By Wang Yiming, DRC

2017-6-14

With the launching of the strategies of the Belt and Road Initiative, the coordinated development for Beijing-Tianjin-Hebei region, and the development of Yangtze Economic Belt, China's regional economic development has ushered in a new historical opportunity, and the coordinated, healthy and sustainable regional economic development has become an important engine propelling the economic and social development in the future. At the same time, China's regional economic development is still facing many problems and challenges.

At China’s City Annual Forum 2017 with the attendance of over 100 experts, Wang Yiming, Vice President of the Development Research Center of the State Council, made a speech on city group construction, the coordinated development of regional economy, the building of a world-class city agglomeration in Beijing-Tianjin-Hebei region, and the control of local government debt growth.

China has a huge regional difference. It is generally regarded that regional difference is a major social issue. But viewing from the perspective of dialectics, China, as a developing country, enjoys a large room for development by use of regional difference in a phased mode for sustainable growth. In some areas, the economic growth slows down, while in some other areas the growth is gaining momentum. The room for potential development makes the cycle of economic growth become longer.

China's economic development has entered a new normal, under which regional development has also undergone significant changes.

We used to think that the regional difference presents an inverted U curve, and the basic trend of performance is that a widening difference is generally followed by a narrowing one. But will the difference become widened again? The experience of developed economies indicates that it will continue to become widened, especially with the development of high technology and the aggregation of high-end factors.

With regard to regional difference between the northern part and the southern part in 2016, the areas where the economy grew slowly were almost in the north, whereas economic growth was relatively fast in the south. The reason lies in the fact that most of the areas in northern China are resource-based provinces with heavy chemical industries. Now, because of the impact of sharply falling of resource product price and the overcapacity of traditional industry, the economic growth in some resource-backed and heavy chemical industry-oriented provinces dropped significantly, the revenue and profits of enterprises declined substantially, with difficult industrial restructuring, debt pressure, pension deficits, as well as the loss of young labor forces and high-end talents.

Although some areas have experienced some difficulties and challenges, there are also huge opportunities.

It needs to be noted that the launching of the Belt and Road Initiative has brought changes relating to the position of and role played by different regions in the implementation of the strategy of opening-up. It turned out that many landlocked provinces were soon transformed into front lines of opening up, which has changed the original "coast to inland and center to periphery" development pattern and reshaped the regional economic structure of China.

The Belt and Road construction has created conditions for the development of an open-oriented economy in the central and western provinces. For example, the opening to traffic of Chongqing-Europe trains service significantly changed the location and opening conditions of Chongqing municipality, enhancing the city’s ability to integrate resources and allocate elements. Now the China-Europe trains service boasts 3000 trains, going to many cities including London, Madrid and some other European cities. Small items of commodities produced in Yiwu of Zhejiang province can be sent to Madrid via the China-Europe trains service.

The change of regional development is also reflected in the improvement of agglomeration degree of economic space. Production factors generally flow to first- and second-tier cities because these cities have the best universities, the best hospitals, the best cultural facilities and the best public service facilities. The concentration of production factors in first- and second-tier cities gives an impetus to urban agglomeration, resulting in a higher concentration degree of production factors. According to economics theory, urban agglomeration is more effective than non-urban agglomeration. On the whole, especially in the case of China with a large population and limited land, such a trend is beneficial for the improvement of efficiency.

Among the various factors of production, labor flow is the most active factor in the market. Once labor force is free to flow, those cities with dynamic economies will draw the inflow of labor force, whereas labor force would leave those cities with sluggish economic activities. According to our statistical analysis relating to various kinds of cities, we find that the places of labor force inflow in recent years are basically large cities, especially those cities with a population of over 5 million. Net inflow of labor force to big cities and net outflow of labor force from small and medium-sized cities is an important reason for housing shortage in first-tier cities and the high-inventory of housing in third- or fourth-tier cities.

The high-speed rail networks will also change the geographical factors of cities. Some formerly unimportant cities will become important hubs of communications once they are connected with rail networks.

Overall, urban agglomeration is an important way to promote regional coordinated development. It serves as a carrier for modern industry, market forces and information platform. As China has a large population with limited land, it is conducive to the development of a moderate scale economy and sustainable development with adequate planning.

In the past, when we talked about urban agglomeration, we would focus on whether cities could gain more international competitiveness. The gathering of high-end factors can improve efficiency, information sharing, and external cost reduction. Viewing from this point, the Yangtze River Delta is among the top-notch urban agglomerations in China.

When we use modern tools to analyze the Yangtze River Delta in the traditional sense or other city agglomerations including "1+14" or "1+15" （i.e. one big city with 14 or 15 city groups）, we would find that the city groups based on the flow of people and the relationship among them are different from those city groups defined with administrative boundaries. Their scope is beyond our imagination. The distribution patterns of urban agglomerations are often not completely consistent with the results and plans analyzed with large data.

According to the total number of floating population, the largest number of labor flow is the Pearl River Delta, followed respectively by the Yangtze River Delta, Chengdu-Chongqing region, and Beijing-Tianjin-Hebei region, and this is different from our traditional way of thinking. Relevant data show that with regard to people’s distribution and population density of each city group, Beijing-Tianjin-Hebei region is not on top while the Yangtze River Delta boasts the highest. Each city group has a central city, and the size of the center can also be observed with big data, but the conclusions are often different from what have thought.

In short, we can come to three conclusions. First, the production factors are becoming more and more concentrated in China, and at this stage, it is conducive to improving efficiency. As most of the service industry and high-end industries are based on large-sized urban agglomerations and ordinary urban agglomerations as platforms and carriers, we need to attach great importance to metropolitan agglomerations. We need to take a new approach and some new methods to get to know the law relating their performance and growth space. Second, we need to gradually change the former system that high-quality resources are allocated according to the administrative level, and delegate the appropriate management power to the small and medium-sized cities, rather than to a big city alone, which is conducive to the development of urban agglomerations. Third, due to the rapid development of the high-speed rail networks and the way for people’s migration, we need to change our traditional planning concepts based on administrative division units, and make pilot practice to focus city planning on urban agglomerations and ordinary urban agglomerations and allocate infrastructure and public services and improve the ecological environment under such a landscape.