BEIJING — China’s real estate woes and U.S. sanctions have severely impacted some Chinese cities, even as others benefit from Beijing’s tech push, the Milken Institute’s index of China’s top-performing cities showed on Tuesday.
Since 2015, the index has studied the economic vitality and growth prospects of China’s large and medium-sized cities. The latest version compares 2023 and 2021 data overall.
Hangzhou, the capital of eastern Zhejiang province and home to Alibaba and other technology companies, topped this year’s rankings.
Other cities, such as the once “rising star” Zhuhai, have fallen in the rankings due to the real estate downturn.
The city in southern Guangdong province, near Hong Kong, dropped 32 spots to 157th from the last index released in 2022.
Builders don’t have much money to complete their projects,” Perry Wong, the institute’s general manager of research, told reporters in Mandarin (translated by CNBC).
Real estate and related industries once accounted for more than a quarter of China’s gross domestic product. But in 2020, Chinese authorities began to crack down on property developers’ heavy reliance on debt.
Huang added that real estate has been a drag on the growth of several major cities in the region except Dongguan. The factory city is home to Huawei’s sprawling European-style campus but has been hit by U.S. sanctions. Dongguan dropped 15 places to 199th in the Milken Index ranking.
There are 217 cities in the index. While nearby metropolis Shenzhen has risen in the rankings, the city ranks ninth, behind Beijing. In an interview with CNBC, Huang pointed out that most of the Chinese companies initially blacklisted by the United States were based in Shenzhen or Beijing.
“Zhuhai is an excellent place to engage in service work, even production work, high-end production work in biotechnology,” he said. “So (excluding the real estate impact) it should have a very promising future.”
Another city whose exports are affected by geopolitics is Zhengzhou, the capital of Henan province and home to iPhone maker Foxconn. Zhengzhou fell from 3rd to 22nd.
Huang pointed out that historically, controlling Zhengzhou, Hefei and Wuhan was crucial to ensuring control of the country.
From an economic perspective, the cities of Hefei in Anhui Province and Wuhan in Central China’s Hubei Province fared better in the latest index.
Wuhan jumped nearly 30 places to second place, while Hefei remained firmly in the top ten. Huang attributed this to Wuhan’s efforts to keep factories running during the epidemic, allowing the city to rebound quickly, while a university in Hefei received direct government support for technology development.
As for Hangzhou’s success, the institute’s research points to the city’s growth as an e-commerce, manufacturing and financial center.
But asked on CNBC’s “Squawk Box Asia” if Hangzhou’s success could be replicated, Huang said it would be difficult, in part because of rising costs of living caused by the outperformance of the local real estate industry.
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