China’s Inland Ocean of Trading Partners: Its Supercities

In October of 2020, when Xi Jinping heads up the country’s Fifth Plenum to get the ball rolling on China’s Fourteenth Five-Year Plan 2021-2025 (due out by March 2021), these five mega-regions will figure prominently.

Half of the 220 million immigrants will settle directly in one of the five mega-regions where each region of 120 million will each be nearly as populous as the current population of Japan (126 million).

Within those mega-regions, mega-cities (i.e. cities with populations larger than New York City’s 8 million), will zoom from a present day of 9 to 23 by 2030.

MS projects that next-gen technologies in these mega-cities, enabled by an estimated $800 billion in capex for digital infrastructure, should sustain “total factor productivity growth at 1.6 percent annually through 2030. Offsetting industrial automation, vocational training should help match skilled workers with high value-added manufacturing and service jobs.” Labor productivity will almost double, MS estimates, with 55 percent of the increase coming from the “agglomeration effects” of supercities and 40 percent from rural-urban migration.

Most importantly, MS remains confident that “China will reach high-income status as annual per-capita income almost doubles from $9,450 today to $17,800 by 2030…[ most already exceeding the high-income threshold of $12,300 as of 2018]…We [MS] expect total factor productivity to be sustained at a 1.6 percent CAGR through 2030 (down from 1.9 percent in 2014-18), as labor productivity increases by 80 percent from today’s level.”

China’s inland ocean has got the makings of being a very happy place.

MS is describing five very special pieces of real estate harboring a middle class of unprecedented proportions. MS researchers go on to say that these five will “account for 75 percent of China’s real GDP growth (65 percent in 2014-18).” China’s GDP for 2018 was $14 trillion.

“Bigger cities are associated with higher productivity and faster economic growth,” writes The Economist. “As a result, the government has sought to foster the rise of mammoth urban clusters, anchored around giant hubs and containing dozens of smaller—but by no means small—nearby cities.”

Three of these mega-regions are already well on track: the Pearl River Delta, next to Hong Kong; the Yangtze River Delta, which surrounds Shanghai; and Jingjinji, centered around Beijing.