Urban areas need to make companies feel welcome, attract new investment and train creative people for next-generation biz

The world economy is likely to get more interesting in the coming years. And forget about short-term gains, because the financial market is boring everywhere you look.

When China-based companies are screaming about increasing costs, first of all in real estate prices in the cities in which they operate, the government will have to listen to them and try to make them happy in one way or another.

Shenzhen-based Huawei just said it would relocate its future production base somewhere outside the city, where housing prices saw an average rise of more than 50 percent from a year ago.

Across from the campus of Huawei used to be the large production center of Foxconn, the manufacturing contractor for iPhone. The company built factories in central and western parts of China many years ago, and in India more recently.

Shenzhen is considered one of the few "tier-one cities" by real estate agents, meaning cities with the highest housing prices.

In Shanghai and Beijing, and even in Suzhou's Kunshan, an investment area close to Shanghai, companies have long been complaining about lingering problems such as high living costs, pricey real estate, traffic congestion and difficulty in finding inexpensive, low-skilled help.

What local governments can do is to offer companies some preferential terms for them to stay.

The help that the central government in Beijing can come up with is more on the strategic level. One main idea is to build up so-called city clusters, or groupings of cities that can presumably offer a more favorable environment than what businesses can find in just a single city.

City clusters are partly in government plans and partly a reality.

The city cluster in the Yangtze River Delta, which includes Shanghai and the most affluent parts of Jiangsu, Zhejiang and Anhui provinces, is more of a reality. It's because the businesses in those cities are interconnected on many levels.

While in the circle around Beijing and Tianjin, which also covers a small part of Hebei province, it is more of a wish of some development officials. The small cities in Hebei don't have many industries and services to attract outside customers. Their connectivity with the large cities is poor.

Diverse realities aside, rebuilding cities is going to be a thing to come in China. The central government program to revitalize the country's "rust belt" of its northeastern provinces primarily involves rebuilding the old industrial cities there.

Indeed, the most challenging thing in the supply-side reform called for by Chinese economists is not saving uncompetitive state-owned enterprises. Most SOEs aren't worth much, in comparison with the money needed to cover their workers' unemployment welfare.

For the northeastern provinces, it is to somehow build a business-friendly environment that has never really existed since the beginning of the reform era.

For all Chinese cities, it is to do the right things to make businesses stay (first of all to prevent local housing prices from rising too fast), to attract new investment in the real economy (rather than in stir-frying existing assets), and to train young creative people to staff the next-generation industries and services.

What all this means is that the next big game in China is government investment in the cities.

The city cluster of the Yangtze River Delta will be the likely champion, thanks to the good local business tradition and support from both the central and local governments.

The logic applies also to other city clusters, whether planned or existing. Their chance for success depends largely on how hard they work, instead of how hard they wait - as President Xi Jinping told local officials in Northeast China recently.

This is a game China needs to be very serious about and play well. It's the formula that Larry Summers, Harvard economist, also recently called for in the United States, for the government to increase investment in research and development, and in education.

Such investment is at its lowest point in 45 years, Summers noted, insisting that the federal government should boost investment to help inoculate the economy against further growth slowdowns and lay the groundwork for long-term expansion.

If the US government can take just a few steps along the lines recommended by the former Obama adviser, there will be a race of sorts.

The author is editor-at-large of China Daily. Contact the writer at edzhang@chinadaily.com.cn