Strong potential in Chongqing for new joint project

Chongqing is a sprawling metropolis with a population of seven million in the urban centre.
Chongqing is a sprawling metropolis with a population of seven million in the urban centre. PHOTO: ST FILE

City's strategic location is a plus but experts see challenges in implementation ahead

Chongqing has strong potential as the latest joint project between China and Singapore, given its strategic location and elevated status as one of China's four municipalities, say analysts, officials and businesses familiar with the city.

But as officials from both countries prepare to discuss implementation, it is also clear there will be sizeable challenges in building connectivity in the country's less developed and mountainous western region, where Chongqing is located.

Given the hiccups that earlier projects faced, observers believe both sides will also need to draw lessons from past experiences to avoid problems.

The "China-Singapore (Chongqing) Demonstration Initiative on Strategic Connectivity" was launched during President Xi Jinping's visit to Singapore last week. The project will focus on four priority areas: financial services, aviation, transport and logistics, and information and communication technology.

 

Chongqing may have been picked for a few reasons, such as its strategic location and existing infrastructure, which fit the theme of modern connectivity and services, experts told The Straits Times.

WELL-DEVELOPED BUT ISOLATED

While Chongqing is well-developed, it's isolated. It lacks supporting cities, the way Suzhou, Hangzhou and Nanjing support Shanghai, to spur growth in all these locations.

DR LIAO YUANHE, from Chongqing Technology and Business University

The city is located on the Yangtze River, which flows all the way east to Shanghai. It also marks the start of the Yuxinou railway which opened in 2011, connecting Chongqing to Germany with 11,000km of train tracks through Kazakhstan, Russia, Belarus and Poland.

Furthermore, Chongqing is already a developed metropolis and being a municipality directly under the central government means that policy decisions can be made and implemented more quickly, said Sichuan University analyst Song Zhihui.

"The potential of Chongqing is reflected in its economic growth," he noted, referring to the 11 per cent growth it enjoyed in the first three quarters of this year, well above the national 6.9 per cent.

He believes that cooperation in the financial sector might take off most quickly, particularly with the Chinese government agreeing to apply new cross-border yuan rules as part of the launch.

This will allow companies based in Chongqing to borrow offshore yuan from Singapore-based banks, which already have a presence in Chongqing.

CDL China CEO Sherman Kwek has also observed Chongqing's greater political stability and rapidly maturing urban landscape in the last five years, which helps provide opportunities for growth.

Chongqing businessman Ou Huadong is optimistic about success. "The chosen sectors are part of China's economic transformation plan, while this project is situated along the 'One Belt, One Road' initiative. It'll get strong political backing," he said.

Yet there are evident challenges. Transport, logistics and aviation will be tough sectors to grow in the relatively remote and mountainous region of western China, said Dr Liao Yuanhe from Chongqing Technology and Business University.

"And while Chongqing is well developed, it's isolated. It lacks supporting cities, the way Suzhou, Hangzhou and Nanjing support Shanghai, to spur growth in all these locations," he said, adding that bigger districts in the municipality, like Jiangjin and Hechuan, do not measure up yet.

Indeed, two-thirds of Chongqing's 33 million residents still live in rural areas as farmers, far removed from the gleaming skyscrapers of its urban centre. This results in a smaller talent pool for the services sector, which requires skilled workers.

"Success depends on attracting talent and relevant companies, so necessary conditions such as international schools, top medical facilities and transportation links to the region should be created," noted Mr Chin Phei Chen, CapitaLand's managing director for corporate strategic relations in China.

These are among issues that representatives from both China and Singapore are likely to discuss as the first meetings begin to nail down implementation details.

Like the first two government-led projects - where months of assessments and studies took place even before siting them in Suzhou and Tianjin - concrete developments might not be expected so soon.

This also suggests the project will be a long-term undertaking that requires patience and flexibility, observers say.

Based on past experience with large-scale bilateral projects, Mr Chin, former CEO of the Sino-Singapore Guangzhou Knowledge City, feels it is also crucial for officials and joint-venture partners from both sides to be in close and regular contact with each other, as well as those involved in previous collaborations.

"Maintaining good relations with the government is still very much a factor of success in China," said Mr Kwek. "Singapore companies that desire to establish a partnership with a local enterprise should also do adequate homework and pick the most suitable partner."

A version of this article appeared in the print edition of The Straits Times on November 13, 2015, with the headline 'Strong potential in Chongqing for new joint project'. Print Edition | Subscribe