SUSTAINABLE GROWTH: The resource-oriented central region has to focus on adjusting its industrial structure and cultivate sustainable growth in the coming future

Central China, which includes Shanxi, Henan, Anhui, Jiangxi, Hubei and Hunan provinces, is widely considered less developed than the prosperous eastern coastal region, the frontier of China's economic reform and opening up, but richer than the undeveloped and less populated vast western region.

But that's all story of the past. The central region has lagged behind the western region since China adopted a "west development" strategy in 2000 and gave priority to the west in policies and development funding allocation. The uneven development in different regions has taken the shape of "U" and the central region sunk toward the bottom.

Officials from the six central provinces gathered in Wuhan, capital of Hubei Province, to discuss issues on the central China rise on April 26. This is the third time they met each other for this purpose, with the previous two meetings held in Changsha, capital of Hunan, and Zhengzhou, capital of Henan, respectively. The sponsor of the event also invited representatives of domestic enterprises and multinationals and officials of the ministries and commissions of the Central Government in hopes of winning their support. The event this year drew overseas representatives of governments and corporations from 113 countries or regions, and nearly 60,000 businessmen nationwide.

It's a consensus among the six provinces that they must promote the economic growth of the central region altogether, said Wang Sanyun, Governor of Anhui Province, on April 26 at the Third Central China Investment and Trade Expo.

Opportunities in sight

The central region, with 28.1 percent of the country's total population, contributes to 20 percent of the country's GDP. Compared to east, northeast and west China, the central region is not a region with integrated economic functions. It's a geographical division. "It's probably because of this that the central region sees new opportunities in inheriting industries transferred from the eastern region," said Wang.

The open coastal areas have to give up some labor-intensive industries in which they no longer enjoy advantages due to increases in labor and land costs, as well as an overburdened environment from industrial development. The adjacent provinces, with a good industrial tradition, cheap labor and resources and geographical proximity, are the ideal destination for the legacy.

More opportunities come from full-fledged cross-region economic cooperation. The coastal areas have sought to expand multi-regional cooperation in order to overcome the development bottleneck. The Pearl River Delta used to refer to the collaborative economic development of Guangzhou, Shenzhou, Foshan, Zhuhai, Dongguan, Zhongshan and other cities in the area. The delta was expanded to be the Greater Pearl River Delta last year to include nine adjacent provinces (autonomous region) with close economic and trade relations and Macao and Hong Kong special administration regions. The nine provinces (autonomous region) are Fujian, Jiangxi, Guangxi, Hainan, Hunan, Sichuan, Yunnan, Guizhou and Guangdong.

The Yangtze River Delta, which covers Shanghai Municipality and Jiangsu and Zhejiang provinces, is planning expansion to include Hunan, Jiangxi and Anhui provinces and might reach as far as the middle reaches of the Yantze River.

Being accepted into the comparatively developed Yangzte River and Pearl River regional cooperation systems will mean a larger market and more effective resource integration for the central region, said Wang.

Also, linked by convenient transportation, Wuhan in Hubei Province and Changsha, Zhuzhou and Xiangtan in Hunan Province formed a pilot zone for comprehensive resource-efficiency and environmentally friendly reforms on December 14 last year.

China is moving rapidly toward industrialization and urbanization. With the improvement in inter-city infrastructures, more convenient and reliable transportation and closer economic connections between cities, economic hubs enjoy increasing influence on surrounding small and medium-sized cities, and more city clusters will emerge, said Li Hongzhong, Governor of Hubei Province.

More opportunities will come from the support provided by government policies. The Ministry of Commerce will lend the central region their support in seven aspects, said Chen Deming, Minister of Commerce, on April 26 at the expo. The ministry will increase the destinations for inheriting processing trade, give instructions to foreign investors in conducting varied investment promotion activities in this region, encourage foreign investors to build manufacturing bases, cooperative

OEM factories and research and development centers, and encourage them to invest in the shareholding reform of small and medium-sized state-owned enterprises, said Chen.

Strengths accentuated

"The six central provinces have opened 20 logistical centers, of which 10 have airports, nine have water ports along the Yangtze River and one has a railway port," said Sheng Guangzu, Director of the General Administration of Customs, on April 26 at the expo.

Statistics from the Chinese Academy of Social Sciences shows the central region hosts 12 of the 20 Chinese cities with great investment potential favored by multinationals in 2006.

The six provinces give priority to the hi-tech industry. Hunan Province, for example, reaped 270.06 billion yuan ($38.6 billion) from the industry, hitting a record-high year-on-year increase of 42.65 percent.

Jiangxi Province has established advantages in three industries involving new materials, optoelectronic engineering, biopharmaceutical and medical devices, and the three industries contributed to more than 60 percent of the province's GDP last year.

The Wuhan Donghu Hi-Tech Zone had gathered 15 state-level laboratories, 13 national research centers of engineering, 37 provincial laboratories and research centers of engineering, and 500-plus research institutes of enterprises by the end of 2007. With 20,000 technical personnel working in the zone, the Donghu Hi-Tech Zone proves to be the most active link in the innovation system of Hubei Province.

The development zone introduced and improved a series of policies related to innovation fund management, venture capital investment and intellectual property protection to encourage innovation, said Liu Chuantie, Deputy Director of the Administration Committee of the Donghu Hi-Tech Zone. He said the zone would continue to perfect the investment and service mechanism of innovation capital, optimize the innovation environment and build a multi-level market-oriented innovation system to serve the enterprises and encourage applications of research results into production.

"We hope that the Donghu zone will soon be integrated into the global innovation network and become an important innovation base in the global optoelectronic industry," said Liu.

According to Li Hongzhong, Governor of Hubei Province, the six central provinces have been working on shaping the regional innovation capacity by optimizing existing systems, management, technologies and services, echoing the Central Government's call for building an innovation-oriented China.

Difficulties ahead

There are certain obstacles to overcome before the central region attains remarkable growth, said Ruan Huabiao, an economist with the Anhui Provincial Economic Information Center attending the expo, who thought the biggest pressure comes from energy saving and emission reduction requirements.

The resource-oriented industries account for a large proportion of the industrial structure in this region. High resource-consuming and polluting industries such as iron and steel, coal, power generation, cement and non-ferrous metal dominate this region, and the region faces enormous pressures from the Central Government to reduce emissions and save energy.

Another difficulty is with the money. Banks on the one hand are putting much stricter requirements on companies applying for loans and, on the other hand, some industries have slowed down due to tightened macro-policies these years, which have created a ripple effect among related industries. The major industries in the central region that enjoy advantages, such as electrolyze aluminum, coke and coal-fired power generation, happen to be industries that slowed down in recent years owing to restrictions put on by the state.

The increase in exports from the region also dropped due to export policy adjustments. From January to August last year, five of the six provinces except Henan saw their exports slow down. Of them, the export increase in Hunan Province dropped by 8 percentage points, and that in Anhui, Hubei, Jiangxi and Shanxi dropped respectively by, 5.2, 4.4, 2.7 and 0.8 percentage points.

"The government will continue to promote energy saving and emission reduction, adjust the export rebate policy and close down backward production capacities, and might expand the list of industries and fields under state restrictions and monitoring," said Ke Changsong, an official with Anhui Province Economic Information Center. "All these factors will bring uncertainty to the development of the central region."(Beijing Review)