Coordinated Quality Development Across Regions

Coordinated Quality Development Across Regions* 

August 26, 2019 

Circumstances have changed and new issues have arisen affecting China's regional economic development. It is imperative that we decide which existing policies to maintain and which to adjust in response to the changing domestic and international situation. We also need to prepare strategic plans for the Second Centenary Goal.

I. Regional Development in Its Current State 

In contrast to most other countries, China has a vast territory and a large population, and its natural resources vary greatly from region to region. Coordinating development across different regions has always been a great challenge for us.

Since the founding of the People's Republic in 1949, there have been several major adjustments to the distribution of productive forces in the country. During the First Five-year Plan period (1953-1957), more than 70 percent of the 156 key projects supported by the Soviet Union were located in the north, and 54 were in the northeast. In his speech titled “On the Ten Major Relationships” in 1956, Mao Zedong proposed that the relationship between industry in the coastal regions and industry in the interior must be correctly handled. Development of the third-line regions was initiated in the mid-1960s.

After reform and opening up started in 1978, China made a series of key moves such as establishing special economic zones and opening up coastal cities. Since the mid- and late 1990s, while continuing to encourage the eastern region to take the lead in economic development, we have made a series of major strategic decisions, such as developing west China, revitalizing old industrial bases in the northeast and other parts of the country, and spurring the rise of the central region.

Since the 18th CPC National Congress in 2012, the Central Committee has put forward new regional development strategies, including the coordinated development of the Beijing-Tianjin-Hebei Region, the Yangtze River Economic Belt, the Belt and Road Initiative, the Guangdong-Hong Kong-Macao Greater Bay Area, and the integrated development of the Yangtze River Delta. Next, the Yellow River Basin will be put on agenda for ecological conservation and quality development in the region.

Despite sound regional development on the whole, we are confronted with new issues and circumstances that deserve our attention.

First, economic development varies greatly between regions. While the Yangtze River Delta, the Pearl River Delta and other regions have embarked on the track of quality development, some northern provinces have slowed down in growth. As a result, the national economy has further leaned towards the south. In 2018, the economic output of the north accounted for 38.5 percent of the national total, down 4.3 percentage points from 2012. Obvious imbalances also exist within some sectors and provinces.

Second, the driving forces for development are becoming increasingly polarized. There is a noticeable trend of the economy and population concentrating in big cities and city clusters, which enjoy growing advantages and good prospects for further growth. These include megacities such as Beijing, Shanghai, Guangzhou and Shenzhen, and large cities such as Hangzhou, Nanjing, Wuhan, Zhengzhou, Chengdu and Xi'an. They form regional growth poles for quality development.

Third, some regions are facing difficulties in their development. The northeast and northwest lag behind. From 2012 to 2018, the northeast's share of China's total economic output dropped from 8.7 to 6.2 percent, and the number of permanent residents decreased by 1.37 million, most of whom were young people and those working in high-tech industries. Some cities are ailing, especially resource-exhausted cities and those in traditional industrial and mining areas.

Generally speaking, our economic configuration is undergoing profound change, and leading cities and city clusters are becoming the main repositories of development resources. We must adapt to this new situation and develop new ideas for coordinated development across regions.

II. Guidelines for Coordinated Regional Development 

The guidelines for promoting coordinated, quality development across regions are: 

• adjust and improve regional policies in accordance with the objective laws of economics;
• give full play to the comparative strengths of different regions, and promote the rational flow and concentration    of resources;
• stimulate innovation-driven development and enhance the dynamics for quality growth;
• increase the economic and population carrying capacity of regions with development edges, including leading       cities and city clusters; and
• strengthen the capacity of other regions for food, eco-environmental and border security.

Our economy is transitioning from rapid growth to quality development, which has set new requirements for coordinated regional development. We cannot simply expect all regions to reach the same level of growth. Instead, each region should optimize its economic structure and growth model in light of local conditions. It is necessary to have a number of new growth drivers for quality development, such as the Beijing-Tianjin-Hebei Region, the Yangtze River Delta and the Pearl River Delta in particular, and some important city clusters. Imbalances are common, and we should pursue a relative balance between regions – this is a dialectical approach to coordinated regional development. In order to achieve this goal, we must follow four principles:

First, we should respect the objective laws of economics. It is natural that industry and population gather in regions with comparative advantages, where city clusters emerge to serve as the main engines for growth and higher overall efficiency of the economy. We need to remove obstacles to the natural flow and concentration of resources, and enable the market to play the decisive role in resource allocation for higher efficiency. That said, Beijing, Shanghai and other megacities should keep the size of their population at a level based on their available resources and principal functions.

Second, we should give full play to the comparative strengths of different regions. Regions with conditions favorable for economic development should take on more industries and population and play a stronger role in creating economic value. Regions of eco-environmental importance should be effectively protected and their eco-functions reinforced. For the purpose of national security, border regions should enhance their capacity for development so that their population and economy can grow, laying the foundation for national unity and border stability.

Third, we should make the best use of our territorial space. We need to implement and improve the strategy of functional zoning, refine the configuration of functional zones, and formulate and implement targeted policies for key development zones, ecologically fragile zones, and zones with abundant energy resources. In so doing, we will form a rational process of territorial development strictly based on functional zoning.

Fourth, we should guarantee people's wellbeing. One basic requirement of coordinated regional development is to ensure equal access to essential public services and a balanced distribution of infrastructure. We should improve supporting policies involving land, household registration and transfer payments, enhance the carrying capacity of city clusters, and promote the stable settlement of the migrant population. To help rural people settle in urban areas, we should be results-oriented, do solid work, and ensure that people can move out and settle down easily. We need to ensure equal access to public services in regions which serve the strategic functions of security and eco-environmental protection.

III. Measures for Coordinated Regional Development 

We need to improve the mechanism for coordinated regional development and push forward relevant policies and measures. 

First, we should form a unified, open, competitive and orderly national market for products and resources. We should implement a unified negative list for market access in all regions, eliminate discriminatory and hidden barriers between regional markets, break administrative monopolies, and eliminate local protectionism. In addition to established policies and regulations from the central government, we need to comprehensively ease the conditions for granting permanent urban residency, improve supporting policies, break down barriers hindering the flow of labor, and promote the optimal allocation of human resources. We should improve market integration, reinforce regional cooperation, and strengthen inter-regional cooperation in infrastructure, environmental protection and industry.

Second, we should bring pension premiums under national unified management as soon as possible. This is of great importance to a nationwide unified market, fair competition between enterprises, and the free flow of labor. While ensuring the unified collection and allocation of provincial funds in 2020, we should accelerate the effort towards unified management of pension premiums nationwide to ensure consistent rules across the country and mutual assistance between regions.

Third, we should reform the land management system. We need to speed up reform in this area and prioritize leading cities and key city clusters in the use of land for construction. With land use planned and rural land rights certified, provincial governments are mainly responsible for managing and coordinating the land quotas for urban and rural construction. More land should be provided for the development of regions with comparative strengths.

Fourth, we should improve the system for dual control over the amount and intensity of energy consumption. This system has played a positive role in energy conservation and pollution prevention and control. However, more than 10 provinces have suggested that it is difficult for them to meet the targets of energy consumption control for the 13th Five-year Plan (2016-2020). This deserves careful study. We should give full consideration to the actual conditions of individual regions while striving to control energy consumption. For fast developing regions where the intensity of energy consumption meets the standard, the control over the total amount of energy consumed can be relaxed appropriately.

Fifth, we should establish a comprehensive system to provide recompense for eco-protection. We need to improve the inter-regional mechanism under which eco-protectors are properly recompensed by the beneficiaries. We need to improve the vertical subsidy mechanism and increase transfer payments to the protection of forests, grasslands, wetlands and key eco-environmental functional zones. We should also spread the Xin'anjiang experience gained in a pilot program for the protection of the river water environment, and encourage mutual recompense between the upper and lower reaches of a river through means such as financial, industrial and personnel support. We need to build a market-oriented, multidimensional mechanism to provide recompense for eco-protection, and introduce a pilot mechanism for realizing the value of eco-environmental undertakings in the Yangtze River Basin.

Sixth, we should enhance the government transfer payment system. We need to improve the fiscal system and define a reasonable proportion of central expenditure in the overall spending on eco-environmental protection. We should provide effective transfer payments to key eco-environmental functional zones, major agricultural production areas, and poor areas. Basic public services must be provided to residents where they live. To facilitate the flow of labor across the country, we need to use information technology to build an accessible and efficient public service platform.

IV. Comprehensive Revitalization of the Northeast 

The northeast is an important industrial and agricultural base in our country. It has a strategic bearing on national defense, and on food, eco-environmental, energy and industrial security. Since the 18th CPC National Congress, I have made five field trips to the northeast and held two meetings there. In the next step, especially during the 14th Five-year Plan period (2021-2025), we will take new strategic measures to promote the comprehensive revitalization of the northeast.

The northeast has good foundations for a modern economy. Comprehensive revitalization does not mean giving undue support to declining industries and enterprises. Rather, it means effectively integrating resources and adjusting the economy, so as to form a new industrial structure that facilitates balanced development. Through improving its weak points and tapping its strengths, the northeast should carry out technological transformation in the traditional manufacturing industry, develop new technologies, new industries and new forms of business, and cultivate new growth areas such as care for the elderly, tourism and entertainment. The region should promote the transformation of resource-exhausted areas, speed up the cultivation of alternative industries, and extend the industrial chain. We will increase investment in innovation to provide new impetus for industrial diversification.

The state-owned sector accounts for a large proportion of the economy in the northeast. We should speed up reform of state-owned enterprises to give them a boost. We need to create a new frontier of opening up and attract more multinational companies to invest in the northeast. The central government can provide preferential policies to this end, but it is more important for the northeast to change its mindset and forge ahead boldly. The region should accelerate the transformation of government functions, substantially reduce direct resource allocation by the government, strengthen supervision and follow-up, and create conditions for market development. It should support the growth of both local businesses and businesses from elsewhere, and encourage entrepreneurship. A capable workforce is key to revitalization. We need to take measures to make Shenyang, Dalian, Changchun, Harbin and other important cities more attractive to investment and business. We should give incentives to good officials, take the right approach to appointing officials, and provide a platform for responsible and competent officials to do their job well and get rewarded.

* Part of the speech at the fifth meeting of the Commission for Finance and Economy under the CPC Central Committee.

(Not to be republished for any commercial or other purposes.)