China’s economic miracle arose from dozens of manufacturing enterprises. Dongguan, known for its furniture and toy manufacturing, experienced a 21% GDP gain in 2004. Hohhot, a town on the Mongolian steppe’s outskirts, had nominal growth of 18% in 2006 as it mined its mineral-rich terrain. Shanghai, the country’s commercial powerhouse, experienced 15% growth the next year as it manufactured everything from machinery and textiles to cargo ships and steel, creating billionaires in the process.
These towns have since slowed, like the rest of the country. Shanghai’s economy, which is now seven and a half times larger than it was 20 years ago, expanded by only 5% last year. However, there are still some areas where growth, while not spectacular, is nonetheless very good, averaging 8-10% per year. Most are tiny “county level” cities, with populations ranging from a few hundred thousand to a couple of million, and are managed by larger nearby conurbations. China’s remaining boomtowns are of significant importance to Xi Jinping, the country’s supreme leader, as he seeks ways to revitalize the economy, which grew at a mere 4.7% annual pace in the second quarter of 2018, down from 14.2% in 2007.
The Communist Party’s third plenum, which concluded on July 18th, emphasized the need of pursuing “high-quality development,” a word that refers to the transition from basic manufacturing to high-value businesses. The meeting also emphasized the importance of urbanization and private sector development. To get a flavor of what this means in practice, take Yueqing, a 1.3 million-person eastern coastal municipality that grew by more than 8% last year.
The town’s GDP in 2023 was 166 billion yuan, which was roughly equal to Dongguan’s in 2004 in real terms. Before noticing the factories, visitors will admire the various churches and temples tucked among the rugged slopes. Its industrial zone is made up of thousands of smaller plants that manufacture the smallest electrical items such as circuit breakers, switches, and fuses. Since the late 1970s, when Mao Zedong died, the town has been one of the world’s leading makers of low-voltage, low-value components.
How has Yueqing maintained its near-miraculous growth rate while other cities have stagnated? Its entrepreneurial history helps. Access to Wenzhou, a southern port, is also important. However, government policy—in the shape of an intensive renovation plan—also plays a role. Officials assisted industries in transitioning from basic widgets to important electronics. Yueqing, for example, has emerged as a market leader in bonding wires, which join the microscopic components that comprise semiconductors. Policymakers encouraged Jiabo Technology, a local firm, to collaborate with a nearby university; together, they surpassed the international organizations that had previously led the field. Overall, 960 area businesses are now classified as “high tech” by regulators, which means they generate high-value products. Fourteen are listed on the stock exchange, a rarity for a town of Yueqing’s size.
Last year, Yueqing became China’s first county-city to be designated as a “national advanced manufacturing cluster”. The title is often reserved for larger cities that have established networks of businesses in industries crucial to Mr. Xi’s vision of high-quality development. Its win could indicate that innovative manufacturing would eventually extend from the hubs of Shanghai and Shenzhen to smaller towns. Diffusion would assist with another issue that provincial China faces: population decrease. Between 2010 and 2020, 1,240 counties and county-cities out of 1,866 saw their numbers decline, some by up to 35%, as people relocated to larger cities in pursuit of work. In contrast, Yueqing’s population has increased, which in turn has helped it dodge the worst of China’s property crisis.Â
