BEIJING – China’s real estate battle and U.S. sanctions have significantly hit some of its cities, while others are benefiting from Beijing’s technological push, the Milken Institute’s China index of top-performing cities showed on Tuesday.
Since 2015, the index has studied China’s large and medium-sized cities for their economic vibrancy and growth prospects. The latest version generally compares data for 2023 with that of 2021. Last year, the institute did not publish a report due to a reassessment of its methodology.
Hangzhou, the capital of eastern Zhejiang province and home to Alibaba and other tech companies, ranked first in this year’s rankings.
While other cities such as Zhuhai, once a ‘rising star’, fell in the rankings due to the slump in the real estate sector.
The city, in the southern province of Guangdong, near Hong Kong, fell 32 places from the previous index published in 2022 to 157th.” Suddenly no one was buying houses.
Builders did not have much money to complete their projects,” Perry Wong, director of research at the institute, told reporters in Mandarin, as translated by CNBC.
Real estate and related sectors once accounted for more than a quarter of China’s gross domestic product. But in 2020, Chinese authorities began cracking down on real estate developers’ heavy reliance on debt.
Wong added that real estate slowed the growth of some of the major cities in that region, except Dongguan. The city of factories, home to Huawei’s sprawling European-style campus, was instead hit by US sanctions. Dongguan fell 15 places in the Milken Index rankings to 199th.
There are 217 cities in the index. While the nearby metropolis of Shenzhen rose in the rankings, the city ended up in 9th place, behind Beijing. A majority of the Chinese companies initially blacklisted by the US were based in Shenzhen or Beijing, Wong pointed out in an interview with CNBC.
“Zhuhai is an extremely good place to do service jobs, to even do manufacturing jobs, high-end manufacturing jobs in biotechnology,” he said. “So [excluding the real estate impact] it should have a pretty promising future.”
Another city hit by the geopolitical barrier to exports is Zhengzhou, the capital of Henan province and home to iPhone maker Foxconn. Zhengzhou fell to 22nd, down from 3rd.
Historically, Wong pointed out, having control over Zhengzhou, Hefei and Wuhan has been critical to ensuring control of the country.
From an economic perspective, Hefei, in Anhui province, and Wuhan, in central China’s Hubei province, fared better in the latest index.
Wuhan rose almost 30 places to second place, while Hefei remained in the top ten. Wong attributed this to Wuhan’s efforts to keep factories running during the pandemic, which allowed the city to recover quickly, while a university in Hefei received direct government support for technology development.
As for Hangzhou’s success, the institute’s research pointed to the city’s growth as a hub for e-commerce, manufacturing and finance.
But when asked on CNBC’s “Squawk Box Asia” whether Hangzhou’s success could be repeated, Wong said it would be difficult, partly because of the outperformance of the local real estate sector and the rising cost of living.
