Keywords to success: Domestic demand and markets

Updated: 2012-12-30 07:57

By Zheng Yangpeng(China Daily)

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On his first inspection tour to provinces since the latest leadership reshuffle in November, Vice-Premier Li Keqiang highlighted some key words that will possibly indicate policy focus: urbanization, domestic demand and the role of market forces.

The largest potential of the nation's domestic demand lies not only in the eastern region, but also in the less-developed central and western regions, Li said at a forum held Friday in Jiujiang, a port city along the Yangtze River in central China's Jiangxi province.

One of the strategic fulcrums of the central region's development is the area along the Yangtze River, Xinhua news agency quoted Li as saying.

The Yangtze River, China's longest waterway, runs through several provinces in the central heartland, including Hubei, Hunan, Jiangxi and Anhui.

China's sustainable and healthy development lies in changes to the development pattern and the adjustment of the economic structure. The greatest mission in the adjustment is boosting domestic demand, and there is huge potential in the central and western regions in this regard, he said.

The regions along the Yangtze River would spur development in central and western China. Li said, and he called for efforts to close the gaps between urban and rural areas, as well as the different regions of China. The potential of less-developed areas will provide strong momentum for China's economic development and the improvement of the people's lives.

Li noted the average urban Chinese resident makes three times more than his rural cousin, and the average per capita GDP in the eastern regions was almost eight times that of some western areas.

To solve this problem, he urged better urbanization, modern agriculture, city-rural integration and the integration of development in the regions along the Yangtze.

Li used the analogy of a traditional Chinese chess game to illustrate the importance of balanced development: "It is like a game of Go. Strategic play in the board's corners and around the sides are vital, but the moves in the center are important, as well," Li said.

He also called for increased efforts to develop domestic and foreign markets to boost demand, to maintain the rule of law in the economy and to provide equal rights, equal opportunities and fair play for all market participants.

Fair market competition will also create more jobs for the public, he said.

The vice-premier proposed the concept of "city clusters along the Yangtze River's middle reaches". He told local governments to provide support in terms of trans-regional transportation infrastructure and streamlined job markets and social security systems, according to Xinhua.

To that effect, local governments must break down unreasonable administrative barriers to foster a unified market through reforms in the country's economic system.

Administrative boundaries are not market territories, and local governments should shift their functions and cast off restrictions within specific sectors and local authorities, Li said.

In order to secure energetic and robust development, he emphasized the importance of forming a single market and ensuring free flow of market factors according to market rules.

Several proposals by local governments were presented to Li, including Hubei's suggestion to dredge the Yangtze River and Hunan's proposal to coordinate key projects and infrastructures across provincial borders.

"You raised a lot of suggestions, especially to the central government," Li told provincial heads.

"Many of these suggestions are about more support from the central government, but more are about asking the central government to grant you more autonomy. Local governments should have their own initiative. The central government ministries should transfer their roles.

"Reforms should respect the law of the market, because market forces are irreplaceable," he stressed.

Niu Fengrui, a researcher with the Institute for Urban and Environment Studies of the Chinese Academy of Social Sciences, said urbanization, in essence, is the concentration of population and industries.

"The concentration allows the efficient flow and function of capital, land and human resources," he said. "So it best represents modernization and the inevitable direction China must take."

Niu said China is in the middle of accelerating the process. The speeding up of urbanization would unleash tremendous domestic demand, notably the huge potential for fixed-asset investment growth.

He estimated that in the next few years, 1,500 to 2,000 square kilometers of new urban area would be built every year. If this translates to about 1 to 2 billion yuan in fixed-asset investment per square kilometer, it means a total of 1,500 to 4,000 billion yuan fixed-asset investment per year.

Li Tie, head of China Center for Urban Development, a think tank under the National Development and Reform Commission, felt that the new urbanization drive will focus on boosting consumption rather than investment.

He called for an overhaul of China's rigid household registration and land and social security systems to guarantee the migrant workers' right to equal access to public service.

At the forum, Li Keqiang had indicated he preferred natural market forces to push forward the central region's development.

Zhu Huasheng, associate professor of economics with the Beijing Normal University, said it is important for local governments in the central region to respect the law of the market because the experience of the eastern region showed that it is internal market forces, rather than those the government dictates, that motivated economic success.

Xinhua contributed to this story.

(China Daily 12/30/2012 page1)