How China's reform agenda to address regional inequality and environmental sustainability affects each province
At the provincial level, economic restructuring will be painful for some in the short term, while others will benefit from strong policy support and migration of industries. Our latest macroeconomic update reflects the economic outlook of China's key provinces:
Beijing, Tianjin and Hebei
One of the most promising policy efforts at rebalancing growth, the Capital Economic Circle will continue to relocate several industries and service sub-sectors from Beijing to its surrounding provinces, Tianjin and Hebei. Several industries have already relocated from Beijing to Tianjin's Binhai New Area and this will support the latter's economic growth. Hebei's economy faces challenges in the short term as its steel industry grapples with overcapacity and more strict environmental regulations. However, plans to relocate part of Beijing's service sector to Hebei will create opportunities to diversify its economy.
As China's manufacturing and business hub in the South, Guangdong's economic outlook is challenged by the slowdown of export-oriented industries and increasing labour cost. Over the longer term, it will face intensifying competition from other emerging markets such as Vietnam.
Located in China's central region, Henan's economic growth has been largely driven by investment. 'The Rise of Central China Plan' has gradually stimulated infrastructure and industrial development in Henan in recent years. The province's abundant mineral resources, especially coal, crude oil and natural gas, will also continue to facilitate its industrial growth.
Of all the western provinces Sichuan has the largest GDP and population. Chengdu, Sichuan's capital city, is planning to set up the "Hi-tech Free Trade Zone" to attract FDI and strengthen its industrial competitiveness. Sichuan is also rich in mineral and energy resources, such as gas, which will support industrial growth in the long run.
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