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China's Southeast Asia Strategy

Nanning's Miraculous Rise


Nanning's Miraculous Rise

Source:Hsiang-Yi Chang

Within a short span of five years, a new regional cooperation strategy between China and ASEAN has turned the sleepy backwater of Nanning into China's glitzy gateway to Southeast Asia.



Nanning's Miraculous Rise

By Hsiang-Yi Chang
From CommonWealth Magazine (vol. 434 )

"Deng Xiaoping created Shenzhen, Jiang Zemin brought about Pudong, so what about Hu Jintao? He's definitely the one who developed Nanning," taxi driver Li Shifu says proudly as he rolls down Minzu Avenue toward Wuxiang ("Five Elephants") Plaza in the financial district of Nanning City.

In just two days in Nanning, this is the third person to assure me that the incumbent Chinese president is the mastermind behind the city's miraculous ascent. Singing from the same hymnbook were a rep from the Taiwan Affairs Office of the Guangxi Zhuang Autonomous Region government and a Taiwanese businessman who has been in and out of China for more than ten years.

The 80,000-square-meter Wuxiang Plaza gets its name from a huge sculpture-cum-fountain that features five elephants and is illuminated at night. Dozens of surrounding skyscrapers housing banks and other financial institutions as well as luxury apartments make for a Manhattan-style skyline. The Plaza boasts an abundance of greenery. With tree-lined multi-lane avenues fanning out in all four directions, it immediately brings to mind Ren'ai Circle in downtown Taipei.

Not far away, the 6th China-ASEAN Expo is being held at the 1.5 billion-renminbi Nanning International Convention and Exhibition Center, which has become one of the city's new landmarks with its eye-catching hibiscus blossom-shaped roof. The five-day expo attracted more than 50,000 businesspeople from China and the ten member countries of the Association of Southeast Asian Nations (ASEAN). Deals worth more than US$1.5 billion were hammered out during the annual gathering.

Just in time for the expo, the first phase of construction of a consulate district at the other end of Minzu Avenue was completed, with five of thirteen planned consulates being handed over to their future tenants. Cambodia, Vietnam, Thailand, Burma and Laos have already announced that they will formally open consulates in the district next year.

Just seven or eight years ago when skyscrapers were going up at a breathtaking pace in Shanghai's Pudong District and in the southern border city of Shenzhen, Nanning was still a true provincial backwater. "Nanning was like a forgotten city, with dirt roads everywhere, virtually nothing but pedicabs in the streets and not a single highrise," recalls Chen Ping-ho, chairman of Wanmao Group, a Taiwanese conglomerate with interests in real estate development, department stores, trade and logistics.

But today the roads have been broadened and asphalted, highrises have sprung up, and imported luxury cars with license plates from all over China navigate the streets.

Nanning's rise from obscurity to prominence came virtually over night. Once in the shadows of Guilin, Guangxi's foremost sightseeing spot, the provincial capital jumped to stardom as a regional hub that links southwestern China with its ASEAN neighbors.

The Strategy that Put Nanning on the Map

A look at economic facts and figures shows that this city of less than 3 million people has no large industrial parks and no high-tech industry to speak of. Yet since 2005 its GDP has grown at an annual rate of more than 13 percent for five years in a row. The city's cumulative economic growth rate is the third highest of China's major cities.

Against this backdrop it is no wonder that the locals proudly believe that the Chinese president has made Nanning's development his pet project, and that thanks to this top-level attention the city has been able to outstrip its competitors, even though other special economic zones such as Haixi – the coastal region along the Taiwan Strait – the port city of Tianjin in Shandong Province, and special zones in Sichuan Province – are being promoted at the same time.

What allowed Nanning to stage this remarkable rise to affluence? Behind Nanning's newly won importance is the four-word slogan "One Axis, Two Wings."

The catchphrase was coined in 2007 by Liu Qibao, secretary of the CPC Sichuan Provincial Committee and former secretary of the CPC Guangxi Zhuang Autonomous Regional Committee. Liu had not even served one month in his current post when he proposed the "One Axis, Two Wings" strategy for regional development. He suggested building up road and sea transport infrastructure to create a free trade zone with neighboring ASEAN countries. Guangxi and its capital city Nanning would then become China's gateway into the ASEAN market.

The One Axis refers to the 3,500-kilometer economic corridor that leads southwest from Nanning via Chongzuo on the Vietnamese border and then continues on a highway straight to Vietnam, Laos, Thailand, Malaysia and all the way to Singapore. This axis is China's major artery into Southeast Asia.

The "Two Wings" flank the axis on its eastern and western sides. The eastern wing comprises the Pan Beibu Gulf Economic Cooperation Zone which relies mainly on sea transport. From the three Chinese deep-sea ports of Qinzhou, Fangcheng and Beihai, seagoing vessels can carry goods directly to Singapore, Malaysia, the Philippines and Indonesia. The western wing indirectly links Kunming, the capital of Sichuan Province, with Burma and Thailand in the Greater Mekong Subregion and even India via railway and highway routes. (see map)

The new strategy opened the doors for Nanning to become more than just a local center. But China has more than just economic ambitions when it comes to Southeast Asia. From its foothold in Nanning, the Chinese government hopes to assume a big brother role in Southeast Asia.

