Ni Pengfei speech at Annual Report on China’s Urban Competitiveness No.4 news release

Ni Pengfei: The One Who Actually Takes Responsibility for the Real Estate is the Central Government

Updated: 2008-09-27 15:50:30

Doctor Ni Pengfei from the Institute of Finance & Trade Economics, CASS

Many thanks to all the leaders and experts for attending the meeting today.Thank all the friends in the press as well for the supports on our research. Just as Director Pei said, I extremely thank the units and leaders that supported us. The conclusion and viewpoint in this report is the view of the members of our research group. The research group, especially me, will be responsible for the deficiencies.

First of all, I would like to introduce the global and national background of the urban competitiveness in 2005. It is generalized in few points. First, the global competition makes cities more important, further strengthens the relationship of cities and country. The countries participate in the international competition through cities, and the international competition of cities is also more dependent on the competition of countries. In 2005, the competition of global countries, Asian countries in special, is fierce.

Second, the international competitions of cities rely on the competitiveness of regional urban agglomeration; the overall strength is extremely obvious. Cities get involved in international competitions in the form of urban agglomeration. It is also quite apparent that the urban agglomerations in China rose and competed vigorously in 2005. Third, with the booming of economic integration of China, the competition situation among the cities in the four-region across the straits became a particular focus of Chinese people, entrepreneurs and decision makers of cities domestic and overseas. This is the fourth report we are now presenting. We have widened our research scope due to the strong demand of researching Hong Kong, Macao and Taiwan region, which was appealed after every of the last three reports. Forth, the development of cities in China is under a transition and the competition is upgrading. The quality of citizens, scientific and technical innovation, social harmonious, core competitiveness and city brand are becoming the popular viewpoints. Fifth, the higher house price, unreasonable structure of housing supply, excessive investment on real estate in some cities not only affect the life of urban citizens but also the promotion of urban competitiveness, which has become an important issue on China’s economic, especially its urban economic influence. The report of the year 2005 was made under these five backgrounds.

The report still contains two parts. The introduction on the situation of competitiveness shall be presented in part one, and the introduction on the theme of this report as well as the circumstance of real estate shall come next. Before finishing this report, we formed an analysis framework, also divided into two parts, of competitiveness report, the first part of which contains the factors that demonstrate the competitiveness. We have increased the structure and total amount reflecting the scientific and technical innovation on the base of the 6 original factors: comprehensive ability of growth, comprehensive economic scale, comprehensive efficiency, comprehensive benefits (the save of resource and environment), comprehensive structure especially on science and technology and modern service industry, employment status of China. Thus, we have 7 indicators in total to reflect the comprehensive competitiveness.

The interpretative frame of the urban competitiveness is to explain which factors affecting the city competitiveness ranking in this position. We have developed an important framework named flywheel model. It includes citizen ontology competitiveness, enterprise ontology competitiveness, industry competitiveness, public sector competitiveness, commercial environment competitiveness, innovational environment competitiveness, social environment competitiveness from inside to outside. We compared 200 cities in China, includes Hong Kong, Macao and the cities in Taiwan, just on the basis of this frame.

The most important thing I want to introduce to everyone is the China’s urban competitiveness pattern in 2005. First, the top 20 cities on the comprehensive urban competitiveness ranking list of 200 cities in China are Hong Kong, Taipei, Shanghai, Beijing, Shenzhen, Guangzhou, Kaohsiung, Macao, Hsinchu, Keelung, Ningbo, Suzhou, Tainan, Tianjin, Xiamen, Dalian, Wuxi, Shenyang, Qingdao. As we have extended our research scope, the ranking of the cities in the mainland have dropped this year, but it does not mean that their absolute competitiveness has decreased. The gradation of the competitiveness pattern is very distinct. The ranking declines in sequence as Hong Kong, Macao and Taiwan region; China’s south-east coastal area; Central China; northeast China; western China. And in the eastern coastal area, the five regions rank as Yangtze River Delta, Pearl River Delta, Beijing-Tianjin-Hebei region, Shandong Peninsula, west coast of Taiwan straits.

