With its Domestic Growth Ambitions, Chongqing Shows Investors Why China is the Place to be

[Editor's Note: This is Money Morning Investment Director Keith Fitz-Gerald's latest report from China.]

By Keith Fitz-Gerald
Investment Director
Money Morning/The Money Map Report

CHONGQING, People’s Republic of China - For “Show me” skeptics who want proof that every investor needs to have a China investing strategy, a visit to this industrialized city would likely be enough to change their mind.

Chongqing – which many people still remember by its wartime name of “Chungking” – sits squarely in the heart of the Sichuan province and is a municipality of 33 million people. Covering some 220,000 square miles, the extended province surrounds the city itself. Chongqing is basically a big fertile strip running along the fabled Yangtze River, and the “Three Gorges” hydroelectric project.

I’m writing this while aboard the Victoria Queen on a three-day trip down the river. It’s providing a unique vantage point from which to take in much of what is modern China – constant construction and ambitious progress.

That’s actually an excellent description of Chongqing, which I can see as I look across the confluence of the Yangtze and Jialing rivers. Indeed, it’s an almost-surreal sight.

Then there’s the noise. Like any working waterfront, Chongqing has a rhythm all its own. There’s an overall general din, a kind of blended audio backdrop. But if you concentrate, you can also pick out individual sounds, too. There’s the groan of heavy machinery at work on the waterfront; the voices of a thousand different dockworkers; and staccato barking of the ever-present vendors selling anything you can imagine. Somehow it all works.

Every time I visit this city, I’m struck by progress here. Areas that were rice paddies only last year are now the foundations for huge buildings. New highways and construction zones stretch out as far as I can see. And there’s no evidence of a slowdown anywhere that I can see.

That’s precisely why it’s worth a look at Chongqing’s plans for the future.

The day before our visit, city officials and other dignitaries laid the foundation stones for the Chongqing Financial Center, which will serve as the hub for the city’s new Central Business District, or “CBD” for short. This isn’t just a building. It’s a $4.4 billion development project that’s designed to transform Chongqing into an inland China financial hub by 2015.

The project is noteworthy on a couple of levels. For starters, it’s the first commercial real estate project in the Jiangbeizui central district and its scale is truly massive. The core will consist of nearly 1 million square feet of what here in the U.S. market would equate to new Class A office space. Such an ambitious project may seem outrageous to a world struggling with the credit crisis, but in China it is pretty much standard business fare these days.

China’s inner regions have been less affected by the global financial crisis than the export-dependent coastal regions, which is why growth remains impressive and on track. Chongqing, for example, saw its first-quarter gross domestic product (GDP) advance by 9% on a year-over-year basis. And local officials are very candid in stating that Chongqing’s growth may be 50% higher than the national average next year – and it’s as much as 40% above the national average right now.

Chongqing has the region’s mostly dynamic industrial base, with very solid international partnerships that are carefully balanced with local consumption. Ford Motor Co. (NYSE: F), Honda Motor Co. Ltd. (NYSE ADR: HMC) and Suzuki Motor Corp., for example, all have huge manufacturing facilities here that are turning out products for domestic Chinese consumption. And they’re still running flat out.

Another thing that bodes well is Chonqing’s unique geographic position. Because it’s nestled between two of China’s major rivers, the city is uniquely positioned as a gateway to China’s Western development. In that sense, it’s much the same as Xian in that much of the money Beijing will unleash to spur Western provincial development will flow through this region. And that means the pace of progress here is likely to accelerate – rather than slowing down – anytime soon.

History suggests that we’ll see a flood of infrastructure companies head this way, as well as the usual grouping of high-technology, financial and securities companies in the next few years. As this growth continues, it will continue to underscore – in dramatic fashion – why every investor needs a China strategy now, more than ever before.

News and Related Story Links:

• Money Morning View From China Series:
  Three Gorges Dam Project Demonstrates China’s Domestic Growth Ambitions.
• CCTV International:
  Old Opera House Reopens in Chongqing.
• ChinaCulture.org:
  Yangtze River.
• CNN.com:
  Three Gorges Dam.
• Money Morning View From China Series:
  China Pursues Worldwide Growth Opportunities Caused by the Global Financial Crisis.
• Money Morning View From China Series:
  While the Rest of the World is Stuck in Reverse, the China Auto Market Zooms Ahead.
• Money Morning View From China Series:
  China-Russia Oil Accord a Sign of a Changing World.
• EncyclopediaBritannica:
  Jialing River.
• Alibaba.com/China Knowledge:
  Chongqing aims to develop into a financial center by 2015.
• China Association for Science and Technology:
  Chongqing Science and Technology Museum slated for official opening in September.