China’s Creative Economy: From East to West and North to South

In August of 2010, China made economic history when it became the second largest economy in the world, over taking Japan in the process. As the largest emerging economy in the world, with a total GDP that surpasses that of Brazil, Russia and India combined, China has become a formidable political and economic force. While at this point in time China is still largely seen as the “world’s factory,” the country is beginning to show signs of an emerging post-industrial, creative economy in many of its most developed regions. This finding is emphasized in a recent report by the Martin Prosperity Institute titled: Understanding the Creative Economy in China. This development of a knowledge and creative-based economy in China will be of significance to policy makers, politicians, and economists alike in the coming decades as the country is expected to continue to grow and maintain its new authority as the second largest economy in the world.

The creative economy has become the focus of economic development practitioners and policy makers in the 21st century. Just as the knowledge economy shaped economic development in the later part of the 20th century, the creative economy dominates competitiveness today. The logic expressed behind the creative economy proposes that it is not simply the possession of knowledge and creation of new knowledge that drives economic growth, but more importantly, the creative ideas and products that come out of such knowledge that drive continued economic prosperity. Within a creative based economy, growth is driven by the presence and ingenuity of the creative class; an occupational group comprised of individuals employed in occupations where they are paid not only to think, but to create. The creative class as an occupational group includes people employed in management, finance, law, healthcare, science, engineering, architecture, design, education, arts, music and entertainment.

Exhibit 1: China’s Creativity Index by Region, 2008

Exhibit 1 maps the Creativity index for all 31 provincial level regions in China. The Creativity index is derived by combining the results from three different indexes, each measuring a separate characteristic of the creative economy. The three indices used to derive the Creativity index are: the Talent index, Tolerance index, and Technology index. The map shows how ‘creativity’ is distributed across the country. It reveals that the most creative regions in China tend to be found along China’s eastern and northern provinces, while the least creative regions tend to be found in China’s most western and southern provinces. According to the creativity index, the top four creative regions in China are Shanghai (0.97), Beijing (0.95), Tianjin (0.91) and Guangdong (0.81). The resulting pattern displayed on the map by the Creativity index in China mimics the pattern that is found when we map more traditional economic measures such as GDP and wages. As is expected, some of the most creative regions in China are also the most productive.

As the evidence presented by the map suggests, the development and growth of China is occurring in a pattern from East to West and North to South. This is further supported by the changing composition of some of China’s leading provincial level regions. In China’s most creative regions, the regional economy has become one driven by services, a defining characteristic of regions in many leading post-industrial nations. Between 1978 and 2008, the contribution of the service industry to total GDP and its share of total employment grew significantly in Beijing, Shanghai and Tianjin, China’s three leading Municipalities.

One of China’s economic goals has been to direct growth to and promote economic activity within its central and southwestern regions. The designation of Chongqing as a Provincial Municipality in 1997, placing it in the same category of provincial status as Beijing, Shanghai and Tianjin, was done with the direct intention to accelerate economic development and substantially improve China’s western regions. Currently, Chongqing is continuing to underperform compared to other major eastern cities because of the large rural areas that were brought under its political jurisdiction when it gained Municipality status. The rural areas in Chongqing are 10 times as big as Shanghai and 5 times as big as Beijing. However, despite the fact that Chongqing has a fair bit of substantial ground to cover in order to catch up with many eastern provinces, the new Municipality has the potential to help eventually draw growth to the west.

China’s economy appears to be progressing in a similar fashion as many developed countries have already done, moving from agriculture and subsistence farming to manufacturing and eventually achieving a dominant service industry. However, what is unique is that this pattern of development is occurring unevenly across the country, guided by both political and geographic parameters, and displaying a curious pattern of varying intensity. With the establishment of Chongqing and China’s general desire to relocate manufacturing to inland provinces in central and western China, this will allow a strong service, and more importantly, creative economy to emerge in many provinces across the country. Overall, this general trend is important for policy makers and politicians to watch closely as China continues to emerge as a global power and potentially economic leader in the decades to come.

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The Martin Prosperity Institute at the University of Toronto’s Rotman School of Management is the world’s leading think-tank on the role of sub-national factors—location, place and city-regions—in global economic prosperity. We take an integrated view of prosperity, looking beyond economic measures to include the importance of quality of place and the development of people’s creative potential.