Chongqing highlights

November 14, 2012 / By  

Over the past two months, I have been working with our Chongqing team to prepare the launch of the World Winning Cities – Chongqing profile. This paper, which we plan to release before the Chinese New Year, discusses the themes that underpin the continued growth momentum of Chongqing – the “World’s Fastest Growing Large City” – with average GDP growth exceeding 15% y-o-y since 2005.

A quick preview of the key takeaways about Chongqing discussed in the paper:

  • Chongqing benefits from extensive support from the Central Government with the Go West Initiative and receives high visibility with investors, corporates and the Central Government with its status as the only provincial-level municipality in inland China
  • Inland focus is a structural trend – and underpins persistent economic growth. Chongqing is one of the few provinces that have continued to see double digit FDI growth during the period of global economic uncertainties in 2012
  • Cheap labour is not the only draw – Infrastructure improvements and favourable policies have successfully attracted key multinationals and their supply chains allowing the city to establish scale and strong reputation in manufacturing sectors

Not surprisingly, our findings on the medium term opportunities coincide with the sectors highlighted in our China50 report, namely retail and logistics.

For logistics, improving infrastructure and greater integration with the country and the world will further add pressure to supply shortages. The combination of limited supply and strong demand should result in above average returns for logistics property.

Retail fundamentals are tied to rapid wage increases resulting from the city’s urbanisation process. As Chongqing increases its current urbanisation rate of 55% (low relative to its Tier 1.5 peers), consumer spending growth and changing retail spending patterns will drive demand for more and better retail. And while there has been significant improvement in Chongqing’s retail infrastructure over the past year, current retail offerings – either in terms of total quantity or diversity – still lag cities of comparable size and income level. Given the city’s relatively low income levels and favourable economic outlook, we believe socio-economic factors will provide a good demand base for retail assets in the city.

We look forward to formally introducing the report to you in early 2013!

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