As we enter the year 2019, we are beginning to see some subtle changes in Beijing as the capital of China. As several major groups in Beijing moved eastward to the city's sub-center in Tongzhou, Beijing's urban center became gradually quieter, with fewer people and less businesses. In the surrounding areas of the once prosperous Three Rings, many commercial buildings have begun to become unattended. Take the Southeast Third Ring Road as an example. In what was once a bustling area, several hotels are now permanently closed. The area is now dark and quiet during the night. It is understood that some commercial buildings in the North Third Ring Road also became unoccupied. As the number of businesses decreased, some commercial buildings have been vacant, only to be supported by a few large supermarkets. Similarly, vacant commercial buildings exist in the Sanlitun commercial circle in the East Third Ring Road and the Yansha business district in the Northeast Third Ring Road. Some have even call it a partial "ghost town". Although this statement is exaggerated, it shows that the trend of Beijing's economy deteriorating from being prosperous to the bleak state it is today is worthy of significant attention.

There are signs of changes in Beijing's economic gradual cooling. According to official statistics, Beijing's GDP in 2018 has reached RMB 303.2 billion. Although it exceeded RMB 3 trillion for the first time, the growth rate slowed to 6.6%. Beijing's tertiary industry realized an added value of RMB 2,455.36 billion, a year-on-year increase of 7.3%. From the data, Beijing's consumption has the following characteristics: First, the growth rate of total retail sales of consumer goods has declined year by year. In 2018, the total retail sales of consumer goods reached RMB 1,174.77 billion (46.2% of total consumption), which is an increase of only 2.7%, almost half of the 5.2% which was attained in 2017. With development measures such as population control in place, zero growth will not be ruled out in the future. If the growth rate of total retail sales of consumer goods is reduced, there will be a strong hint to the market: for the physical consumer industry that invests in Beijing, whether it is home-based catering or retail and wholesale, investing in Beijing may become a high-risk investment for them. Secondly, the contribution of service consumption has increased significantly. In 2018, the city's total market consumption reached RMB 2,540.59 billion, an increase of 7.4% over the previous year. Among them, the realization of service consumption amounted to RMB 1,365.82 billion yuan, an increase of 11.8%, accounting for 53.8% of the total market consumption (51.3% in 2017). The contribution rate to total consumption growth reached 82.6%, an increase from 69.4% in 2017 and accounting for 13.2 percentage points. In recent years, the growth rate of service consumption in Beijing has been accelerating, significantly higher economic growth and the growth of the tertiary industry in the same period.

With Beijing's development around the "four centers" moving into the critical stage, the coordinated development of Beijing-Tianjin-Hebei and the construction of the Xiong'an New District has "solidified" the external environment of Beijing's development. Because of this, Beijing's economic development has become a worrying issue. In recent years, Beijing has effectively implemented measures to ease non-capital functions and reduce its development. From 2013 to 2017, Beijing has shut down 92 general manufacturing and polluting enterprises, retiring land of about 11 square kilometers, and reducing annual emissions of atmospheric pollutants by about 15,000 tons. In 2018, 361 of the city's entities have shut down and relocated, of which manufacturing, wholesale and retail, as well as accommodation and catering enterprises accounting for 83.4%. At the same time, the resident population of Beijing continued to show a net decrease in 2017 and 2018, for a total of 187,000 in two years. While easing capital function and reducing the development are things that Beijing must do, it should also be noted that this has an adverse effect on Beijing's economy. At least in the short term, this can artificially disperse economic factors and consumer demand. It also affects the prosperity of Beijing's urban business. In the future, the coordinated development in the Beijing-Tianjin-Hebei region will be deepened, and the construction of Xiong'an New District will be hastened. If Beijing's economic factors and talents continue to have a "net outflow", Beijing will face tremendous economic development pressure in the next few years. Beijing should be prepared to prevent economic stalls.

