China’s high-speed rail network emerges as a growth catalyst by linking underdeveloped rural areas to urban centers
Rarely in the last couple of years has the Hong Kong stock market shown so much charm to investors.
The Hang Seng Index rose around 8 percent from the beginning of the year to Feb 14, and reportedly outperformed all other markets in the world.
Hong Kong has long been a window on the economy of the Chinese mainland. And it still is. Its stock market’s recent performance echoes what some analysts said at the turn of the year — that for all its existing problems and tasks to be fulfilled, the mainland economy, and for that matter, the Hong Kong market, will be a factor of stability in 2017, when new uncertainties are likely to pop up in other markets.
In the last few years, China has accumulated good experience in maintaining equilibrium. It has also managed to sustain the necessary levels of growth amid an economic transition under the pressure of a host of external threats and domestic imperatives.
Some problems have been noted by overseas commentators, and, from time to time, interpreted as signals of a larger setback, if not a general crisis.
But the very fact that nothing of the sort has happened should be indicative of something of a long-term significance. The economy’s growth data from the second half of 2016 and the recent price indices, of both consumer and producer goods, have shown a slow but sure-footed recovery.
That recovery is better than most other emerging economies. More importantly, it was not achieved by slashing the exchange rate of the yuan, or by deliberately exporting more. The days when exports were a major contributor to China’s overall growth are long gone.
For some years, the Chinese business press has been talking about “looking for the new growth drivers”. If the country could continue to rely on exports — its familiar way of growth — it would not need to look for replacements.
Now, apparently, several factors are beginning to function as export-oriented manufacturing once did in contributing to GDP growth. However, whether any of these can drive growth in the same way that exports did in the past is still a question.
A leading new growth driver is the so-called high-speed railway economy. This includes all of the business opportunities that China can create by continuing to develop its national high-speed railway network.
This is a completely domestic railway system and it is just beginning to realize its potential. In 2017, as the threat of an international trade war looms large, the network can serve as a strategic stabilizer for the nation’s economy.
But it would be too simplistic to think of China’s high-speed railway program as only an expediency designed to provide orders for construction companies and jobs for their workers.
Better railways can accommodate more travelers and benefit tourism. Chinese tourism revenue saw a year-on-year growth of 15.9 percent, totaling 423.3 billion yuan (more than $60 billion) in the recent holiday week of the lunar new year, or Spring Festival.
Speedier and more comfortable transportation has allowed small towns — located in what used to be called “out of the way” underdeveloped areas — to become much more accessible to people and the companies from the capital-rich large cities on the east coast.
This accessibility has become increasingly important as not just higher incomes, but also rising health concerns, are leading more urban people to seek an environment unpolluted by heavy industries.
In 2016, domestic tourism reaped 3.9 trillion yuan in revenue, equivalent to more than 5 percent of GDP, from serving 4.44 billion people. In the southern Guangdong province, tourist revenue was equivalent to nearly 15 percent of the local GDP.
China’s development over the past few decades has always had this dimension of economic geography.
Since the 1980s, its long cycles of growth were always led, and showcased, by large-scale development and opening up of certain cities.
This can be seen in the special economic zones that were set up — especially Shenzhen in the 1980s, Pudong in Shanghai in the 1990s, and the conversion of the southwestern city of Chongqing into a municipality directly under the central government’s jurisdiction in the 2000s.
In 2017, the high-speed railway system will continue to expand and help distant cities to form economic ties and cities that are close to each other to form clusters. The amount of financial investment that good transport and communications can facilitate is far beyond the sales of the train tickets, however big an amount this may be.
There are high-speed railways that, on the surface, do not seem able to generate enough direct returns to cover their costs, such as those that cut through the country’s southwestern mountains and northwestern deserts.
But they are of great help to the local people, who can earn better returns from sending local products to the markets of distant large cities.
By the same token, from the financial markets of Hong Kong, investors can see their returns from companies involved in the mainland’s high-speed railway system — which is not just one new industry, but a new dimension of China’s entire economic geography.