1.    An Overview of the Hangzhou Economy

1.1  Macroeconomic background and development planning

Hangzhou is the capital of Zhejiang province, it also has the largest economic scale in terms of gross domestic product (GDP) among all cities in the province. Hangzhou is the largest provincial capital city in China second only to Guangzhou. Where economic output is concerned, it ranks eighth among all large and medium cities across the country. In 2008, the GDP of Hangzhou amounted to Rmb478.1 billion, up 11% over the previous year, maintaining double-digit growth for 18 consecutive years, and with per capita GDP reaching Rmb70,832. Hangzhou has a resident population of 7.966 million, with urban population and rural population accounting for half each. As at the end of 2008, a total of 65 of the world’s top 500 enterprises had investment in 107 projects in Hangzhou.

Hangzhou's GDP and its Growth in Recent Years

Source: Hangzhou Statistical Yearbook 2008, Communiqué of Hangzhou Municipal Statistics Bureau

In the World Bank report on Competitiveness Enhancements for 120 Cities in China released in 2006, Hangzhou and five other cities (Qingdao, Shaoxing, Suzhou, Xiamen and Yantai) were rated “gold medal cities” in terms of governance, investment climate and harmonious society. Moreover, according to the ranking of Business Environment of Cities in China released by the Economist Intelligence Unit (EIU) in 2008, Hangzhou came fourth after Shanghai, Guangzhou and Beijing.

In 2007, there were 110,000 private enterprises in Hangzhou, accounting for about 22% of all private enterprises in Zhejiang province. Private enterprises in Hangzhou span across various industries, including such big names as Wahaha and Transfar Group. As the provincial capital, Hangzhou also houses many provincial government enterprises and headquarters of enterprises in the province. Examples include Zhejiang Expressway Co Ltd, Geely Automobile and Minsheng Pharmaceutical. In 2007, among the top 100 private enterprises in Zhejiang, 30 were in Hangzhou, topping all other cities in the province.

The leading industries in Hangzhou include food, garment, textile chemical fibre, silk, pharmaceuticals, electronics, machinery and chemicals, with many of them having built their brands. For instance, in ladies’ garment, household names include JNBY, Lesies and Langmanyishen (浪漫一身). Other well-known brands are Nongfu Spring, Dandy Kitchen Utensils, Paradise Umbrella etc.

The urban circle of Hangzhou mainly comprises the four cities of Hangzhou, Huzhou, Jiaxing and Shaoxing. The establishment of the urban circle was aimed at promoting better coordination, cooperation and complementarity in development planning and advancing regional projects. In 2008, 23 cross-regional cooperation projects were launched in the Hangzhou urban circle, including the opening of the first inter-city public transport line in China linking Hangzhou and Deqing, paving the way for assisting in the hosting of Shanghai World Expo in 2010.

The Qinghefang historical culture street, Hubin tourist and business street, Nanshan Road art and leisure street, silk street, Wulin Road ladies fashion street, Sijiqing garment street, Wensan Road electronic information street, Meijiawu tea culture village, and Xinyifang commercial pedestrian street are the nine large-scale specialised business streets built in Hangzhou in the early days. In the Three-year Action Plan for Building Brands for Hangzhou’s Specialised Business Streets issued by the Hangzhou municipal government in 2007, it was emphasised that in the three years that followed great efforts would be devoted to upgrading these nine specialised business streets. Furthermore, steps would be taken to build nine new specialised business streets, namely Zhongshan Road historical culture street, Qingchun Road financial street, Baijingfang Lane commercial street, Shaoxing Road auto culture and accessories street, Qiutao Road home products street, Shixiang Road auto trading street, Xiaohe Street traditional residence street, Shuguang Road urban leisure street, and Beishan Road historical culture street.

In early 2009, in order to stimulate the purchasing desire of residents, the Hangzhou Municipal Trade Bureau put forward two sales promotion schemes, “2+5” and “day and night”. “2+5” refers to the hosting of more promotions to boost consumption from Monday through Friday so that consumption does not concentrate on weekends alone. Through “day and night”, efforts are made to develop healthy night-time consumption and entertainment activities by encouraging retailers to extend their business hours.

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2.    Hangzhou’s Consumer Market

2.1  Growth in retail sales

In 2008, total retail sales in Hangzhou amounted to Rmb155.8 billion, a growth of 20% year on year. Hangzhou is not only the largest consumer market in Zhejiang, but also an important business centre of the province. In 2007, there were about 1,600 wholesale and retail enterprises of designated scale in Hangzhou, 1,000 more than those in Ningbo, the second largest city in Zhejiang.

Retail Sales of Consumer Goods

Source: Hangzhou Statistical Yearbook 2008, Communiqué of Hangzhou Municipal Statistics Bureau

In terms of ownership per 100 urban households, consumer goods with CAGR (compound annual growth rate) exceeding 10% during the period from 2003 to 2007 include: mopeds, cars for home use, mobile phones, home computers and video cameras. This reflects that following the rise in per capita disposable income, the ownership of luxury goods and telecommunications and electronic products is increasing.

Average Ownership of Consumer Durables per 100 Urban Households at Year End

Source: Hangzhou Statistical Yearbook 2008

2.2  Per capita disposable income and consumption expenditure

In 2007, the per capita disposable income of urban households in Hangzhou was Rmb21,689, an increase of 14% year on year. The disposable income of high income households even reached Rmb44,065. In the same year, per capita consumption expenditure was Rmb14,896, up 2.9% over the preceding year, with the consumption expenditure of high income households amounting to Rmb27,343.

Per Capita Disposable Income and Consumption Expenditure of Urban Households in Hangzhou

Source: Hangzhou Statistical Yearbook 2008, Communiqué of Hangzhou Municipal Statistics Bureau

Most of the consumption expenditure was on food, accounting for 37.1% of the per capita consumption of urban households. Clothing accounted for 10.2% of total consumption; household facilities, articles and services accounted for 4.6%; medical and healthcare accounted for 6.4%; transportation and communications accounted for 17.1%; education, cultural and recreational services accounted for 11.3%; housing accounted for 10.1%; and miscellaneous goods and services accounted for 3.2%. Among these, the share of transportation and communications registered a marked growth during the period from 2000 to 2007. In terms of the overall average of per capita consumption expenditure, the CAGRs of transportation and communications, housing, clothing and medical and healthcare during these seven years were rather high.

Source: Hangzhou Statistical Yearbook 2008

2.3  Average remuneration by industry sector

In 2007, the average remuneration of on-post staff and workers* in Hangzhou stood at Rmb36,496. The average annual remuneration offered by different industries ranged from Rmb21,271 to Rmb103,536. In the manufacturing sector and construction sector, which employed the largest numbers of workers, the average wages were Rmb25,642 and Rmb23,421 respectively.

* On-post staff and workers refer to people who are employed by and receive wages from state-owned units, urban collective units, joint operation units, shareholding units, foreign-invested units (including those funded by Hong Kong, Macau and Taiwan investors) and other units, while excluding workers of rural and private enterprises, urban self-employed individuals, and foreign workers (including those from Hong Kong, Macau and Taiwan) employed by urban units.

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