Beijing now appears to be more anxious about economic development than in the past. How should it make the top ten high-tech industries establish themselves there? How can Beijing give full play to the advantages of its science and technology and education and strengthen the transformation of scientific and technological achievements? How can it find new impetus for its economy? How can Beijing utilize its service industry to expand the open comprehensive pilot demonstration zone in order to boost its economy? How can Beijing use its international exchange advantage to drive its economy? How can Beijing further improve its business environment to attract enterprises and capital agglomeration? These are issues that Beijing is highly concerned of.

For a metropolis like Beijing, it is obviously not easy to push for economic transformation and development. More important than the introduction of specific policies however, Beijing should have correct judgment on the current situation and its future development environment. Based on Anbound research team's long-term tracking of Beijing's urban and economic development, the only way to get Beijing out of its predicament is to promote the transformation of urban consumption, rather than to promote the development of secondary production. It's not that the secondary industry is not important, but for Beijing, the timing is not right. Anbound scholar Chan Kung pointed out that only by implementing an urban consumption transformation, coupled with the appropriate development of the secondary industry that suits the trend would the optimal industrial option be realized for Beijing. Chan Kung estimates that in the absence of real estate tax, driving urban consumption reform can support the urban economy to maintain around 6.5%-7% growth.

As for the development of the secondary industry in Beijing, there are still constant reflections and differences. There is a view that Beijing should learn from Shanghai, and Shanghai clearly states that the economic share of the secondary industry is not less than 25%. This maintains the toughness of the Shanghai economy and make the productive service industry something to depend on. However, Anbound believes that the contribution rate of the tertiary industry to Beijing's economic growth in 2018 has reached 87.9%. Currently, Beijing has missed the opportunity to vigorously develop the industry. In addition, if the policy is incompatible with this, Beijing should consider the constraints of reality. Taking Beijing's only secondary industry as an example, Beijing's development goal is that by 2020, it will realize a regional GDP of RMB 200 billion, and a total industrial output value of RMB 600 billion, effectively forming six hundred billion industrial clusters. Modern manufacturing and strategic emerging industries account for more than 80%. This goal is ambitious, but the feasibility and possibilities must be considered. Chan Kung believes that feasible industries that can work in Beijing are probably biopharmaceuticals, robotics, aerospace satellites, hydrogen fuel vehicles, light rail vehicles, electronic technology and information industries. Industrial output requirements may not be met, and there is strong competition from Xiong'an, Hebei, Tianjin and cities in South China.

Chan Kung further pointed out that the development of the industry is limited by two factors. First, the market space, which is limited and competitive. If there is no guarantee of market space, products cannot be sold, and this will result in unsold stocks and the creation of debts. The second is environmental conditions. Specific industries must have specific industrial and environmental conditions, and this would require more than mere land and funds. Such conditions would also include competitive policy conditions. From the perspective of manufacturing, it takes more than two years from construction, investment to production. This means that there may be a "collapse period" of the Beijing economy from 2019 to 2020. If Beijing is not out of this condition, the whole of North China may be affected. Chan Kung estimates that Beijing's competition with Xiong'an New District will focus on the tertiary industries, as well as the industries on the edge of the secondary and tertiary industries. However, it is quite difficult for the entire secondary industry in Beijing wishes to stand out and support the economy of Beijing. Looking from the trend, as Beijing is a very huge city, its main economy would be that of the tertiary industry, and it relies on consumption and market construction. If the demand is reversed, strengthening the secondary industry will be like a reverse process of the urban economy, more so when it is under the condition of decreasing population reduction. Unless there is a miracle, it would be impossible to realize that.

Final Analysis Conclusion

Under such complicated development, Beijing's economic development may face difficulties. If Beijing wants to get out of this predicament, it cannot strengthen the secondary industry. Rather, it should depend on the tertiary industry. The most basic strategy is to promote an urban consumption transformation and stimulate Beijing's economy by expanding consumption and the market.