The second pattern that is worth focusing on is the rapid change of competition pattern. It is that the competitiveness of inland cities increases rapidly, meanwhile, the competitiveness of the cities in Taiwan region grows slowly, some of them are even gliding down. It is notable that economy of Jiayi has been negatively grown in two consecutive years, and Taichung had negative economic growth in 2004 as well. The economy of the entire Hong Kong-Macao-Taiwan region, except Macao, grows much slower compared with inland cities. Developmental stage, of cause, is one of the factors, but it also reflects a tendency of potential competitiveness. It is not yet caught attention by the related persons in Hong Kong, Taiwan and Macao. Some cities in north-eastern and western areas of mainland China have rapidly increased their competitiveness.

The third, affected by macro-control and high frame, the competitiveness of several cities in the areas such as Yangtze River Delta and Pearl River Delta, which used to surge forward by high investment and high housing price, is now decreased. We have drawn them out from the ranking, and I am not going to give any speech on them. Different areas have different competition patterns. The former fast-developing manufacturing cities in the east, especially the middle-sized and small sized cities we have mentioned before, are facing adverse situation in resource factors and technique. The leading cities in the north-east and mid-west, such as Wuhan, Shenyang, Changsha, Chengdu, Chongqing, started to show their comprehensive advantages, but the distance between the small-medium cities and leading cities in the mid-west area is getting far.

We also have ranked China’s top 60 competitive cities in 2005 for their explanation competitiveness. People do not understand what the explanation competitiveness is in the past. As a matter of fact, the comprehensive competitiveness if formed by the 7 performance indicators mentioned above. The explanation competitiveness we are talking about is formed by another different 8 indicators. We also specifically compared these two data this time.

We have an important discovery from this research. We have done a research on the factors affecting the urban competitiveness. I will emphasize one of them, first class indicator, or to say how much the 8 comprehensive factors impacting the urban competitiveness. It now appears that the talent is the most important factor, the industry comes secondly, and the biotic environment is the next.

We have also made an investigation of China’s urban competitiveness for over 50 indicators, 60 cities and 6000 questionnaires, and it turns out that people are more satisfied with the following issues: first is more satisfied with the basic education; secondly, the entrepreneur’s desire for the fortune and urban concept are much better; and then is the market expectation, which means people are more optimistic about the prospect of the city, the entrepreneurial concept and consciousness of the citizens is better, the risk of cities’ foreign investment is more ideal. Meanwhile, we have discovered the 5 factors from the 50 that performing the worst, or to say the citizens like them least, are: the satisfaction about medical service is low; and the urban privilege, the destruction of the equality of opportunity is unsatisfying; then the urban and rural social insurance distance, urban public service distance, the rationality of urban and rural medical charges. These are the most unsatisfying issues. In fact, we have made such investigation annually in last 4 years, and the results are basically the same. In other words, people concerned these issues much but are not satisfied with them for several successive years.

According to the abovementioned situation, we have several policy suggestions for China’s urban competitiveness. Firstly, from the view of the central government, they should establish the regional policies center on developing the regional competitiveness, especially support the eastern area going onto the world stage and form powerful international competitiveness. On the other hand, they need to help the cities in mid-western area develop themselves and strength their ability of competition, not just simply transfer the payment. And, at the same time, they should support the middle sized cities strongly, which the prime minister Wen Jiabao also mentioned this year. However, our research found that the gap between the cities in the middle area and eastern area is extending.

After the research on the urban competitiveness, there still is a background of it, the study of the urban agglomeration, on which the doctor Bai Mei in our industrial & agricultural research institute has done a lot of studies.

Moreover, we were also trying to research on China’s national competitiveness. We used our own frameworks and indicators this time and we think this research is convincible. The basic processes are as this, for instance, to determine the content, the frame, the indicators, the data, chose the samples, to analyze China’s advantages, disadvantages and competitive environment. The conclusion is China ranks on the 34th in the list of chosen 100 countries and regions in the world. The top 10 rank as the USA, Germany, Japan, the UK, France, Netherland, Ireland, Italy, Belgium, and Hong Kong ranks on 11th. China has irresistible development trend, but also inevitable competitive disadvantages and its competitive environment is full of crises. We, at the same time, have proposed “China’s global win-win strategy” that getting through the close siege. China’s competitive strategy needs great research. We are now only presenting a preliminary thought, giving specific opinions on 8 aspects. It still needs further study.

