The East Coast (and Fujian)

General Overview

In general, China’s east coast has historically outstripped the interior of the country in almost every economic indicator. In the days before the Second World War, the east coast was dominated by colonial powers and hence traded broadly with the world – whereas the interior remained remote and isolated due a lack of hinterland infrastructure. In the days since reform, the eastern seaboard has regained its mantle as the economic engine of the country – so much so that the nation’s rulers have feared the consequences of the country’s growing economic disparity. Home to the three major economic hubs of the nation – the PRD, the YRD and Bohai Bay – the growth of the east in economic terms has been nothing short of meteoric.

However, for many years, the province of Fujian has lagged behind its more developed cousins on the coast. The reasons for this underdevelopment are ostensibly two-fold. The first is that the necessity of military preparedness in the straits of Taiwan meant that the region was weighed down with a vast military presence, thereby hindering development of non-military infrastructure. The second reason, closely related to the first, was that the administrative environment and security concerns engendered by the military build-up made the environment for foreign investment less friendly than many of the province’s neighbouring areas.

This said though, the recent thawing of cross-straits relations is bringing about something of a renaissance in the region’s prospects. Spurred by what one Chinese official called a ‘narrowing and shallowing’ of the straits, the central government has earmarked substantial funds for investment in provincial infrastructure aimed at maximising the province’s proximity to the Mainland’s former adversaries.

Logistical Overview

Early deregulation of the investment environment for fixed asset maritime infrastructure investment, most notably in container handling facilities, led to the rapid growth of the region and the influx of FDI early in the reform era. This link to the outside world has, however, had some interesting and unique side effects. Regions along the coast integrated themselves into the global supply chain, and provinces and municipalities increasingly saw themselves in a regional competition with their neighbours – to the extent that some even introduced import substitution tariffs.

This regional competition in many ways meant that as China entered the 21st century, many of its regions were in fact better integrated into the global, or regional, economies than they were into the national economy. For instance, it was in many ways easier for firms in Guangzhou to trade with companies in the Americas than it was for them to trade with companies in, say, Xinjiang in the far northwest of China.

In many ways, the greatest challenge for China in this century is to try and aggregate these disparate regional economies into a wider national framework. Measures such as the proposed introduction of a national trucking license and the fuel tax reform (see section 6.16) and the current program of rapid hinterland infrastructure are aimed at addressing this matter.

Key Dynamics

  • The primary driving force for development of the east coast has been the region’s proximity to high-class, foreign invested maritime container terminals.
  • This proximity has opened the region to a flood of foreign investment and a subsequent rise in living standards that has swollen regional domestic demand.
  • Fragmentation between regions on the coast remains an issue Beijing is keen to address by linking regions through administrative as well as infrastructural connections.
  • Growing détente across the straits will likely lead to a flood of investment from the island of Taiwan, most likely in the assembly of high-tech goods from components manufactured on the other side of the straits.
  • This growth of investment and trade will likely lead to increased demand for high quality supply chain solutions in regions traditionally overlooked by many global logistics providers—such as connecting Fujian and other primary trading ports linked to Taiwan with lower cost pools of workers further inland.
  • Growth in trade will likely further spur domestic consumption of Taiwanese produced goods creating higher demand for consumer good distribution strategies.