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close this bookEmerging World Cities in Pacific Asia (UNU, 1996, 528 pages)
close this folderPart 2. Changing Asia-Pacific world cities
close this folderGlobalization and the urban system in China
View the document(introductory text...)
View the documentIntroduction
View the documentEconomic reform and globalization in China
View the documentThe globalization of china's economy
View the documentForeign investment
View the documentUrbanization and urban system development in China
View the documentThe effects of globalization on the urban system in China
View the documentProblems of urban development under the open policy
View the documentPolicy implications and future trends in urban development
View the documentNotes
View the documentAcknowledgements
View the documentReferences
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The effects of globalization on the urban system in China

The open policy has led to a concentration of foreign investment in the Eastern Coastal region. SEZs and open coastal cities benefit more from the open policy than inland cities and have higher economic growth rates (Leung, 1990; Xie and Costa, 1991; Fan, 1992). The distribution of foreign investment is mainly concentrated in the extra-large cities and in the Eastern Coastal region (table 7.6). Quite a sizeable amount of foreign investment is also located in the medium-sized cities in the Eastern Coastal region. However, as reflected by the coefficient of variation, there is great variation between regions and city sizes (tables 7.7 and 7.8). FDI tends to concentrate in the coastal regions and large cities. For most regions and city sizes, the coefficient of variation is higher than 300 per cent. The variations in foreign investment are very high for small, medium-sized, and large cities. But the variation is relatively small in extra-large cities, indicating that most extra-large cities have high foreign investment and less variation. The great concentration of foreign investment is shown in table 7.9. In 1990, the top 20 cities as regards foreign investment accounted for 78.3 per cent of total FDI in cities. All these cities are coastal cities in the Eastern Coastal region. Most of them are located in Guangdong province, which is adjacent to Hong Kong, the major source of foreign investment in China.

Table 7.7 Foreign direct investment in cities by region, 1990

Region

Total FDI US$'000

Per cent

Mean (US$'000)

Standard deviation (US$'000)

Coefficient of variation (%)

No. of cities

Eastern

2,362,930

95.7

10,363

34,982

337.6

228

Central

74,780

3.0

512

1,608

314.1

146

Western

32,350

1.3

347

1,291

372.0

93

Total

2,470,060

100.0

5,289

24,937

471.5

467

Source: China Urban Statistical Yearbook, 1991.

Table 7.8 Foreign direct investment in cities by city size, 1990

City size

Total FDI US$'000

Per cent

Mean (US$'000)

Standard deviation (US$'000)

Coefficient of variation (%)

No. of cities

Small

458,750

18.6

1,576

9,762

619.4

291

Medium

900,930

36.5

7,700

35,589

462.2

117

Large

218,120

8.8

7,790

19,073

244.8

28

Extra-large

892,260

36.1

28,782

52,735

183.2

31

Total

2,470,060

100.0

5,289

24,937

471.5

467

Source: China Urban Statistical Yearbook, 1991.

Table 7.9 Top 20 cities for foreign direct investment, 1990

City

Province

City size

Foreign direct investment (US$'000)

Shenzhen

Guangdong

Medium

349,200

Dalian

Liaoning

Extra-large

200,750

Shanghai

Shanghai

Extra-large

177,190

Huizbou

Guangdong

Small

146,230

Guangzhou

Guangdong

Extra-large

117,010

Beijing

Beijing

Extra-large

105,760

Dongguan

Guangdong

Medium

100,100

Tianjin

Tianjin

Extra-large

83,150

Shantou

Guangdong

Large

81,970

Foshan

Guangdong

Medium

79,230

Haikou

Hoinan

Medium

73,880

Xiamen

Fujian

Medium

72,730

Fuzhou

Fujian

Large

65,100

Zhuhai

Guangdong

Small

62,190

Nanjing

Jiangsu

Extra-large

57,350

Zhongshan

Guangdong

Medium

53,280

Qingdao

Shandong

Extra-large

30,960

Jiangmen

Guangdong

Medium

28,340

Shenyang

Liaoning

Extra-large

27,470

Putian

Fujian

Small

22,720

Total FDI in the top 20 cities



1,934,610

Total FDI in all cities



2,470,060

% of the top 20 cities in total FDI in cities



78.32%

Source: China Urban Statistical Yearbook, 1991.

