of private consumption, which was badly influenced by the deteriorating employment situation and lagging farmers` income.

Re-employment of the laid-off workers remains a big problem all over China. By the end of 2001, 6.8 million people in the urban areas across the country were registered as unemployed. In addition, there were approximately 150 million jobless farmers in rural areas, flooding into cities and looking for employment opportunities. Their presence has a clear dampening effect on the employment situation as their employment or unemployment does not show in any official statistics. Situations in Zhejiang and Jiangsu are relatively good, while employment remains a big problem in Shanghai. The urban unemployment rate reached 3.8 % (with 218,000 laid-off workers), a peak in the official statistics. About four million immigrant workers from other provinces (mainly from Anhui, Henan, Sichuan and northern part of Jiangsu ) marked the employment situation in Shanghai. China will see an annual average of 12 million to 13 million new workers entering the work force. Over the coming years the country is undoubtedly going to experience the most serious pressure on the labour market since the economic opening in 1979.

Li Rongzhang

Current Economic Indicators*
of the Consular Area**

9.6.2002

Consulate General of Switzerland
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