The Chinese economy is currently in the "new normal" of downward adjustment of growth rate. This is a painful and complicated system adjustment involving the industries, leverage, growth model, financial system, government-market relations, and China's economic relations with the world.
After experiencing a long period of high-speed and relatively extensive growth, China’s economic development potential is much less than in the past; there is the gradual disappearance of demographic dividends, the rise in factor costs, and the sharp rise in urban asset prices. Debt and financial risks have increased tremendously, and environmental constraints are much stricter than in the past. Regionally, the southeastern coastal areas that played the role as the main driving force of economic growth in the past are facing the common problems of excessive urbanization, population aging, and economic growth slowdown. All of this makes it more difficult for China to find new growth drivers.
If effectively new growth drivers can be explored, this will have practical significance for China.
Based on extensive field research on the Chinese economy, Anbound’s chief researcher Chan Kung recently proposed an important policy proposal, the "Chengdu-Wuhan Axis", which is to establish Chengdu-Wuhan in the inner part of the heart of China as the development belt of the core axis that promotes the regional economic development in the middle reaches of the Yangtze River to increase the growth of the Chinese economy as a whole.
Chan Kung points out that under the current global situation, especially under the severe influence of the U.S.-China trade war, China's economic policy must seek new breakthroughs. At present, if the "major release" policy has no rules and clear objectives, therefore it may be difficult to solve China's major problems and effectively expand the internal market. In the southeastern coastal areas of China, due to the early urbanization process, factors like high cost, lack of young people, monotonous industry, insufficient business prosperity, and aging, the focus should be the region’s stable consumption and urban governance issues, and to consolidate the original economic results. Under such context, China needs to take advantage of its size and development gradient to find new economic driver.
Chan Kung believes that the Yangtze River basin, which is not well developed in the central region, is expected to become an important engine for economic growth in the future. There are two important cities in the middle reaches of the Yangtze River, the first is Chengdu and the second is Wuhan. These two cities form the Chengdu-Wuhan development axis. Spatially, the straight-line distance from Chengdu to Wuhan is about 1000km. This development axis directly involves the Sichuan, Chongqing, and Hubei provinces-municipalities. If the northern part of Hunan Province is included, the population of the Chengdu-Wuhan Axis region will be over 200 million. Due to its central location, the cost of the Chengdu-Wuhan Axis area is relatively low, and it is close to the Asian hinterland market; it is not too far from the coastal areas and therefore has high potentials.
Regionally, the Chengdu-Wuhan Axis also has another advantage; it is located in the western and central sections of the Yangtze River Economic Belt, and eastward is connected to the Yangtze River Delta region with developed economies in China. Once developed, the Chengdu-Wuhan Axis region is expected to become the “central accelerator” of the Chinese economy. The development of this region is itself an important support for the development of the Yangtze River Economic Belt, which completely overlaps with the relevant development plans of the Yangtze River Economic Belt and can be coordinated such development in terms of resources and policies.
During the fieldworks, Anbound’s research team discovered that Chengdu and Wuhan have attracted many young people and talents in recent years. Chengdu has done a better job and attracted more talents in technology, finance and service industry; it even attracts companies and talents from Beijing and Shanghai to settle there. Wuhan attracts relatively less talents, but since Wuhan is the second region that has largest amount of institutes of high learning in China, there are a large number of college students each year, which also provides a rich talent resource reserve and potential consumption capacity for Wuhan's future development. It can be argued that the current situation and growth prospects of attracting talents presented by Chengdu and Wuhan are more attractive compares with high-cost first-tier mega cities like Beijing, Shanghai and Shenzhen.
If China can successfully develop the Chengdu-Wuhan Axis in the central region, the development pattern of the country’s economy will change. The current economic scale of this development axis is considerably huge. The economic scale of Sichuan, Chongqing and Hubei in 2017 has exceeded RMB 9.3 trillion, accounting for 11.3% of the Chinese economy. If the axis can be developed, it will effectively promote the development of the central region and the Yangtze River basin. Under such circumstance, China's economic growth will not slip to 5% quickly, but will be stabilized to around 6%; this speed is quite suitable for China's economic transformation.
At the strategic level, once the central government accepts the proposal of developing the Chengdu-Wuhan Axis, the future focus will be on empowering the leadership of the relevant regions, increasing policy support, and activating market resources and economic vitality. What Anbound wishes to emphasize is that the strategic goal in China is clear; the focus is to allow the local government give full play and coordinate with the central government to promote the stability of the Chinese economic transformation under the basis of reforms. In fact, China's reform and opening-up has proved that the its achievements have always been inseparable from the active participation and promotion of the local governments; this successful experience should continue to be carried forward.
Final Analysis Conclusion:
Anbound proposes to develop the “Chengdu-Wuhan Axis” in the Yangtze River Basin in the heart of China, making it an important engine to drive the development of the central region to achieve stable economic growth in China and stabilize the country's transformation.
