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The effects of globalization on the urban system in China

The open policy has led to a concentration of foreign investment in the Eastern Coastal region. SEZs and open coastal cities benefit more from the open policy than inland cities and have higher economic growth rates (Leung, 1990; Xie and Costa, 1991; Fan, 1992). The distribution of foreign investment is mainly concentrated in the extra-large cities and in the Eastern Coastal region (table 7.6). Quite a sizeable amount of foreign investment is also located in the medium-sized cities in the Eastern Coastal region. However, as reflected by the coefficient of variation, there is great variation between regions and city sizes (tables 7.7 and 7.8). FDI tends to concentrate in the coastal regions and large cities. For most regions and city sizes, the coefficient of variation is higher than 300 per cent. The variations in foreign investment are very high for small, medium-sized, and large cities. But the variation is relatively small in extra-large cities, indicating that most extra-large cities have high foreign investment and less variation. The great concentration of foreign investment is shown in table 7.9. In 1990, the top 20 cities as regards foreign investment accounted for 78.3 per cent of total FDI in cities. All these cities are coastal cities in the Eastern Coastal region. Most of them are located in Guangdong province, which is adjacent to Hong Kong, the major source of foreign investment in China.

Table 7.7 Foreign direct investment in cities by region, 1990

Source: China Urban Statistical Yearbook, 1991.

Table 7.8 Foreign direct investment in cities by city size, 1990

Source: China Urban Statistical Yearbook, 1991.

Table 7.9 Top 20 cities for foreign direct investment, 1990

Source: China Urban Statistical Yearbook, 1991.

There is a difference in the source of FDI between northern coastal cities and southern coastal cities. Take Shenzhen and Shanghai, for example. The source of investment in Shenzhen is mainly Asian countries, particularly Hong Kong, whereas Asian FDI is less prominent in Shanghai (table 7.10). In the period 1985-1989, 93.0 per cent of the FDI in Shenzhen came from Asia, with 85.0 per cent from Hong Kong. In Shanghai, only 52.7 per cent of FDI was from Asia and 30.5 per cent was from non-Asian countries. Although Hong Kong was still the largest investor, it constituted only 34.7 per cent of its FDI. Investment from Japan and the United States was more important in Shanghai than in Shenzhen. The pattern of foreign investment is different too. Most of the foreign investment in industries in

Table 7.10 Distribution of the source of foreign direct investment in Shenzhen and Shanghai, 1985-1989 (%)

Sources: Shenzhen Statistical Yearbooks; Guangdong Statistical Yearbooks; Shanghai Statistical Yearbooks; Almanac of China's Foreign Economic Relations and Trade.

Shenzhen is small, whereas foreign investment in Shanghai tends to be large. This is mainly because of the nature of foreign investment from Hong Kong. Foreign investment from Hong Kong is mainly related to outward processing of small industries from Hong Kong, and tends to involve many investors with small capital, utilizing the cheap labour and land in Shenzhen.

There is also a difference between the two cities in the distribution of FDI among different sectors. In the period 1985-1989, over 75 per cent of FDI was in industry in Shenzhen, whereas industry constituted only 41.6 per cent in Shanghai (table 7.11). On the other hand, there is more foreign direct investment in real estate in Shanghai than in Shenzhen.

The country of origin of foreign investment has different impacts on the urban system. Foreign investment from Hong Kong is mainly located in the southern provinces, particularly the Pearl River Delta. Such investment is increasingly located in rural townships, contributing to the rapid rural urbanization of the Pearl River Delta. In contrast, most of the foreign investment from Japan and other countries is located in cities and less in rural areas. However, because of the development of export industries, many towns and cities are producing goods that are exported to different parts of the world.

Table 7.11 Distribution of foreign direct investment by sector in Shenzhen and Shanghai, 1985-1989 (%)

Sources: Shenzhen Statistical Yearbooks; Guangdong Statistical Yearbooks; Shanghai Statistical Yearbooks; Almanac of China's Foreign Economic Relations and Trade.

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