Yangtze River Delta development offers good lesson

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Last updated at: (Beijing Time) Thursday, October 09, 2003

Yangtze River Delta development offers good lesson

Shanghai, along with 14 cities in neighbouring Jiangsu and Zhejiang provinces in the Yangtze River Delta and Huangshan, a city in Anhui Province, recently held a joint fair to promote their tourism.

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Shanghai, along with 14 cities in neighbouring Jiangsu and Zhejiang provinces in the Yangtze River Delta and Huangshan, a city in Anhui Province, recently held a joint fair to promote their tourism.

The event was part of a plan to eliminate industrial and administrative barriers in the regional market, a consensus reached at a summit of the respective mayors several weeks earlier.

Hailed by some media to be a start towards a "united" Yangtze River Delta, the move takes on special significance considering the heated discussion on how to consolidate resources in the region with minimum cost to further its growth.

Including Shanghai and parts of Jiangsu and Zhejiang provinces, the Yangtze River Delta is one of the country's most developed regions in economic terms.

With 10 per cent of China's total population, the delta produces 22 per cent of the national GDP and its foreign trade volume accounts for 29 per cent of the country's total.

In the first half of this year, the delta's 15 cities received US$12.37 billion in foreign investment while the rest of the country attracted US$30.25 billion during the same period, according to statistics from the Ministry of Commerce.

This April, Shanghai offered favourable treatment in its three suburb districts to attract investors.

Voices are loud that this move might trigger a new round of vicious competition to lure investment among cities with unreasonably preferential conditions.

In the ensuing debate on the way of "uniting" the Yangtze River Delta, those deeply concerned proposed to set up an official institute to regulate the economy of the region as a whole.

Their reason is that the cities in the delta are under different provincial jurisdictions. Establishing such a regulatory body could effectively rein in repetitious construction and vicious competition, so that the delta could develop more efficiently with limited resources.

Admittedly, their concerns are out of good will. But the solution seems to be an authentic legacy from the planned economy: omnipotent government and superb planning arrange a perfect position for everybody, then the whole system will operate smoothly.

It is true that a force is needed to allocate resources and boost production efficiency for the delta, but such force should be anything but an administrative body.

As the country's economic engine, the delta has nurtured one of the most developed market systems in China. It has adequate strength to organize production and maintain competition order with its "invisible hand."

Its ability is fully proven by the balance among the cities' current roles.

Without any administrative mandate, investors have found their destinations according to their own needs and the different endowment of cities since the delta was opened up two decades ago.

Cities with relatively low costs in labour and land have become manufacturing bases where a complete production chain from raw materials to finished products can be found.

Shanghai leads the region by offering an international platform. A metropolis supplying the latest information, it's also a base of technological research and development, financial services, transportation, education and entertainment.

This is the result of the market's self-adjustment. Will there be a better situation if we set up an administrative body to govern the economy?

In fact, the experience of an experimental body in the early 1980s is enough to rule out that proposal.

An office in charge of planning for the Shanghai Economic Zone was born in 1983. During its five-year function, the office promoted co-operation among most bicycle producers within the Yangtze River Delta and urged the construction of power plants.

But its biggest drawback was that it could never restructure the region's industry and the duplication of projects, according to Wang Zhiping, a researcher in economics who worked there.

More than a decade later, though there has been no drastic restructure campaign, the industrial structure in the Yangtze River Delta has evolved on its own and there are few signs that the region's economy is endangered.

According to Zhuo Yongliang, director of the Institute of Reform and Development in Zhejiang Province, despite the overall similarities of the industrial structure in Shanghai, Jiangsu and Zhejiang, they differ remarkably when the specific departments are measured.

Zhuo said the similarities are inevitable because of the homogeneity in their natural and social resources. As long as an ordered competition can be maintained, it is unnecessary to meet troubles halfway by trying to map out a "more reasonable" industrial structure according to imagined theories or others' experiences.

Looking back on the country's economic advancement, one lesson can be drawn from numerous examples: The need for deregulation can never be overstated.

Given enough room, the market will exert its muscle. Some so-called planning will only harm the market's ability to solve its own problem.

Instead of trying to tackle micro economic problems, the proper role of government should be promoting legislation, eliminating barriers for market access, supplying information and facilitating businesses.

Local governments in the Yangtze River Delta chose a wise way to co-operate in their tourism promotion.

Regarding their promises to develop a city conglomerate based on free flow of capital, labour and transportation, an even brighter prospect is on horizon.(China Daily)

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