The Development in China's Heartland

Robert Hsu, May 12, 2009

China's heartland consists of six provinces: Hunan, Hubei, Jianxi, Henan, Anhui and Shanxi. Because coastal cities flourished and heartland cities lagged behind, the average per capita income in this area is 40% below that of cities like Shanghai and Shenzhen.

In addition, because the coastal cities were the main focus as China was building its export business, there hasn't been fast transportation between the heartland and coastal regions. And as a result, there aren't many factories in central China -- it didn't make financial sense to locate there.

This is all about to change, though.

With the help of China's massive $586 billion stimulus plan, two major high-speed rail networks are being constructed to cut transportation time to the heartland in half – from 10 hours to five hours. Also, local governments are providing special tax breaks and other incentives for businesses setting up shot in central China.

Because of the fast rail system, many new manufacturing zones will be built in the central region, creating more jobs there. This is great news, especially when you consider that many migrant workers who lost their jobs in coastal factories are returning to the heartland in search of work.

Many companies have already set up businesses in the heartland, including Foxconn International – the largest electronic contract manufacturer in the world. It's moveing a large part of its manufacturing operation from Shenzhen to Wuhan, a city with seven million and central China's transportation hub.

And many other businesses are following suit, as construction on several projects has already started in central China. If these companies find success there, it will bode well for the overall Chinese economy by creating jobs and expanding already successful businesses.

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