Chongqing has the capacity to become central to the economic future of western China with its impressive scale, economic scope and a strategic location. But Chongqing wants to be a global city and not just a global city, a great city. We live in an age when one of the driving forces of economic development is urbanisation, a theme BlueNotes has been analysing with its Metropolis Now series.
This past weekend, in my role as Executive Chairman of the Chongqing Mayor's International Advisory Council, we focussed on helping the city, already of global significance, continue to evolve as part of the strategy of Chinese Government's One Belt One Road Strategy. The challenge is to create a cohesive economy, a focal point for the region and connect Chongqing more deeply with the world.
So what does it take to become a great, global city?
Global cities are not just concentrations of people and businesses; rather, they are thriving, innovative and strategically connected centres of knowledge, and highly attractive locations for foreign investment. Globally connected lead cities, such as New York, London or Tokyo have unique stories to tell and share some key attributes. Their scale means they need to continuously refine their planning and invest in infrastructure.
Chongqing needs to organise from within to become the leading city in a regional cluster and connect with the rest of the world. In our research for the council conducted with the support of Deliotte Access Economics, we've drawn lessons from the experiences of some of the world's leading cities. Chongqing has scale, economic scope and a strategic location. It has the capacity to become even more central to the economic future of western China.
Global cities have high levels of connectivity, making them natural homes for transnational corporate headquarters, financial and information services and decision making at the highest level. Global cities are able to attract and mobilise capital; enable the free flow of information and ideas and maintain a healthy and creative populace.
A recent study by the London School of Economics, "Cities Centre", contends foreign firms are attracted to city regions with strong market characteristics – high Gross Domestic Product (GDP) per capita (and/or close to high GDP regions), good accessibility by car and air, strong competitiveness, high population density and low unemployment.
Beyond these fundamentals, however, city regions also need to score high on knowledge indicators like research and development intensity, number of patents, educated workforce, top universities and specialisation in high and medium-tech production or knowledge-intensive services. Singapore, the overall winner for FDI attractiveness, was also the number one destination for FDI projects between 2008 and 2013 (fDi Intelligence 2014). Shanghai and Beijing also ranked highly, coming in at 8th and 10th, respectively. For emerging market cities (with GDP per capita less than $35,000), Chongqing ranked 10th overall, Chengdu 7th.
Two of our most interesting discussions this past weekend were on “soft power” and encouraging an entrepreneurial culture and start-ups. We heard how Chongqing could address this through educational and tourism exchanges; through highlighting its culture and history. We had perspectives on this idea of soft power from Hong Kong and from Singapore.
From the research into great cities, four key components emerge:
- being 'smart'
- transport infrastructure
- communications and information sharing
- positive social outcomes
Yangtze River Economic Belt. Source: Global Times (2015)
Chongqing is in a prime position to capitalise on opportunities arising from the Yangtze Economic Belt strategy. Chongqing's strategic position within the Yangtze Economic Belt places it in the centre of the new plan to promote clusters as a means of growing the economy of western China (see Figure 2.1).
Clusters cannot be forcibly created; rather they develop in cities and city-regions with the necessary institutions, factor markets, business climate and entrepreneurs. It is up to leaders to create this new wave of economic growth, be that entrepreneurs at the local level or cities at the regional level. Research conducted by the City of London found four major clustering engines provide growth and sustainability of the financial cluster in London: labour supply, personal relationships through face-to-face contact, innovation, and processes of co-location and competition (City of London 2003).
Clusters promote what are known as favourable factor conditions: co-located businesses benefit from common factors of production – labour markets, specialised infrastructure and the capacity to leverage educational institutions.
Implications for government
Cluster thinking offers important lessons for economic development. It allows policy makers and practitioners to:
- build on the unique strengths of their region rather than duplicate the approach of other regions
- directly engage with cluster members to identify the requirements of industry, be that research and development support or investment in world class training
- foster an environment that encourages the development of new clusters rather than creating a cluster from the top down.
But be aware: there is general agreement it is difficult or nearly impossible for public policy intentionally to create industry clusters where they do not already exist. The lesson for policy makers is they should focus on establishing the right conditions for new industry clusters to emerge (institutions that support knowledge creation, low barriers to entry for new firms and access to capital), then recognise and support burgeoning clusters.
When thinking of prominent and renowned cities across the world, names such as New York, London, Tokyo, Paris, Hong Kong, Singapore and Sydney come to mind. Why? What is it about these global cities that make them work like they do? Is it merely a result of being in the right place at the right time, or the outcome of a strong history and renewed focus for long term strategic planning? How does London's economy outperform the UK average by 72% (Knight Frank 2015)? How does New York's economy outperform the US average by 36%?
Smart phone penetration and triple bottom line performance.
Source: Ericsson (2014)
Today, the information economy, or the progressive transition of advanced economies from the production of goods to the production of knowledge, has been a driving factor in the creation of the leading global cities.
Ericsson's 'Networked Society City Index' ranks 40 global cities according to their ICT maturity. In 2014, Stockholm ranked the highest, followed by London, Paris, Singapore and Copenhagen. Figure 3.2 illustrates the relationship between countries' triple bottom line (economic, social and environmental) performance and the penetration of smartphones. Countries with high smartphone penetration use this mobile technology to maximise the social, economic and environmental benefits arising from well-developed ICT infrastructure.
The contemporary global city … and why it's not only about the economy
Global cities are not only based on a thriving economy. Many animated and intense debates, triggered by these powerful economic trends, are being undertaken to understand the changing character of modern urban life – factors that are required to make cities liveable, safe and desirable place to work. The leading global cities of today are aiming to be cities that don't exist yet. Contemporary and complex issues, such as climate change, energy and sustainability, as well as inequity are at the forefront of each major city's strategy. Addressing these factors is critical to ensuring cities remain attractive to the creative culture, a key driver of a global city.
Characteristics of a global city
A global city should have the necessary systems and policies in place to:
- provide the ability to attract and mobilise capital, irrespective of its origin
- enable communication and the free flow of information and ideas, both internally and externally, and over greater distances
- create an environment suitable to attract and maintain a healthy, creative economy
Figure 3.3: Elements of a global city
Source: Deloitte Access Economics, summarised based on key strategic goals stated in the future city strategies of Sydney, New York City and London
The Future for Chongqing
Over the next decade Chongqing is set to become one of the world's largest cities, both in terms of its economy and its population. By capitalising on its strategic position – and its links to the Yangtze Economic Belt and One Belt One Road strategies – Chongqing will be afforded unprecedented opportunities for economic growth and prosperity. The opportunity is for Chongqing to continue to concentrate on its internal organisation, then emphasis must be placed on rising to 'lead city' status in western China (leveraging the Yangtze Economic Belt strategy) and finally, as underscored by the One Belt One Road strategy, Chongqing must connect with the world. With strong foundations, Chongqing can become a truly global city.
Over this weekend, a number of key factors emerged in our discussion:
- The the importance of people development, talent and entrepreneurship in building a workforce in Chongqing that can support the 'one road, one belt' strategy
- The 'one belt, one road' strategy is not just about physical infrastructure. Digital and emerging technologies are vital in every sector from automotive to transport and logistics to financial services.
- Energy connectivity is essential in terms of making everything else work and Chongqing could play a role as a gas trading hub
- This is an edited version of a speech and research document, One Belt, One Road and the Yangtze Economic Belt, presented by Mike Smith to the Chongqing Mayor's International Advisory Council 10th Annual Meeting, 20 September 2015.