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Building a mega growth alliance in central China
2006-08-07
China Daily
Wedged between the economically prosperous eastern and southern coastal areas and the relatively backward west, the provinces of central China have come up with their own development strategies in 2004 since the State accounted it wanted to promote the region's economic growth.
Their answer has generally been to look coastward. Hunan Province, for example, plans to merge into the Pearl River Delta economic zone in the south. Anhui Province is eager to ally itself economically to the Yangtze River Delta. Henan and Shanxi provinces, meanwhile, have their eyes on the Bohai Bay Rim, which encompasses Beijing and Tianjin municipalities and Liaoning Province.
These provinces are justified in mapping out their coastal focused development strategies because it promises capital and technology in the short term.
But taking a longer perspective, the exclusive emphasis on alliances with the coastal areas seems misguided.
To begin with, the exclusively economic marriage with the coastal areas negates the central area's own unique advantages.
With every province having its own coastal partner, the area will find it hard to organize within itself and form a regional economic force. On the contrary, chaotic competition between the provinces is likely.
Secondly, solely focusing on alliances with coastal areas will put the central area in a disadvantageous position in terms of the division of work.
Since the reform and opening up policy was initiated in the late 1970s, the coastal areas have enjoyed the priority in receiving capital, manpower, technology and other vitally important production elements, thus helping them become the country's chief manufacturing and service bases.
By contrast, an industrial structure based on the supply of raw materials and primary products has taken shape in the central area.
A nucleus-periphery model has come into being, in terms of the relationship between the coastal and central areas.
In this environment, it is feasible that the central area can work in concert with the coastal region economically.
But in the long run, it will only cement the current division of work and, as a result, the central region would be further marginalized economically.
The central provinces have hammered out their coastal focused development strategies because they count on the fact that some industries in the coastal areas will be transferred to the central area as a result of industrial upgrading.
But this may be a confused hope.
First, they should ask themselves the question: How much would we profit from this industrial shift? And will a large-scale industrial transfer really take place in the coming 15 to 20 years?
Viewed under the framework of the current international division of work, China's abundant cheap labour constitutes the key factor in its impressive economic growth over the last 27 years. This determines that the industries in the country's coastal areas, no matter how well developed they are by Chinese standards, are largely labour intensive in nature. And this is not likely to change in the coming 20 years.
This, in turn, dictates that no massive industrial transfer from the coastal to the central areas will take place.
If industrial shift does take place in the eastern or southern coastal areas, the industries to be transferred are bound to be moved to lesser developed localities within the coastal areas, not to the central provinces.
In addition, it must be seen that some of China's neighbours such as Myanmar, Viet Nam and Cambodia also boast cheap, or even cheaper, labour, which would pose a challenge to China's central area.
Finally, even if some industries are moved from the coastal regions to the central provinces, they will likely be the heavily polluting ones churning out low added value.
In view of all this, a development strategy is needed that not only looks at economic marriage with the coastal areas but also forges major development centres within the central area.
A mega development centre that matches the Pearl River Delta, Yangtze River Delta and the Bohai Bay Rim economic zones should be created in the region.
Generally speaking, big cities, with their powerful economic operations, drive development in the vast areas around them and help incorporate the neighbouring regions into much larger groups in terms of the division of work.
But the major cities in the country's central area are generally weak economically, which has caused many localities in this vast area to look directly to the coastal areas for co-operation.
This kind of economic co-operation largely increases the transportation and logistical costs of the economies in the hinterland and makes industrial transfer all the more difficult.
Things would be different if a mega growth centre was in place in this area. It would make the best use of the rich natural resources, local capital and abundant manpower in the area. Moreover, the transportation distance of the raw materials and manufactured goods would be dramatically shortened. As a result, the economic advantages of the area as a whole would be brought into play and manufacturing costs in this vast region would decrease. This may, in turn, drag down costs across the whole nation.
Fortunately, conditions for forging gigantic development centres in this area are ripening.
Minor cities and townships, for instance, are springing up around Wuhan, capital of Hubei Province, and Zhengzhou, capital of Henan Province. These city groups are the basis on which mega-development centres could be formed.
The author Ouyang Hui is a researcher of the Institute of land development and regional economy Under the National Development and Reform Commission
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