China’s property market has been facing challenges due to U.S. sanctions and a crackdown on real estate development by Chinese authorities. Hangzhou, a city in the eastern Zhejiang province known for being the home of tech giants like Alibaba, managed to secure the top spot in the latest Milken Institute’s best performing cities China index. However, other cities like Zhuhai in Guangdong province suffered a significant drop in rankings due to the slump in the real estate sector.
Real estate and related industries used to play a crucial role in China’s GDP, accounting for more than a quarter of the total output. However, in recent years, the high debt reliance of real estate developers led to a government crackdown, negatively impacting economic growth in several cities. Perry Wong, managing director of research at the institute, highlighted how the lack of housing purchases affected builders’ ability to complete projects, leading to a slowdown in the sector.
Cities like Dongguan, known for its manufacturing sector and Huawei’s presence, faced challenges due to U.S. sanctions. This resulted in Dongguan dropping in the Milken index rankings, showcasing the impact of geopolitical tensions on local economies. Similarly, Zhengzhou, home to iPhone manufacturer Foxconn, saw a decline in its position in the index, signaling the repercussions of global trade conflicts on Chinese cities.
Despite the challenges faced by some cities, others like Shenzhen and Beijing managed to climb the rankings due to their diversified economies and strong tech sectors. Shenzhen, in particular, was able to mitigate the impact of U.S. sanctions on Chinese companies based in the city. Wong emphasized the importance of cities like Zhuhai, Hefei, and Wuhan for their potential in service jobs, production, and technological development, highlighting the resilience of these cities in the face of economic adversities.
Hangzhou’s success as a hub for e-commerce, manufacturing, and finance has been attributed to its robust tech ecosystem and business environment. However, replicating Hangzhou’s success may prove to be difficult due to the local property market’s performance, which has led to increased living costs. Wong noted that while cities like Hangzhou have shown significant growth, the sustainability of this growth model remains a key concern for future economic development in China.
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