Photographer: Johannes Eisele/AFP via Getty Images

China's Expanding 1 Trillion Yuan Club Shows Changing Economy

From

For a glimpse of how China's economy is changing, take a look at Nanjing, capital of Jiangsu province, and Qingdao, home to one of the nation's busiest ports. Both just joined the nation's 1-trillion-yuan club.

The two cities are benefiting from a national push to generate more economic activity from sectors like services and consumption and less from old smokestack industries. Nanjing and Qingdao each saw their gross domestic product exceed 1 trillion yuan ($146 billion) last year, bringing to 12 the number of Chinese municipalities with economies on that scale. Combined, the dozen accounted for more than a quarter of China's GDP in 2016 and exceeded the entire size of France's $2.4 trillion economy, according to Bloomberg calculations.

That shift is part of an emerging national picture. Services accounted for more than half of total output for the first time in 2015 and 51.6 percent of last year's output.  In Nanjing, services expanded by 10 percent in 2016 from a year ago, making up 58.4 percent of the city’s total GDP. Internet-based enterprises, creative industries, software, technology services and tourism were the biggest drivers, according to the city statistics bureau.

It's a similar story in Qingdao, where high-tech manufacturing such as pharmaceuticals and telecommunications equipment, together with the courier industry and e-commerce, are flourishing. Services grew by 9.2 percent to account for 54.7 percent of total output. Consumption was also robust with retail sales growth hitting a notch above 10 percent in both cities, according to official data.

Other cities that have long embraced the new economy are redoubling their efforts. Shenzhen, the thriving innovation hub in coastal Guangdong, has narrowed its GDP gap with provincial capital Guangzhou to 11.8 billion yuan last year thanks to its fast growing high-tech industries and services sectors.

Still, the transition is far from uniform. Chongqing and Tianjin, which ranked fifth and sixth nationwide, continue to rely on government-led investment. Chongqing’s GDP rose 10.2 percent in real terms last year, boosted by infrastructure investment.

"Most cities in the 1-trillion-yuan club are those which have been taking on new drivers, while the outperforming Tianjing and Chongqing benefit a lot from a huge amount of investment led by government," said Qian Wan, an economist at Bloomberg Intelligence in Beijing. "But for most other cities, as the sugar-high of investment stimulus fades, they need to transform to a more sustainable and resilient growth pattern."

— With assistance by Miao Han

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE