Download China in Transformation VII_Fosha

Strategy Research
January 11, 2016
Thematic Strategy
China in Transformation (VII):
Foshan is committed to city upgrades
Changes in Foshan
Foshan has achieved extraordinary economic development,
but its urban development has lagged. Foshan recorded a CAGR
of 16% in GDP over 1978~2014, much faster than the nation’s 10%. In
2014, the city had the largest economic output in Guangdong’s
prefecture-level cities, with a per capita GDP higher than Beijing and
Shanghai. Its industrialization was led by private entrepreneurs and
was domestic-oriented, ensuring more stable economic growth. But
the free hand in economic development also led to disorder in urban
construction and a deterioration in the ecological environment. The
city’s appearance was unworthy of its level of economic development.
Hui WANG, CFA
SAC Reg. No.: S0080514120001
[email protected]
Guang ZHOU
SAC Reg. No.: S0080513050001
SFC CE Ref: ALS668
[email protected]
Foshan has implemented a program to upgrade the city,
promote industrial restructuring and achieve a better
integration of the city, industry and its people. In 2012, Foshan
proposed a program to promote sustainable urban development
through pollution controls, landscaping, re-engineering of urban
functions, and reshaping of city value. The program is fully consistent
with top-level designs for urban development proposed by the Central
Urban Work Conference held at end-2015, and Foshan is playing a
pioneering role. In the future, Guangzhou-Foshan integration and the
coordinated development of the Pearl River Delta will provide more
opportunities for Foshan.
Land reforms in Foshan
Foshan broke through land bottlenecks via reforms. Most of the
land in Foshan was collective-owned. As the city underwent rapid
industrialization, land soon became a bottleneck that limited its
economic development. Therefore, Foshan implemented rural land
joint-stock reforms and created a market for transactions in
collective-owned land use rights. The government also expropriated
land by providing farmers with high returns and diverse compensation.
Foshan’s experience suggests that land reforms can unlock the value of
land and offer a win-win situation. Property income accounted for a
much higher proportion of farmers’ income in Foshan than nationwide.
Foshan’s state-owned land transfer revenue contributed greatly to local
government revenue.
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From Foshan to China, the inspirations
Given the wide diversity of economic growth across China, it is
important to study different cities to understand China’s economy.
Foshan does not have natural resources or policy advantages, but it
has a long history of pioneering market reforms in China. The
balanced and well fitted relationship between government
and market is the key to the remarkable success story of
Foshan.
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CICC Research: January 11, 2016
Contents
Introduction: why Foshan? ................................................................................................. 4
The changes in Foshan ....................................................................................................... 6
A healthy economy dominated by the industrial and private sectors ......................................... 6
Industries: local government engineered an innovative path to industrial upgrades ..................13
Urban construction: city upgrades as part of supply-side reforms ...........................................17
Foshan’s land reforms ...................................................................................................... 20
Foshan broke through the land bottleneck via reforms ..........................................................20
Reforms unlocked the value of land and created a win-win situation .......................................22
Figures
Figure 1: The sixth leg of our field trip of Chinese cities – Foshan ................................................ 5
Figure 2: Foshan is located in the PRD and borders Guangzhou to the east ................................... 7
Figure 3: From 1978~2014, Foshan’s GDP grew at a CAGR of 16%, significantly outpacing the
nation’s 10% .......................................................................................................... 7
Figure 4: Among Guangdong’s prefecture-level cities, Foshan ranks first in terms of GDP and
second in terms of per capita GDP, but its tertiary industry has a relatively low
proportion of GDP .................................................................................................... 8
Figure 5: Foshan’s per capita GDP reached US$16,000 in 2014, ranking eighth among the 56 cities
with resident populations of >7mn and higher than in Beijing and Shanghai ................... 8
Figure 6: The industrial sector’s proportion of Foshan’s GDP reached 60%, at a historic high and
much higher than the national level of 36% ............................................................... 9
Figure 7: The secondary industry contributed the most to Foshan’s economic growth ..................... 9
Figure 8: Foshan is among China’s areas with the most developed private economy .....................10
Figure 9: Growth in FDI attracted by Foshan slowed while FDI as a percentage of Foshan’s GDP
continued to fall ................................................................................................... 10
Figure 10: Foshan’s export growth slowed ...............................................................................11
Figure 11: Foshan’s industrial sales have gradually shifted to the domestic market .......................11
Figure 12: Foshan has had relatively stable FAI ............................................................................ 12
Figure 13: Foshan’s mainly self-funded FAI mostly goes to real estate and the industrial sectors ... 12
Figure 14: Foshan has developed town-based industry clusters ................................................ 14
Figure 15: The growth in Foshan’s industrial value added slowed markedly due to the large
proportion of traditional industries ........................................................................ 14
Figure 16: Foshan accounts for >10% of the national output of home appliances and wall tiles ......15
Figure 17: Industrial enterprises in Foshan increased their R&D spending in recent years, raising
the R&D intensity significantly ................................................................................15
Figure 18: Foshan’s listed companies ......................................................................................16
Figure 19: Changes in Foshan’s urban area and population ........................................................17
Figure 20: Foshan had an urbanization rate of 95% in 2014 ......................................................18
Figure 21: Foshan’s pollution controls have been effective judging from its sewage treatment rate
and sulfur dioxide emissions ................................................................................ 19
Figure 22: The structure of Foshan’s land use ..........................................................................22
Figure 23: Farmers in Foshan benefited from the appreciation in land prices ................................22
Figure 24: Property income accounted for 13% of farmers’ income in Foshan’s Nanhai District,
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CICC Research: January 11, 2016
much higher than the nation’s 3% and Guangdong’s 9% ...........................................23
Land appreciation contributed greatly to Foshan’s government revenue .......................24
Provincial government fund revenue as a percentage of total government revenue........24
Proportion of provincial public fiscal revenue that is related to real estate ....................24
Foshan’s investment in real estate development over the first 11 months of 2015 grew
10.9% vs. the nation’s 1.3% growth; Foshan’s real estate development investment as
a percentage of GDP has been relatively stable ........................................................25
Figure 29: Growth in Foshan’s housing sales area and price index ..............................................25
Figure 30: Foshan’s average housing price is less than 2/3 that of Guangzhou’s ...........................25
Figure
Figure
Figure
Figure
25:
26:
27:
28:
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CICC Research: January 11, 2016
Introduction: why Foshan?
Being an ordinary city,
Foshan
achieved
extraordinary development.
Its experience is worth
studying and learning.
Foshan is just an ordinary city in China. Foshan, one of 19 prefecture-level cities in
Guangdong Province, does not have rich natural resources like cities in northeastern
China, or an abundance in land and cheap labor like cities in central China, or relative
policy advantages like municipalities, provincial capitals or sub-provincial cities.
Traditional industries make up a high proportion of Foshan’s economy, while it has
encountered issues in transportation, environmental and others during its urban
development. Foshan is relatively unknown by people outside of China, with its main
claim to fame probably being Chinese martial arts (Bruce Lee’s ancestral home was in
Foshan).
However, Foshan’s development has been extraordinary.
Foshan has achieved rapid economic growth since China started to reform
and open up, and it is one of the areas in the country with the most well
developed private economy. From 1978~2014, Foshan’s GDP grew at a CAGR of
16%, significantly outpacing the nation’s 10%. Foshan’s per capita GDP reached
US$16,000 in 2014, higher than in Beijing and Shanghai and met the World Bank’s
standard for a high-income economy. The private economy contributed 60% of
Foshan’s GDP and 70% of its value in industrial output and has been a key driver of its
economic development. In 2014, the city had the third largest economic output in
Guangdong Province, only behind Guangzhou and Shenzhen.
Foshan is in the forefront of China’s land reforms and urbanization. The high
proportion of collective-owned land in Foshan has made reforms imperative for the
purpose of industrial development and urban construction. The city’s government has
vigorously pushed ahead with land reforms, which have unlocked the value of land,
made enough land available for urban construction and industrial development, and
increased the incomes of farmers and the government’s revenue. In 2014, Foshan had a
resident population of 7.3mn and an urbanization rate of 95%.
To find out the story behind Foshan’s success, we visited Foshan on the sixth
leg of our field trip of Chinese cities.
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CICC Research: January 11, 2016
Figure 1: The sixth leg of our field trip of Chinese cities – Foshan
2
5
Zhengzhou
4
3
Chongqing
Hefei
Wuhan
6 1
Foshan
Shenzhen
Source: CICC Research
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CICC Research: January 11, 2016
The changes in Foshan
A healthy economy dominated by the industrial and private sectors
Foshan’s economy grew rapidly since China started to reform and open up
In 2014, Foshan had the
third
largest
GDP
in
Guangdong, behind only
Guangzhou and Shenzhen;
its per capita GDP ranked
eighth among cities similar
size and was higher than in
Beijing and Shanghai.
Foshan is located on the Pearl River Delta (PRD) and borders Guangzhou to the east.
The area is a pioneer in China’s reforms and opening up and one of China’s most
important economic hubs. In 2014, Foshan’s GDP reached Rmb744.2bn, ranking first
among Guangdong’s prefecture-level cities. From 1978~2014, Foshan’s GDP
grew at a CAGR of 16%, significantly outpacing the nation’s 10% (Figures 3
& 4). The city’s per capita GDP reached US$16,000 in 2014, ranking eighth among the
56 cities with a resident population of >7mn and higher than in Beijing and Shanghai.
The other top-ranking cities are mostly municipalities or provincial capital cities (Figure
5).
Compared with the other cities we visited:
Compared with Dongguan, also a prefecture-level city in Guangdong:
both Foshan and Dongguan are dominated by the private economy. Like Dongguan,
Foshan had also attracted foreign direct investment (FDI), but with the rise of local
SMEs, the proportion of foreign-invested enterprises has gradually declined in
Foshan, making its economic growth more endogenous and resilient. Dongguan has
more foreign-invested enterprises and is more impacted by industry relocations.
Since 2009, Foshan’s GDP has grown at a CAGR of 10.9%, much faster than
Dongguan’s 7.8%.
Compared with Shenzhen, which is also along the Pearl River: both Foshan
and Shenzhen have high per capita GDP of >Rmb100,000. Nearly half of Foshan’s
residents do not have a local hukou, while this percentage is as high as 70% in
Shenzhen. Both cities export a significant proportion of their industrial products to
overseas markets. But in recent years, more of Foshan’s sales of industrial products
have shifted to the domestic market and the proportion of exports has declined to
14%. Both are highly industrialized but Foshan’s industrial sector is dominated by
traditional industries, while Shenzhen has successfully achieved industrial
transformation and upgrades.
Compared with the capital cities of inland provinces: although Foshan does
not enjoy advantages in terms of resources, land, labor and policy, it is ahead of
most inland cities in terms of economic development, economic vitality, land
reforms and urbanization. With the improvement of transportation infrastructure in
inland regions, Foshan’s experience in reforms can be drawn upon by inland cities.
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CICC Research: January 11, 2016
Figure 2: Foshan is located in the PRD and borders Guangzhou to the east
Foshan
Source: Baidu, CICC Research
Figure 3: From 1978~2014, Foshan’s GDP grew at a CAGR of 16%,
significantly outpacing the nation’s 10%
Foshan GDP per capita (RHS)
Foshan GDP Growth
(%)
40
National GDP growth
National GDP per capita (RHS)
(Rmb)
101,617
100,000
35
CAGR: 16%
30
80,000
25
60,000
20
15
40,000
8.3
10
20,000
6.9
CAGR: 10%
5
2015
2013
2014
2011
2012
2007
2008
2009
2010
2003
2004
2005
2006
2001
2002
1999
2000
1995
1996
1997
1998
1991
1992
1993
1994
1988
1989
1990
1987
1983
1984
1985
1986
1979
1980
1981
1982
0
1978
0
Source: Foshan Statistical Yearbook, Wind Info, CICC Research
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CICC Research: January 11, 2016
Figure 4: Among Guangdong’s prefecture-level cities, Foshan ranks first in
terms of GDP and second in terms of per capita GDP, but its tertiary industry
has a relatively low proportion of GDP
Proportion of
tertiary industry, %
55
Area represents
GDP per capita
Dongguan
50
Zhuhai
Shaoguan
45
Maoming
Qingyuan
Meizhou
Jiangmen Zhongshan
Shantou
Heyuan
Zhanjiang
Huizhou
ShanweiChaozhou
40
Foshan
Zhaoqing
Yunfu Yangjiang
35
30
Jieyang
GDP, Rmb bn
25
-
100
200
300
400
500
600
700
800
Source: Guangdong Statistical Yearbook, Wind Info, CICC Research
Figure 5: Foshan’s per capita GDP reached US$16,000 in 2014, ranking
eighth among the 56 cities with resident populations of >7mn and higher
than in Beijing and Shanghai
(Rmb)
160,000
GDP per Capita
(th)
Population (RHS)
30,000
149,497
140,000
129,925
24,152
128,478
120,000
107,683
107,545
25,000
21,148
105,202
103,757
101,617
100,000
99,995
98,972
97,343
20,000
14,722
80,000
60,000
15,000
12,927
10,629
10,579
7,221
8,844
8,188
10,000
7,663
7,296
40,000
5,000
20,000
-
0
Shenzhen
Suzhou Guangzhou Changsha Nangjing
Tianjin
Hangzhou
Foshan
Beijing
Ningbo
Shanghai
Source: CEIC, Wind Info, CICC Research
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CICC Research: January 11, 2016
Economic structure
Foshan
is
highly
industrialized.
The
industrial
sector
contributes
60%
of
Foshan’s GDP and is the
main driving force behind
its rapid economic growth.
The industrial sector is the main driving force behind Foshan’s rapid
economic growth. Since 1978, the industrial sector has contributed half of Foshan’s
GDP and its contribution peaked at 63% in 2008. Currently the industrial sector
contributes 60% of Foshan’s GDP, well above the national level of 36%. The secondary
industry makes a much greater contribution to Foshan’s economic growth than the
primary and tertiary industries and is the pillar of Foshan’s economic development.
The development of the tertiary industry has been relatively slow. From
1978~2000, the tertiary industry’s proportion of Foshan’s GDP increased from 18% to
45%. Over the same period, the proportion of the secondary industry fluctuated
between 50~60%, while that of the primary industry shrank rapidly. But after 2000,
Foshan became more industrialized, with the proportion of the secondary industry rising
above 60%. Meanwhile, the proportion of the tertiary industry declined. In recent years,
Guangzhou and Shenzhen saw rapid development of their service sectors, with the
proportions of their tertiary industries outstripping that of their secondary industries.
Under the plans for the integrated and coordinated economic development of
Guangzhou-Foshan, the development of the city’s service sector has been relatively
slow compared with other cities in Guangdong (Figure 4).
Figure 6: The industrial sector’s proportion of Foshan’s GDP reached 60%, at
a historic high and much higher than the national level of 36%
Industrial sector 's proportion of
Structure of Foshan's GDP
Primary
sector
2%
Other
service
sectors
14%
Real estate
6%
Financials
4%
(%)
Foshan's GDP
National
60
Foshan
Shenzhen
59.7
50
39.8
40
Hotels &
Restaurants
2% Wholesale &
retail
8%
Transportati
on, Storage
& Logistics
2%
Construction
industry
2%
Industrials
60%
35.8
30
20
2014
2011
2008
2005
2002
1999
1996
1993
1990
1987
1984
1981
1978
10
Source: Foshan Statistical Yearbook, Wind Info, CICC Research
Figure 7: The secondary industry contributed the most to Foshan’s economic
growth
(%)
25
Contributors to Foshan's economic growth
Primary sector
Secondary sector
Tertiary sector
Structure of Foshan's GDP
(%)
70
Secondary sector
Primary sector
Tertiary sector
60
61.8
20
50
15
40
36.4
30
10
20
5
10
0
1.8
2014
2011
2008
2005
2002
1999
1996
1993
1990
1987
1984
1981
1978
2013
2011
2009
2007
2005
2003
2001
1999
1997
1995
1993
1991
1989
1987
1985
1983
1981
1979
0
Source: Foshan Statistical Yearbook, Wind Info, CICC Research
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CICC Research: January 11, 2016
The type of economy
Foshan is dominated by the
private economy and local
enterprises. Its economic
growth
is
vibrant,
endogenous and resilient.
Foshan is dominated by the private economy and its economic development
is vibrant. Foshan is among China’s areas with the most developed private economy.
In 2014, the private economy contributed 61.2% to Foshan’s GDP and 69.6% of the
value of its industrial output (Figure 8). Private enterprises have become an important
driving force behind Foshan’s sustained, rapid and healthy economic development.
Currently, there are 145,000 private enterprises in Foshan, accounting for 87.8% of the
total number of enterprises in the city.
The proportion of foreign-invested enterprises declined and the dependence
on foreign investment was reduced. Like other cities in the PRD, Foshan attracted
foreign investment as early as when China began to reform and open up. Before 2000,
FDI represented >10% of Foshan’s GDP and foreign-invested enterprises contributed
40% of Foshan’s industrial output value (32% from Hong Kong, Macau and Taiwaninvested enterprises). But after 2000, Foshan’s local enterprises prospered and its
dependence on foreign investment was reduced. In 2014, FDI represented only 2% of
Foshan’s GDP and foreign-invested enterprises’ proportion of Foshan’s industrial
output value fell to 30% (the proportion of Hong Kong, Macau and Taiwan-invested
enterprises dropped 14ppt).
Figure 8: Foshan is among China’s areas with the most developed private
economy
Foreign-invested
Structure of gross industrial output in Foshan
100%
8
9
32
32
14
90%
HK/MC/TWinvested
14
Others
70%
60%
18
23
5
50%
15
40%
21
25
13
10
2
30%
25
20%
12
26
13
22
28
4
0
2013
10%
8
0%
3
2003
1998
Private
Private economy
80%
2008
Company limited
by share
Company limited
Associated
Joint stock
cooperative
Colletive
SOE
Source: Foshan Statistical Yearbook, Wind Info, CICC Research
Figure 9: Growth in FDI attracted by Foshan slowed while FDI as a
percentage of Foshan’s GDP continued to fall
(US$
Actual utility of FDI in Foshan
Actual utility of FDI
Growth rate
mn)
Foreign dependency degree of
Foshan's economy
45% 20%
FDI/GDP
40% 18%
2,500
35% 16%
2014
0%
2012
2%
0%
2010
4%
5%
2008
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
0
6%
2006
10%
500
8%
2004
15%
2002
1,000
10%
2000
20%
12%
1998
25%
1,500
14%
1996
30%
1994
2,000
Source: Foshan Statistical Yearbook, Wind Info, CICC Research
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Exports
Foshan’s industrial sales
have gradually shifted to
the domestic market. The
proportion of exports fell
gradually, but industrial
sales have continued to
grow.
Foshan’s industrial sales have gradually shifted to the domestic market. Like
other cities in the PRD, Foshan is closely linked with the global economy and exports its
products to global markets. The proportion of exports in Foshan’s industrial sales
peaked at 32% in 2004, only half of Shenzhen’s peak level but much higher than 10
years ago. Foshan’s exports took a hit from the global financial crisis and the proportion
of exports in Foshan’s industrial sales dropped 7ppt in 2009. In fact, Foshan has been
gradually shifting to the domestic market since 2004. Even though the proportion of
exports fell gradually, its industrial sales have continued to grow.
Figure 10: Foshan’s export growth slowed
Export of Foshan
(US$ bn)
50
Export (LHS)
Growth rate
40%
Trend of growth rate
45
30%
40
35
20%
30
25
10%
20
0%
15
10
-10%
5
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
-20%
1994
0
Source: Foshan Statistical Yearbook, Wind Info, CICC Research
Figure 11: Foshan’s industrial sales have gradually shifted to the domestic
market
(Rmb bn)
Industrial sales output value
Export
1,800
share
Growth rate
1,668
50%
45%
1,600
40%
1,400
35%
1,200
30%
1,000
25%
800
17% 20%
600
15%
14%
400
10%
200
5%
-
0%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: Foshan Statistical Yearbook, Wind Info, CICC Research
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Investment
FAI in Foshan has been
relatively
stable.
FAI
accounts for ~30% of
Foshan’s GDP vs. the
nation’s 80%.
Unlike some cities with excessive investment, Foshan has had relatively
stable fixed asset investment (FAI). In terms of FAI as a percentage of GDP (Figure
12), Foshan and the nation have shown diverging trends. Since 2000, the nation’s FAI
has increased rapidly from 30% of GDP to 80% of GDP, while Foshan’s FAI only rose
from 20% to 35%, lower than Guangdong’s 39%. In recent years, growth in the
nation’s FAI has slowed markedly, while Foshan’s growth has been relatively stable at
around 15%.
In terms of its investment structure, real estate investment and industrial
investment each accounted for ~35% and their proportions have gradually
increased since 2009. The proportion of infrastructure investment reached ~30%
in 2009 and 2010, before declining to 18% in 2014.
In terms of the sources of investment funding, self-funding accounted for 55%, but
lower than the nation’s 70%.
Figure 12: Foshan has had relatively stable FAI
Growth rate of FAI
(%)
50
National
FAI/GDP
90%
Foshan
45
80%
40
70%
35
Foshan
National
Guangdong
80%
60%
30
50%
39%
2015 Sep YTD 40%
16.2
30%
2011
2008
2005
2002
1999
1996
1993
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
0%
1999
10%
0
1998
5
1990
20%
1987
10.30
1984
10
35%
1981
15
1978
20
2014
25
Source: Foshan Statistical Yearbook, Wind Info, CICC Research
Figure 13: Foshan’s mainly self-funded FAI mostly goes to real estate and the
industrial sectors
Structure of Foshan's FAI: by invetment
sector
Others
12%
Structure of Foshan's FAI: by Source
Other
sources
26%
Infrastructu
re
investment
18%
Capital in
budget
2%
Domestic
loans
15%
Property
36%
Industry
34%
Selffunded
55%
Source: Foshan Statistical Yearbook, Wind Info, CICC Research
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CICC Research: January 11, 2016
Industries: local government engineered an innovative path to
industrial upgrades
Manufacturing
Foshan is an important
manufacturing
base
in
China,
but
the
large
proportion of traditional
industries
calls
for
transformation. The local
government engineered an
innovative
path
to
industrial upgrade.
Foshan is an important manufacturing base in China. Foshan’s traditional
leading industries include machinery & equipment, home appliances, ceramics &
building materials, metal processing & products, textile & apparel, electronic
information, food & beverage, fine chemicals & pharmaceuticals, and household
products. Foshan accounts for >10% of the national output of home appliances
(including electric fans, cameras, rice cookers, air conditioners, refrigerators) and wall
tiles (Figure 16). In addition, Foshan’s emerging industries (optoelectronics,
environmental protection, new materials, new pharmaceuticals, alternative-fuel
vehicles) are flourishing, on the back of improving supply chains.
The city has developed town-based industry clusters (Figure 14). Foshan has
five districts — Chancheng, Shunde, Nanhai, Sanshui and Gaoming, each with its
distinctive industrial development. Foshan has developed town-based industry clusters,
such as the home appliance industry cluster in eastern and central Shunde District, the
furniture industry cluster in Lecong Town; the nonferrous metal processing industry
cluster in Dali Town of the Nanhai District, the metal hardware processing industry
cluster in Danzao Town, the textile industry cluster in Xiqiao Town; the ceramic industry
cluster in Shiwan Town of the Chancheng District and the food & beverage industry
cluster in central Sanshui District. The development of industry clusters creates
economies of scale, can boost the economic development of towns and villages and
residents’ incomes, and greatly contributes to Foshan’s economic growth.
Foshan feeling the pressure for industrial transformation. In 2014, Foshan’s
industrial value added grew 9.9%, faster than the nation’s growth. The value added in
high-tech manufacturing industries grew 15%, while traditional manufacturing
industries grew only 6.2%. The growth of traditional industries slowed, while that of
high-tech manufacturing industries remained fast. The growth in overall industrial value
added slowed markedly, due to the large proportion of traditional industries (Figure 15).
But in recent years, industrial enterprises in Foshan increased their R&D spending,
raising R&D intensity to a level significantly higher than the nation as a whole (Figure
17).
Foshan’s government engineered an innovative path to industrial upgrade,
relying on city upgrades to promote industrial upgrades and create a
virtuous cycle between them. Unlike most of the inland cities which promote
industrial upgrades by attracting investment and high-tech industries, Foshan is
committed to relying on city upgrades to promote industrial upgrades and create a
virtuous cycle between them. Specifically, Foshan focuses on building a high-quality
environment to live and facilities to attract and gather high-end talent and high-tech
enterprises. Under this method, Foshan’s government reduced its direct intervention in
industrial development and instead created favorable conditions for industrial upgrades.
This places industrial upgrades on a more solid foundation, though it may take longer to
achieve the upgrades.
Regulation AC certifications and important disclosures are located at the end of this research report
13
CICC Research: January 11, 2016
Figure 14: Foshan has developed town-based industry clusters
Guanyao: toys
Heshun:construction
materials
Datang: vegetables
Lishui: socks
Dali: aluminium
extruded sections
Shishan: auto components
Songgang: appliances
Yanbu: underwear
Luocun: lightings
Shiwan,Nanzhuang: ceramics
Chencun: flowers
and plants
Jinsha: hardware
Jiujiang: metal products
Hecheng: plastic
materials
Renhe: furniture
building materials
Beijiao: appliances
Lunjiao: wood
machinery
Genghe: stainless
steel products
Genglou: cultures
Daliang: mechanical
plastics
Lecong: furniture
Longjiang: furniture
Junan: jeans and clothing
Source: Baidu, CICC Research
Figure 15: The growth in Foshan’s industrial value added slowed markedly
due to the large proportion of traditional industries
Structure of Foshan's manufacturing Electric
equipment
and
machinery,
22%
Others, 29%
Industrial value added growth rate YoY
(%)
Foshan
National
25
20
15
Wearing
apparel, 3%
10
Basic
chemicals,
4%
9.9
8.3
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
5
General
purpose
machinery,
4%
Textiles, 5%
Metal
products,
9%
Metal
smelting
and
pressing,
5%
Non-metal
minerals,
Electronic
8%
and
telecommun Rubber
ication
products,
equipment,
6%
6%
Source: Foshan Statistical Yearbook, Wind Info, CICC Research
Regulation AC certifications and important disclosures are located at the end of this research report
14
CICC Research: January 11, 2016
Figure 16: Foshan accounts for >10% of the national output of home
appliances and wall tiles
Output of major industrial products
4,500
As % of China, 2014 (RHS)
As % of China, 2008 (RHS)
4,000
30%
3,500
23.2%
3,000
22.5%
2,500
2,000
8.8%
10.7% 8.4%
4.6%
5.7%
5.3%
6.1%
19.8%20%
15%
10.6%
10.1%
25%
20.0%
19.8%
16.2%
16.7%
15.1%
1,500
1,000
35%
32.9%
12.9%
10%
8.7%
8.7%
5%
4.4%
500
-
0%
10th
10th
mn
Washing
machines
Bicycles
Paint
10 th tons
10 th
10 th
sq.km
10 th
10
th
Air
Electric
Lightings AluminiumRefrigerator Ceramic
products
tile
conditioners cookers
10 th
10 th
Cameras
Electric
fans
Source: Foshan Statistical Yearbook, China Statistical Yearbook, cnii.com.cn, CICC Research
Figure 17: Industrial enterprises in Foshan increased their R&D spending in
recent years, raising the R&D intensity significantly
1.1%
R&D of industrials as % of revenue
Foshan
Foshan: number of invention patent
1,400
National
Number
1.0%
Growth
80%
1,200
70%
0.9%
60%
1,000
0.8%
90%
50%
0.7%
800
0.6%
600
40%
30%
20%
0.5%
400
10%
0.4%
0%
200
0.3%
-10%
2014
2013
2012
-20%
2011
2014
2010
1996 1998 2000 2002 2004 2006 2008 2010 2012
2009
0.2%
2008
0
Source: Foshan Statistical Yearbook, Wind Info, CICC Research
Regulation AC certifications and important disclosures are located at the end of this research report
15
CICC Research: January 11, 2016
The financial industry
The
development
of
Foshan’s financial industry
has been relatively slow.
There is still significant
potential for enterprises in
Foshan to leverage the
capital market.
The development of Foshan’s financial industry has been relatively slow. The
total market capitalization of China’s listed companies (A-shares, H-shares and USlisted Chinese companies) has exceeded China’s GDP. Although Foshan has the eighth
highest per capita GDP among cities with similar population sizes, it has only 34 listed
companies with a total market cap of ~Rmb550bn, equal to only 74% of Foshan’s GDP.
Foshan has only 41 companies listed on the rapidly developing New Third Board,
accounting for only 6% of Guangdong’s total. Some of Foshan’s booming industrial
towns do not consider going public as a way to grow their businesses. For example,
there is no listed company in the furniture industry cluster of Lecong Town. There is
still significant potential for enterprises in Foshan to go public.
Please see Figure 18 for a list of Foshan’s listed companies.
Figure 18: Foshan’s listed companies
Ticker
Name
Sector
Rating Cur. MktCap Price
(billion) 31-Dec
C.BUY RMB
140.0
32.8
Chg.
2015Y
23%
Earnings growth
P/E
2014A 2015E 2016E 15E
97.5
21.1
18.6
11.0
P/B Div.Yield
LF
TTM
2.9
3.0
000333.SZ
Midea
Home Appliances
603288.SH
Haitian
Food & Beverages
BUY
RMB
95.7
35.4
61%
30.1
20.6
19.8
37.9
11.9
000541.SZ
Foshan Elec
Home Appliances
n.a.
RMB
18.4
16.7
115%
5.7
n.a.
n.a.
50.5
4.7
1.0
0921.HK
Hisense Kelon
Home Appliances
n.a.
HKD
12.2
4.1
-40%
-45.7
n.a.
n.a.
n.a.
1.1
-
000921.SZ
Hisense Kelon
Home Appliances
n.a.
RMB
10.2
9.5
14%
-45.7
-5.7
16.9
20.5
3.3
-
002705.SZ
Xinbao
Home Appliances
n.a.
RMB
9.2
20.9
43%
11.0
42.7
13.2
30.4
4.0
1.2
002543.SZ
Vanward
Home Appliances
n.a.
RMB
8.0
18.2
65%
7.7
15.4
17.0
26.0
2.9
1.0
000533.SZ
Macro
Home Appliances
n.a.
RMB
7.0
10.2
71%
-30.4
14.0
9.0
48.5
5.1
0.5
002076.SZ
Cnlight
Home Appliances
n.a.
RMB
6.6
18.0
153%
7.0
325.1
70.5
90.2
7.0
0.3
002291.SZ
Saturday
Apparel
n.a.
RMB
6.8
17.0
113%
5.7
-2.6
2.9
193.8
3.7
0.5
Chigo
Home Appliances
n.a.
HKD
1.0
0.1
-27%
-140.5
n.a.
n.a.
n.a.
0.3
-
Shenglu
Telecom
Nationstar
Optoelectronics
Information
Technology
Technology
Hardware
Technology
Hardware
Technology
Hardware
Real Estate
n.a.
RMB
16.6
37.1
172%
965.4
185.9
77.2
120.7
7.3
0.0
n.a.
RMB
8.0
16.9
61%
28.1
25.4
36.1
44.3
2.9
0.8
n.a.
RMB
7.3
36.6
169%
3.0
288.9
150.2
44.9
9.4
1.1
0449.HK
002446.SZ
002449.SZ
002670.SZ
300417.SZ
2007.HK
3623.HK
600323.SH
2128.HK
600499.SH
300004.SZ
002260.SZ
002711.SZ
002611.SZ
300415.SZ
2083.HK
Huasheng
NANHUA
Instruments
Country Garden
China Success
Financial Services
Finance
Grandblue
Environmental
Environment
Service
China Lesso
Construction
Group
Materials
Keda Clean
Environmental
Energy
Service
Nanfeng
Machinery
Ventilator
DEA General
Aerospace&Defense
Aviation
Europol
Internet
Dongfang
Machinery
Precision
mi Precision Mach
Machinery
n.a.
4.2
102.3
4.4
6.4
18.8
131.0
12.0
0.2
HOLD
HKD
71.8
3.2
11%
20.1
-5.6
24.0
6.2
0.9
8.4
n.a.
HKD
1.7
3.5
29%
38.7
n.a.
n.a.
n.a.
1.6
0.5
n.a.
RMB
12.3
16.1
12%
32.0
32.3
34.9
30.3
2.9
0.6
n.a.
HKD
16.8
5.4
45%
7.2
21.7
14.2
7.5
1.5
2.4
16.0
22.6
20.5
61.0
4.5
22.7 3.8
0.9
19.3
62.6
BUY
RMB
RMB
342%
1.3
23%
n.a.
RMB
13.5
26.6
30%
134.6
104.4
4.4
0.1
n.a.
RMB
12.0
45.2
266%
65.1
n.a.
RMB
11.6
35.0
80%
8.0
36.9
73.5
n.a.
35.1
0.0
66.8
9.1
n.a.
RMB
8.7
14.9
77%
49.8
3.9
64.9
0.2
102.5
9.2
n.a.
RMB
5.6
23.2
144%
-3.4
16.3
0.1
7.0
63.0
7.5
0.9
-112.1 200.0
Nature Home
Light Industry
n.a.
HKD
1.4
1.0
-25%
-154.6
n.a.
n.a.
n.a.
0.5
1.5
000973.SZ
FSPG Hi-Tech
Chemicals
n.a.
RMB
12.6
13.0
110%
1.5
n.a.
n.a.
n.a.
6.2
-
002666.SZ
Delian Group
Sunwill
Precising Plastic
Dymatic
Chemicals
Jingyi Metal
Chemicals
n.a.
RMB
10.0
13.3
103%
1.0
20.9
26.3
51.4
3.9
0.5
Chemicals
n.a.
RMB
6.6
41.1
153%
11.7
n.a.
n.a.
n.a.
6.2
0.2
Chemicals
n.a.
RMB
5.9
14.1
113%
-16.9
191.9
-27.4
21.2
3.3
0.7
n.a.
RMB
n.a.
n.a.
5.5
-
6.5
1.2
5.6
n.a.
0.7
3.3
002676.SZ
002054.SZ
002295.SZ
3386.HK
0098.HK
Dongpeng
Xingfa
Aluminium
Metallurgy
Construction
Materials
Construction
Materials
5.9
23.6
156%
n.a.
n.a.
n.a.
HKD
3.8
3.0
9%
70.5
-12.4
n.a.
HKD
1.1
2.7
62%
72.0
n.a.
14.4
n.a.
Note: the rating “n.a.” indicates we do not cover that company and that market consensus earnings
estimates are used.
Source: Wind Info, CICC Research
Regulation AC certifications and important disclosures are located at the end of this research report
16
CICC Research: January 11, 2016
Urban construction: city upgrades as part of supply-side reforms
Foshan has grown into a large city
Foshan is a multi-center
large city with a resident
population of 7.3mn and an
urbanization rate of 95%.
Foshan’s urban built-up area has reached 155 km2, driven by adjustments in
administrative divisions and urban construction. The five districts of Foshan
(Chancheng, Shunde, Nanhai, Sanshui and Gaoming) were formerly independent
counties. Over 1992~1994, Shunde, Nanhai, Sanshui and Gaoming became countylevel cities governed by Foshan on behalf of the province. In December 2002, Shunde,
Nanhai, Sanshui and Gaoming became administrative districts of Foshan but retained
some degree of fiscal independence and autonomy in planning. Foshan’s original
urban districts were merged to become the Chancheng District to be directly governed
by Foshan’s government. Hence, Foshan became a multi-center city. The city’s urban
built-up area expanded 10x from 14 km2 in 1985 to 155 km2 in 2012.
Foshan has been attracting people with its rapid economic development. The
city has a resident population of 7.3mn and an urbanization rate of 95%.
Foshan had a population of only 2.34mn in 1978 and its resident population increased
to 7.3mn in 2014, of which 50% did not have a local hukou. The proportion of Foshan’s
resident population without a local hukou has continued to increase, suggesting a
continued net inflow in population. Foshan had an urbanization rate of 95% in 2014,
well above Guangdong’s 68% and the nation’s 55% (Figure 20).
Figure 19: Changes in Foshan’s urban area and population
Foshan's urban area
(km2)
180
820
Constructed urban area
155
160
140
Foshan's population
(%)
Population of Hukou
Resident population
720
735
620
120
520
100
420
80
386
320
60
2014
2011
2008
2005
2002
1999
1996
1993
1990
1987
1984
1981
2011
2009
2007
2005
2003
2001
1999
1997
1995
1993
1991
20
1989
-
1987
120
1985
20
1978
220
40
Note: The change in urban area in 2002 was mainly caused by adjustments to administrative divisions.
Source: Wind Info, CICC Research
Regulation AC certifications and important disclosures are located at the end of this research report
17
CICC Research: January 11, 2016
Figure 20: Foshan had an urbanization rate of 95% in 2014
100%
Urbanization rate
(%)
Foshan
China
Guangdong
95%
90%
80%
70%
68%
60%
55%
50%
40%
30%
20%
10%
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
0%
Source: Guangdong Statistical Yearbook, CICC Research
Urban development has been more oriented towards quality
But
Foshan’s
urban
construction lagged behind.
Foshan’s
government
proposed a city upgrade
program in 2012 to achieve
better
integration
of
industry, city and people,
which is fully consistent
with the top-level design
proposed by the Central
Urban Work Conference.
Foshan’s urban construction lagged behind its economic development and
population growth. Foshan’s rapid industrialization led to problems with air and
water pollution. A multi-centered urban construction gave the impression that there
was no city center and downtowns and the suburbs did not look much different from
each other. The appearance of Foshan was unworthy of its level of economic
development.
City upgrades should be part of supply-side reforms. The root cause of urban
problems is a structural mismatch between supply and demand. Supply-side reforms,
which call for effective supply, demand cities to be upgraded. Foshan launched a
three-year action plan for city upgrades in 2012, opening the exploration of urban
transformation and environmental re-engineering to promote urbanization. In April
2015, Foshan extended its city upgrade action plan by two years in order to achieve a
better integration of industry, the city and its people. Foshan’s exploration and method
of urban development are fully consistent with the top-level design laid out by the
Central Urban Work Conference held at end-2015.1 It has played a pioneering role.
Foshan’s efforts in upgrading the city have begun to pay off. We visited a
number of city upgrade projects in Foshan and found that its upgrade program has
begun to pay off:
The economy has become more diverse, as high-end manufacturing, services and
Internet finance companies are attracted to Foshan (e.g. the Chancheng District’s
Smart New City project).
The city has become more beautiful.
Its integrated urban transport system is basically complete (e.g. the Jihua Road
renovation project).
The city has continued to improve its cultural development (e.g. Lingnan Tiandi, a
major urban renewal project which combines the traditional Lingnan culture and
modern urban life and has become Foshan’s city landmark and a destination for
cultural tourism).
1
For an analysis of the Central Urban Work Conference, please see China in Transformation (VI): the value of cities to be reshaped on supply-side
reforms, published on December 28, 2015.
Regulation AC certifications and important disclosures are located at the end of this research report
18
CICC Research: January 11, 2016
The living environment has improved significantly (e.g. Tongji River treatment
project, Chuihong community enhancement project). There are a lot of such city
upgrade projects which have improved Foshan’s image.
Figure 21: Foshan’s pollution controls have been effective judging from its
sewage treatment rate and sulfur dioxide emissions
(%)
(Ton th)
Urban's sewage treatment rate
100%
97%
95%
SO2 discharge amount
130
124
120
90%
110
85%
80%
100
75%
90
70%
65%
80
60%
58%
72
70
55%
2014
2013
2012
2011
2010
2009
2014
2013
2012
2011
2010
2009
2008
2008
60
50%
Source: Foshan statistical bulletins, CICC Research
Regulation AC certifications and important disclosures are located at the end of this research report
19
CICC Research: January 11, 2016
Foshan’s land reforms
Foshan broke through the land bottleneck via reforms
To break through the land
bottleneck,
Foshan’s
government
created
a
market-oriented
land
system
where
the
government
and
the
market fit well. Foshan’s
experience suggests that
breakthroughs can be made
in China’s land reforms.
Foshan’s rapid economic development was driven by industrialization and improved
land productivity, making land more valuable. However, there is state-owned land and
collective-owned land in China, according to the Land Management Law. Unlike
state-owned land, collective-owned land is generally not tradable and thus its value
cannot be unlocked. Since most of Foshan was rural when the Land
Management Law was promulgated in 1986, most of the land in Foshan was
collective-owned. As Foshan attracted more industries and people amid the
rapid industrialization, land soon became a bottleneck that limited its
economic development.
In the past, construction land usually came from land expropriation, which faced great
resistance due to the low compensation offered to farmers. Moreover, the land used by
farmers was scattered, making it difficult to be used on a large scale. In order to break
through the land bottleneck and develop the economy, Foshan created a marketoriented land system.
On the one hand, Foshan formed a collective-owned land use rights market,
which was informal at first but was then legalized.
In 1992, Nanhai County (now Foshan Nanhai District) was the first to implement
rural land joint-stock reforms. Collective-owned property and land were converted
into shares to form joint-stock cooperative organizations, which then directly
leased the land out or built plants and leased them out. Farmers obtained shares
by contributing their contracted land as capital and enjoyed dividends annually. In
1994, the land joint-stock reforms were implemented across Nanhai County.
Gradually, Foshan formed an informal market for transactions in collective-owned
land use rights. The market was informal because transactions in collective-owned
land use rights did not enjoy explicit legal protection, banks would not accept such
property rights as collateral, and the market was open to only local enterprises.
Such transactions were not halted immediately as the PRD served as a testing
ground for reforms and opening up.
In January 2015, the State Council issued the Opinions on Pilot Reform of Rural
Land Expropriation, Collective-owned Commercial Construction Land Transfer and
Housing Land System, and decided to select 33 counties (cities, districts) for the
pilot reforms. Foshan Nanhai was selected as a pilot reform district to allow the
transfers of rural collective-owned commercial construction land, and its
collective-owned construction land transactions have been legalized.
On the other hand, Foshan’s government also expropriated land by providing
farmers with high returns and diverse compensation, and reclassified the
expropriated land as state-owned land which can be transferred legally.
In December 2001, the Ministry of Land and Resources approved Foshan as a pilot
city for reforms in the land expropriation system, facilitating innovation in the city’s
compensation standards and resettlement process.
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20
CICC Research: January 11, 2016
In 2002~04, Foshan issued the Regional Unified Land Expropriation Compensation
Standards Implementation Program, the Transportation Infrastructure
Construction-Related Land Expropriation and Resettlement Compensation
Standards and Implementation Program, the Opinions on Deepening Land
Expropriation System Reform, and the Opinions on Implementation of Basic
Old-age Insurance Subsidy System for Landless Rural Residents. It established a
formal and unified system for land expropriation compensation standards:
Foshan quantified land expropriation compensation standards to link land
compensation and resettlement subsidies directly with the area and type of
land rather than with the annual output value of land, greatly improving the
efficiency of land expropriation.
Foshan set the comprehensive land price for each area and significantly raised
the average land expropriation compensation standard. Collective-owned
construction land should be deemed to have the same price as state-owned
construction land when calculating expropriation compensation. Specifically,
compensation should be equal to the local urban benchmark land price
subtracted by the transfer price or equal to the assessed value subtracted by
the transfer price.
As for resettled farmers, Foshan not only gave them monetary compensation,
offered them urban hukous, and helped them find urban jobs, but also
retained 10~15% of the expropriated land for farmers to provide them with
space for development.
Foshan implemented a land expropriation social security system to provide
subsistence security, pension insurance and basic medical insurance for
farmers to address their worries after their land was expropriated.
Foshan has attached more importance to the economical and intensive use
of land in recent years, and ensured the efficiency of land use through the
orderly reconstruction of old towns, old factories and old villages. Judging
from the change in arable land area (Figure 22), Foshan’s land reforms made the fastest
progress in 2001~06. With the advance of Foshan’s land reforms, industrialization and
urbanization, the size of Foshan’s urban and rural construction land, transportation land
and other construction land has continued to expand. Foshan has a total land area of
385,000 hectares. In 1996, construction land accounted for only 20.8% and agricultural
land accounted for 75.1%. In 2005, the proportion of construction land rose 10ppt to
30.8%, while that of agricultural land declined 15.6ppt. Foshan’s plans for land use
emphasize the economical and intensive use of land and the tightening of the supply in
construction land. It targets only a 5ppt increase in the proportion of construction land
by 2020 compared with 2005.
Foshan’s experience suggests that breakthroughs can be made in China’s
land reforms. Foshan’s local government created a market-oriented land system in
which the government and the market fit well. But Foshan’s experience also has certain
regional characteristics: Foshan is densely populated but economically developed. Many
farmers have their own factories and do not rely on farming as a livelihood, and
therefore are willing to transfer their land for income. On the other hand, whether land
can be transferred also depends on its location. There should be market demand for
land in good locations. Foshan’s industrial towns and industry clusters are dispersed
over its five districts. There is relatively abundant land for transfer.
Regulation AC certifications and important disclosures are located at the end of this research report
21
CICC Research: January 11, 2016
Figure 22: The structure of Foshan’s land use
(Acres)
Foshan's land use structure
Cultivated land
1,400
2001:
1,249
1,300
Others
4.1%
100%
90%
1,200
Construction
70%
1,000
Agricultural land
8.3%
30.8%
35.3%
59.5%
56.4%
2005
2020
20.8%
80%
1,100
land
9.7%
60%
900
50%
800
40%
2006: 672
700
75.1%
30%
600
20%
500
10%
400
0%
1994 1996 1998 2000 2002 2004 2006 2008 2010
2012
1996
Source: Foshan’s land use plans (1997~2010) & (2006~2020), Foshan Statistical Yearbook, CICC
Research
Reforms unlocked the value of land and created a win-win situation
Foshan’s land reforms have unlocked the value of land and contributed greatly to the
property income of villagers, local government revenue, real estate market
development and industrial development, thereby boosting Foshan’s economic growth.
Thanks to land reforms, Foshan achieved a high urbanization rate of 95% as of 2014.
Land reforms increased the property incomes of farmers
Reforms can unlock the
value of land and create a
win-win situation. Property
income accounts for a much
higher
proportion
of
farmers’ income in Foshan
than in the nation.
In Foshan, farmers can enjoy property income from the transfer of collective-owned
land or the expropriation of land by the government. Farmers in Foshan can have two
sources of income:
Wages from urban jobs or net operating income from their own businesses.
Property income from shares in collective-owned land, including dividends and
gains in land value.
Villagers in Foshan have benefited from the 150% rise in local land prices from 2000 to
2015. In 2013, property income accounted for 13% of per capita disposable income of
rural residents in Foshan Nanhai District, much higher than the levels of Guangdong and
the nation (Figure 24).
Figure 23: Farmers in Foshan benefited from the appreciation in land prices
35%
32%
29%
30%
Average land price
(Rmb/m2)
Compensatory payment/ land price
National
3,800
Foshan
3,300
25%
2,800
21%
20%
2,300
15%
1,800
10%
1,300
5%
0
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2000-2002
2003
1992-1999
2002
800
1988-1991
2001
1986-1987
2000
0%
Source: Foshan Local Records (1979~2002), Wind Info, CICC Research
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22
CICC Research: January 11, 2016
Figure 24: Property income accounted for 13% of farmers’ income in
Foshan’s Nanhai District, much higher than the nation’s 3% and Guangdong’s
9%
Structure of disposible income of Nanhai's rural
residents
Operating
income
10%
Property income/ farmer's per capita income
10%
National
9%
Guangdong
8%
7%
6%
5%
Wage
income
73%
4%
3%
2%
Property
income
13%
Transfer
income
5%
1%
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
0%
Source: Nanhai District Statistical Yearbook, Wind Info, CICC Research
Land contributed a great deal to local government revenue
The sharing of benefits with
farmers and the market
from collective-owned land
did not reduce Foshan’s
revenue from the transfers
in state-owned land, which
contributed greatly to local
government revenue.
Although Foshan offered high land expropriation compensation to farmers and retained
some land for farmers whose land was expropriated, while some collective-owned land
also entered the market informally. The sharing of benefits with farmers and the
market from collective-owned land did not reduce Foshan’s revenue from
the transfer of state-owned land, which contributed greatly to local
government revenue. Over the past five years, revenue from state-owned land
transfers contributed ~40% of Foshan’s total government revenue vs. Guangdong’s
29% and the nation’s 18%.
Foshan’s real estate investment and sales are relatively healthy, with ~24% of public
fiscal revenue being related to real estate. Foshan’s real estate development investment
as a percentage of GDP has been relatively stable, up from 8% in 2000 to 11% in 2014,
while the nation’s figure rose from 5% to 15% (Figure 28). Foshan’s real estate
investment in the first 11 months of 2015 still grew 11%, while the nation’s growth
slowed to 1%. Foshan’s housing sales area in the first 11 months of 2015 increased
47%, also better than the nation’s figure. Foshan has a relatively high inventory in
commercial real estate, but the local government has tightened the approvals of
commercial real estate projects and support the use of already approved land for other
purposes. Under the Guangzhou-Foshan integration development strategy, rail
transportation between Guangzhou and Foshan will become more convenient, while at
present, Foshan’s average housing price is less than 2/3 that of Guangzhou’s. In
addition, Foshan’s city upgrade program has been fruitful. The appearance of the city is
continuing to improve and it now has a better environment, greening and urban
management. There is still great potential demand for real estate in Foshan, a satellite
city of megacities.
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23
CICC Research: January 11, 2016
Figure 25: Land appreciation contributed greatly to Foshan’s government
revenue
Proportion of land and real estate related goverment
revenue in 2013
Foshan Guangdong
41%
Land transfer
revenue/government
revenue
55%
Revenue of state-owned land transfer / total
government revenue (budget)
Foshan
National
50%
48.6%
45%
29%
40%
41.4%
35%
30%
25%
Proportion of real estate
related local public
revenue
25%
20%
24%
18.4%
15%
0%
20%
40%
10%
2010
2011
2012
2013
2014
2015
Note: Total government revenue = public fiscal revenue + government fund revenue.
Source: Foshan financial bureau’s annual draft budgets, CEIC, Wind Info, CICC Research
Figure 26: Provincial government fund revenue as a percentage of total
government revenue
60%
Government fund's revenue/ total government
revenue in 2013
50%
40%
34%
30%
20%
10%
0%
Note: Revenue from state-owned land transfers accounted for 80~90% of government fund revenue.
Source: CEIC, CICC Research
Figure 27: Proportion of provincial public fiscal revenue that is related to real
estate
45%
40%
Property related revenue / total government
revenue in 2013
35%
30%
25%
24%
20%
15%
10%
5%
0%
Source: CEIC, CICC Research
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24
CICC Research: January 11, 2016
Figure 28: Foshan’s investment in real estate development over the first 11
months of 2015 grew 10.9% vs. the nation’s 1.3% growth; Foshan’s real
estate development investment as a percentage of GDP has been relatively
stable
(%)
60
Real estate development investment
growth rate
Foshan
National
Guangdong
Real estate development investment
amount / GDP
Foshan
National
Guangdong
14.9
(%)
16
50
14
40
12
30
11.3
2015/11
20
13.5
10
10.9
0
1.3
-10
-20
11.2
10
8
6
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
4
Source: Wind Info, CICC Research
Figure 29: Growth in Foshan’s housing sales area and price index
(2010/12=100)70
Housing sales area growth
(%)
60
Foshan
145
National
140
50
large and medium cities' new housing
price index
70 large &
medium cities
Tier 1 cities
135
40
30
20
12. 8
10
130
Tier 2 cities
125
Tier 3 cities
120
115
-7. 6
-10
110
105
-20
100
-30
2015-08
2015-04
2014-12
2014-08
2014-04
2013-12
2013-08
2013-04
2012-12
2012-08
2012-04
2011-12
2011-08
2011-04
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2010-12
95
-40
Source: Wind Info, CICC Research
Figure 30: Foshan’s average housing price is less than 2/3 that of
Guangzhou’s
25,000
(Rmb/m2)
Average housing prices of 40 cities (2014)
20,000
15,000
10,000
5,000
-
Source: Wind Info, CICC Research
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25
CICC Research
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V150707
Translation: Jincheng HUANG
Editing: Michael PAN