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Pandemic Tarnishes China's North, Strengthens Southern Swing for Jobs

05/07/2021 | 06:14am EDT

By Chong Koh Ping

The economic fallout from the pandemic has heightened regional disparities in China, creating fresh incentives for people to leave the country's industrial heartlands in search of better jobs further south.

That is likely to add to a long-term trend of internal migration toward the warmer, faster-growing areas. China's richer southern regions have a bigger share of newer sectors such as biotechnology and electric vehicles, while northern and central China houses more of the country's traditional heavy-industrial base, such as coal mines and steel mills.

While official population data for 2020 isn't available yet, the shift already appears to be showing up in regional housing markets, which are thriving in southern hubs and faltering in some cities further north, including parts of China's rust belt.

In the southern technological powerhouse of Shenzhen for example, existing-home prices climbed 14% last year, National Bureau of Statistics data showed.

Meanwhile, prices fell 10% in the same period in one of the weakest markets, Mudanjiang, a small city in the far northeastern province of Heilongjiang. They also retreated in bigger, northern cities such as nearby Harbin. In Tianjin, a northern port city near Beijing, existing-home prices dropped 4% in 2020.

Stronger economies in the south have drawn job seekers, which has lifted housing demand, said Yan Yuejin, director of E-House China R&D Institute, a Shanghai-based think tank focused on real estate. "The scale of net talent inflow is relatively large in several provincial capitals in the south," he said.

In Shenzhen, home to tech companies such as Tencent Holdings Ltd. and Huawei Technologies Co., the local economy grew by 3.1% last year. That outpaced a national increase of 2.3% -- and a gain of just 0.4% in Mudanjiang.

The increase boosted Shenzhen's economy to 2.77 trillion yuan, the equivalent of $429 billion, making it roughly as large as the state of Maryland's economy.

Zhu Jiajia, a 35-year-old property agent in the city, said that in recent years more of her friends and family from her hometown in Heilongjiang province had moved south in search of better jobs, a warmer climate and better schools for their children.

"I've told my relatives, for those with good educational qualifications, they can easily surpass me in a few years," she said. Ms. Zhu moved to Shenzhen in 2012 after graduating from nursing school, and later worked as a travel agent before switching to selling property, while also investing in restaurants and real estate.

Surging populations -- Shenzhen's swelled 28% from 2010 to 2019, to 13.4 million people -- have helped buoy property prices in southern metropolises. So too have speculation and rapidly rising household incomes. Ms. Zhu said her home's value had increased by 5.5 times since she bought it in 2012.

The property sector is a huge part of the Chinese economy. Last year, new-property sales totaled $2.7 trillion, making up nearly one-fifth of the country's gross domestic product. After years of rapid price growth, concerns about both affordability and the risks of a crash have led policy makers to repeatedly stress: " Houses are for living in, not for speculation." At the same time, municipalities rely heavily on land sales for revenue, giving them a vested interest in a robust market.

Some recent price moves reflect boom-and-bust cycles, said Mr. Yan at the E-House think tank. For example, he said property in Beijing's suburbs was initially bid up by investors shut out of the capital's central districts by buying restrictions, but as some investors have sold out, a glut of supply has met with weak demand. "This will naturally drive prices down," Mr. Yan said.

China's overall economy is rebounding, with economists forecasting growth of about 8.5% for 2021. And there have been early signs of the recovery broadening in housing markets.

In March, existing-home prices rose year-over-year in 50 of the 70 large and medium-size cities tracked by the National Bureau of Statistics. For all of 2020, prices only rose in 43 cities.

Alicia Garcia-Herrero, Asia-Pacific chief economist at investment bank Natixis, said rising producer prices suggested the regional gulf would shrink in the months ahead.

These prices largely reflect the output of the heavy industries that are centered in northern China, and tend to rise when growth is stronger. "As such, the divergence of home prices between provinces should slowly narrow as economic activities normalize," Ms. Garcia-Herrero said.

Still, while the upturn will offer some respite to northern cities, the longer trend is likely to remain intact.

Writer Vincent Shu, 30, jumped into Shenzhen's property market in 2019, buying a 600-square-foot apartment for 2.8 million yuan, the equivalent of about $433,000.

Mr. Shu, who has been working in nearby Hong Kong, said he plans to get his parents to move from Nanjing, a major city near Shanghai, to join him in their retirement.

He said the decision to move was an individual one. But on a macro level, he said: "Ultimately the job opportunities and salaries in the south are much better."

Write to Chong Koh Ping at kohping.chong@wsj.com

(END) Dow Jones Newswires

05-07-21 0814ET

Stocks mentioned in the article
ChangeLast1st jan.
DJ INDUSTRIAL -1.58% 33290.08 Delayed Quote.10.51%
GOLD 0.41% 1777.875 Delayed Quote.-7.09%
NATIXIS S.A. -0.05% 4.001 Real-time Quote.43.53%
PROPERTY AGENT INC. -3.14% 2348 End-of-day quote.60.38%
S&P GSCI GOLD INDEX 0.41% 1035.1073 Delayed Quote.-6.65%
SILVER 0.16% 25.9792 Delayed Quote.-2.11%
TENCENT HOLDINGS LIMITED 0.67% 603 End-of-day quote.6.91%
UNITED STATES DOLLAR (B) / CHINESE YUAN IN HONG KONG (USD/CNH) 0.31% 6.4759 Delayed Quote.-0.60%
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