There is a difference in the source of FDI between northern coastal cities and southern coastal cities. Take Shenzhen and Shanghai, for example. The source of investment in Shenzhen is mainly Asian countries, particularly Hong Kong, whereas Asian FDI is less prominent in Shanghai (table 7.10). In the period 1985-1989, 93.0 per cent of the FDI in Shenzhen came from Asia, with 85.0 per cent from Hong Kong. In Shanghai, only 52.7 per cent of FDI was from Asia and 30.5 per cent was from non-Asian countries. Although Hong Kong was still the largest investor, it constituted only 34.7 per cent of its FDI. Investment from Japan and the United States was more important in Shanghai than in Shenzhen. The pattern of foreign investment is different too. Most of the foreign investment in industries in

Table 7.10 Distribution of the source of foreign direct investment in Shenzhen and Shanghai, 1985-1989 (%)

Source of FDI

Shenzhen

Guangdong

Shanghai

National

Hong Kong

85.0

87.2

34.7

61.5

Japan

5.6

3.2

12.6

12.7

Taiwan

1.0

0.7

0.0

0.0

Singapore

1.2

0.9

5.4

1.2

Thailand

0.3

0.2

0.0

0.4

Korea

0.0

0.0

0.0

0.0

Philippines

0.0

0.0

0.0

0.1

Total main Asian countries

93.0

92.3

52.7

75.9

USA

6.0

4.0

23.7

11.2

Canada

0.3

0.4

2.5

0.3

United Kingdom

0.1

0.1

2.4

1.3

France

0.0

0.2

0.0

0.9

Germany

0.2

0.1

1.6

1.1

Sweden

0.0

0.0

0.0

0.1

Denmark

0.0

0.0

0.0

0.3

Australia

0.2

0.8

0.4

1.1

Total main non-Asian countries

6.9

5.6

30.5

16.4

Other countries

0.1

2.1

16.8

7.7

Total

100.0

100.0

100.0

100.0

Total (US$ million)

1,332.3

3,840.2

1,328.2

13,099.7

% of national total

10.2%

29.3%

10.2%


Sources: Shenzhen Statistical Yearbooks; Guangdong Statistical Yearbooks; Shanghai Statistical Yearbooks; Almanac of China's Foreign Economic Relations and Trade.

Shenzhen is small, whereas foreign investment in Shanghai tends to be large. This is mainly because of the nature of foreign investment from Hong Kong. Foreign investment from Hong Kong is mainly related to outward processing of small industries from Hong Kong, and tends to involve many investors with small capital, utilizing the cheap labour and land in Shenzhen.

There is also a difference between the two cities in the distribution of FDI among different sectors. In the period 1985-1989, over 75 per cent of FDI was in industry in Shenzhen, whereas industry constituted only 41.6 per cent in Shanghai (table 7.11). On the other hand, there is more foreign direct investment in real estate in Shanghai than in Shenzhen.

The country of origin of foreign investment has different impacts on the urban system. Foreign investment from Hong Kong is mainly located in the southern provinces, particularly the Pearl River Delta. Such investment is increasingly located in rural townships, contributing to the rapid rural urbanization of the Pearl River Delta. In contrast, most of the foreign investment from Japan and other countries is located in cities and less in rural areas. However, because of the development of export industries, many towns and cities are producing goods that are exported to different parts of the world.

Table 7.11 Distribution of foreign direct investment by sector in Shenzhen and Shanghai, 1985-1989 (%)

Sector

Shenzhen

Guangdong

Shanghai

National

Agriculture

0.5

2.5

0.3

2.9

Industry

75.3

76.0

41.6

55.1

Geological inv.

0.0

0.2

0.0

3.1

Construction

2.9

2.3

0.6

2.2

Transport/telecom

3.5

2.6

0.3

1.7

Commerce

3.7

2.4

0.5

5.1

Real estate

12.4

12.8

48.9

24.1

Health and sport

0.1

0.1

0.0

0.5

Education and culture

0.1

0.1

0.0

0.4

Scientific research

0.0

0.1

0.0

0.1

Finance and insurance

0.0

0.0

0.0

0.6

Government department

0.0

0.0

0.0

0.0

Other

1.5

0.9

7.8

4.2

Total

100.0

100.0

100.0

100.0

Total (US$ million)

1,332.3

3,840.2

1,328.2

13,099.7

% of national total

10.2%

29.3%

10.2%


Sources: Shenzhen Statistical Yearbooks; Guangdong Statistical Yearbooks; Shanghai Statistical Yearbooks; Almanac of China's Foreign Economic Relations and Trade.