Thursday, December 6, 2012

Diversity of Growth in China's Metropolitan Areas

The Brookings Institution recently published its report "Global MetroMonitor 2012: Slowdown, Recovery, and Interdependence". Instead of examining country-wide economic measures, it focuses on metropolitan areas. Why? Because The Brooking Institution believes:
...the economy is not organized at the super-regional or national levels, but rather in the cities and metropolitan areas that make distinctive contributions to global growth and prosperity. now, more than ever, it is essential to examine growth patterns in these places. Because metropolitan areas concentrate national and global population and output, understanding their dynamics crucially informs the broader macroeconomic picture. And grim national outlooks miss the variable performance of metropolitan areas and the clues it provides to the sources of growth and recovery. Some metropolitan economies, in contrast to their countries, defied the slowdown trend with accelerating growth in 2012 or recovered to pre-recession levels.
At least at the moment, I don't plan to share any deep thoughts on the overall report. Instead, I'll just pull out some parts of the report pertaining to China that caught my attention and also comment on a related post on The Economist.

The report especially delves into China in a section titled "The diversity of economic performance of the Chinese metropolitan areas":
The different paths among metro areas worldwide reflect the diversity of growth patterns not only across countries, but also within them, particularly in large urbanizing nations like China...

Nearly one half (22) of major Chinese metropolitan areas grew faster than the national GDP per capita and 25 metro areas expanded their jobs more than the national average. For example, Xiamen, located on the southern coast of China, ranked highest on the 2012 index of economic performance among Chinese metropolitan areas, surpassing national averages on both GDP per capita and employment growth. Aided by large foreign investments, Xiamen’s manufacturing sector output grew more than 9 percent from 2011 to 2012, driving its strong performance.

By contrast, Beijing underperformed China’s GDP per capita growth rate in 2012. the capital city of China saw GDP per capita increase by 2.3 percent, much lower than the nation. Local/non-market services in Beijing delivered over one-third of metro output growth over the past year, and half of new jobs created between 2011 and 2012. The large size of local/non-market services might be a cause of concern for Beijing in the future. As a recent Chinese provincial government study shows, the large size of Beijing’s municipal government led to a drop in its efficiency.
The differences between Xiamen, Beijing, and, as described later in this section, Haerbin seem relevant to understanding China's economic growth. And I have little doubt China's metro areas are much more economically diverse than America's. However, I dont' see how pointing out that nearly half of the Chinese cities had numbers above the national average adds anything meaningful to claims of diversity. Imagine that the numbers of 6 cities in China for some measurement were 59, 59, 59, 61, 61, and 61. Half of the cities are above the average (60). Now imagine if the numbers were 10, 20, 30, 40, 50, and 210. Only one of cities is above the average (again 60), yet there is more diversity in these numbers than the previous. I could go on with other examples, but my only point is that the number of examples above an average says rather little about the diversity of a set of numbers and often nothing about whether it is more or less diverse than another set.

In an example where China's economic diversity is particularly clear, Macau earned the top spot in the report's economic performance index for the world:
Since its transfer to China, Macau’s economy has developed rapidly, averaging 12.5 percent annual GDP per capita growth and 7.7 percent annual employment growth from 2002 to 2007. The rapid growth of disposable income among Chinese urbanites over the last decade helped drive this growth trend. Gaming is Macau’s main industry, and since the opening of the industry to new investors in 2002, its output doubled and employment grew by 45 percent from 2002 to 2007.
Macau's gambling industry is unique in China, and the difference in its economy from other Chinese cities is somewhat symbolized by the border that separates it from mainland China. As the report later notes, Macau's ability to maintain its strong economic growth likely depends on it diversifying from its current reliance on gaming and tourism.

The Graphic Detail blog on The Economist shared its own visual representation of the "World's fastest and slowest growing metropolitan economies" based on the data provided by Brookings. You can see it here. The top five cities in its two categories jumped out at me:

"Real GDP per person":
  • Hefei
  • Baotou
  • Changchun
  • Anshan
  • Dalian
  • Hangzhou
  • Hefei
  • Ningbo
  • Changsha
  • Shenzhen
All of the cities are in China. The list is personally interesting since I am in Changsha at the moment and have visited all of the other cities except for Baotou and Anshan. More digging into the data or other analyses would be useful in understanding these rankings, though. For example, if a city's population dropped, an increase in Real GDP per person could found even if the Real GDP were static or falling. This city's economic "growth" would be rather different from a city that had a rise in Real GDP per person while also increasing its population.

And that's all, at least for now. If this has left you feeling data hungry, in addition to the report, several possibly relevant appendices can be found here. Or if this talk of economics has you desiring something more spiritual, photos of Chinese temples at the the economic performance index's top performer, Macau, can be found here.

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