Two-way trade between China and the ASEAN countries amounted to US$105.9 billion in 2004. By 2008 that figure had risen to US$231.1 billion, representing a whopping 118 percent increase. More than 35 percent of total China-ASEAN trade is channeled via Guangxi. Presently, the financial crisis is heavily affecting China's trade with its two major trade partners Europe and the United States. For the Chinese government business and trade linkages with ASEAN via Guangxi have therefore become particularly pivotal.

Why Nanning?

What is it that predestines Nanning for such a crucial role? And how does the positioning of this city in regional trade affect Taiwan's future development?

Nanning is a hub where all transportation arteries between China and ASEAN converge. The city does not aspire to become an industrial center, but rather a great city to live in that attracts talent, in order to serve as the hub of China's political, commercial, R&D and consumer interactions with ASEAN.

So what did Nanning do to become a magnet for skilled workers and capital, given that in contrast to the coastal megacities, it is located in a sparsely populated inland area and has a resource-strapped government? City planners took a shortcut by emphasizing the city's lush green environment to boost real estate development.

Ma Biao, chairman of the Guangxi Zhuang Autonomous Region, played a key role in the city's rapid development.

"Ma Biao thinks big and is very innovative," says Chen Ping-ho.

For the past five years, Ma has also held the post of secretary of the CPC Nanning Committee. That Nanning "came to life" during the past five years is owed to two innovative policies he designed.

The first is greening the city. Avoiding the mistakes of China's coastal cities, which initially pushed industrial development at the expense of the environment, Nanning made greening the city its top priority. Consequently, heavily pollution-intensive industries such as petrochemical refineries, mining, paper and leather manufacturing, and construction material exploration were banned within a 10 kilometer-perimeter of the city. At the same time, Nanning launched a large-scale tree-planting campaign.

Today Nanning is China's greenest and most eco-friendly city. The city's greening efforts have been recognized by the U.N. Habitat Scroll of Honor Award 2007, China's National Civilized City Award and other honors, and have turned Nanning into a model city that is attracting skilled people from China's inner provinces and even Southeast Asia.

Ma's second bold policy was to massively push real estate development. In a bid to attract a large amount of people and capital from other parts of China, Nanning scrapped the work and residency permits that are mandatory in other cities. Any newcomer to the city is allowed to buy real estate. And in return, any homebuyer and his relatives are eligible for household registration in Nanning.

These two policies have attracted a large number of big property developers to the city.

And it is not only Chinese real estate tycoons that have discovered the city's potential. Other property developers from Hong Kong, Macao and Taiwan have also sniffed out the trend. The surge in construction activity caused local average real estate prices to jump from less than 1,000 renminbi per square meter in 2004 to 4.5 times that amount within five years. Today, prices range as high as 12,000 renminbi per square meter in the city's prime locations.

Nanning has already become southwestern China's unrivaled center of affluence. In 2006 China's 11th five-year plan set Nanning's GDP target for 2010 at more than 100 billion renminbi. To everybody's surprise, the city had reached that target by 2007 and still continues to post growth rates of almost 15 percent.

Opportunities for Taiwanese Businesses?

As soon as the China-ASEAN Expo came to its end in late October, the Nanning city government announced that it would spend some 2.5 billion renminbi on the construction of a Guangxi-ASEAN industrial product trade center and an international fruit and vegetables trade center.

In May this year Ma led a large delegation of government officials and entrepreneurs on a procurement trip to Taiwan. During his visit he wooed Taiwan's electronics industry, proposing 24 policies that offer incentives and preferential treatment to Taiwanese investors.

However, the "Nanning old hand" Chen Ping-ho warns that Taiwanese investors should be extra cautious when trying to get a foothold in the city. Before investing they should carefully consider whether Guangxi's resources actually match their own industry's needs.

Chen notes that Nanning is facing a considerable labor shortage and also has strict environmental laws and regulations that make it an unsuitable investment location for Taiwan's conventional industries. And while Guangxi actively woos the high-tech industry and is China's gateway to the ASEAN market, the region lacks the midstream and downstream industry chain that can be found in the neighboring Pearl River Delta.

Chen argues that such risks need to be taken into account. Foxconn Technology Group, a unit under Taiwan's electronics contract manufacturer Hon Hai Precision Industry, for instance, announced a US$3 billion investment in six industrial parks on the outskirts of Nanning in 2007, but has since put the brakes on the project.

Establishing a presence in Nanning for future access to the ASEAN market is more likely to be a successful strategy, in Chen's estimation, for farm product processing and the food industry, as well as Taiwan's traditional strong suits, international trade and logistics.

Jumping on the bandwagon of China's new ASEAN strategy, Nanning designed innovative new policies that have enabled the city to emerge as the investment hot spot of southwestern China. Of all China's coastal provinces, Guangxi is probably the place with the greatest growth potential among the country's few virgin territories.

Translated from the Chinese by Susanne Ganz

Nanning at a Glance:

Population: 6.852 million

(greater metropolitan area)

Surface area: 221.12 million square kilometers

(including six neighboring counties subsidiary to Nanning City)

GDP (renminbi):

Q1-Q3 2009: 104.032 billion (+14.7%)

2008: 131.621 billion (+14.5%)

Chinese Version: 一軸兩翼  創造南寧奇蹟