What is coming next is the theme of this year--the relationship between China’s urban competitiveness and urban real estate. Real estate economy is part of the market economy. They are in a relationship of the part and the whole, are mutually effective and inseparable. After finishing the frame of the research, we made some metrical analysis, and the conclusions are as follow in general. If a city has high competitiveness, it may have high housing price; if it has low competitiveness, the housing price may be low as well. If the housing price of a city is not high, it may weaken the city’s competitiveness, and it is even not good for strengthening the urban competitiveness if it is too low. It is like this generally. We also made a graph in which we can have a look at the comparison of the competitiveness and the housing price clearly. Firstly, the most uncoordinated or problematical cities should be, ordering as this, Shenzhen, Hangzhou, Shanghai, Beijing, Xiamen, Guangzhou, Kunming, Dalian, Nanning. It means the housing price is too much higher compared with its competitiveness. Relatively speaking, the cities that have a developing potential on housing price are Sining, Chongqing, Changchun and Hohhot. This estimation is consistent with some enterprises and practical departments. They, from the perspective of investment, think that Chongqing and Wuhan have potentials.

For the reason that people are paying more attention on the health of the real estate, we have made a great effort on it this year. We have retrieved many foreign literatures, but could not find any real systematic study on it. We made a preliminary and pioneering research on this issue. First of all, we consider that the called healthy real estate market is, in the aspects of the scale, structure, speed, quality and so on, real estate system and macro-economic system, is that the urban macro economy and other systems should be interacting and mutually promoting. From the point of this concept, a frame was shaped and then computed the degree of deviation of the health of real estate of 35 large and medium-sized cities in 4 markets: housing market, commercial real estate, industrial real estate, land market. The procedure is as this: establish a frame first; then the indicator systems, about 46 of them including the issues of housing price bubble, structure, stock, increment and more; and also theoretic formulas, about 40 of them as well, simply linear but very effective and be able to show the issues clearly; then estimate the formula coefficient, work out the empirical data; at last, compare the actual data, empirical data, standard data and compute the degree of deviation.

There are a few conclusions. Generally speaking, the real estates of the 35 large and medium-sized cities are not healthy. The scope and object we are researching on is 35 large and medium-sized cities. They are all unhealthy in strict significance for we could hardly find any healthy submarket of these 4 markets. Nevertheless, we lowered the line. If there are two markets that are healthy, it means you are healthy; if there are three unhealthy markets, it appears that you are not in a healthy condition. The results show 15 healthy, 15 unhealthy and 5 seriously unhealthy. The housing price is on the high side, the scale of the investment on social security housing is small, growth of it is low as well, and the investment on housing is overheated. The price of land market is not high as other former studies. On the contrary, it is low according to our research. It is unhealthy neither. We found that the health issues of China’s urban real estate affected by the development of itself, and also the pre-maturation and incompleteness of regime, institution, administration and policies.

Let me introduce you the discovery of the level of marketization. The ranking of the most market-oriented cities is as Shenzhen, Guangzhou, Shanghai, Qingdao, Hangzhou, Dalian, Ningbo, Nanjing, Chengdu and Beijing. The cities rank in the first places on the overall indicators are Shenzhen, Guangzhou, Shanghai, Qingdao, the cities rank in the last places are Xi’an, Sining, Taiyuan, Lanzhou, Hohhot. The real estate markets of the important cities in our country have basically achieved marketization in general. They, however, have a long way to achieve complete marketization. The overall indicators show that the highest score among the 35 large and medium-sized cities is 7.13, and the lowest is 6.09.

We have done a research on the investment potential of China’s real estate. We have researched the investment potential of 3 markets, housing market, commercial real estate and industrial real estate, of 50 cities. We also have researched the factors affecting the investment potential, especially the housing, and we found that the most important factor is the growth rate and scale of the immigrations. In other words, the housing market might have more potential if the immigration of the city h