Deal to bring down Delta's barriers to trade
By Li Wenfang (China Business Weekly)
Updated: 2004-07-19 10:24

Pan-Pearl River Delta co-operation intends to phase out regional trade barriers and build the area into a vast common market, although this is expected to take a long time to achieve.

The ambitious co-operation scheme, which was the brainchild of Guangdong Provincial Communist Party Secretary Zhang Dejiang, was officially launched in June.

The Pan-Pearl River Delta encompasses the provinces of Fujian, Jiangxi, Hunan, Guangdong, Hainan, Sichuan, Guizhou, Yunnan, the Guangxi Zhuang Autonomous Region, and the Hong Kong and Macao special administrative regions.

The region has great importance, as it accounts for a massive 47 per cent of China's economy and more than half of its foreign trade.

Government officials of the 11 members, which are also known as "9-2," signed a framework agreement for across-the-board co-operation and a supporting working mechanism in June.

The nine mainland members alone account for one-fifth of the total area of China, and one-third of the population and economic size. The agreement is pioneering as it is the first time that the governments of the 11 members have agreed to co-operate economically, something which will benefit all of them.

The Pan-Pearl River Delta accord adopts a principle that the market plays the leading role, with government acting as the facilitator, but officials and academics said the full potential of the market can only be realized when government plays a major role in addressing fundamental issues such as trade barriers and rational planning in the region.

Local protectionism still exists to varying extents across China, despite more than decades of reform and opening. This blocks the flow of goods, labour and capital, which all undermine efficiency.

An example of this took place several years ago, in which province A intended to build a hydropower station and sell electricity to province C, but needed to use the power grid in province B. Having built several small power stations, province B was worried about the competition of electricity from province A and told it: "You want to sell electricity to province C, fly it over on an aeroplane."

"The beauty of regional co-ordination is that we reach an agreement and we work to pull down the barriers between us," said Li Jiange, deputy director of the Development Research Centre of the State Council.

Chen Guanghan, director of Guangzhou-based Sun Yat-sen University's Centre for the Study of Hong Kong, Macao and the Pearl River Delta, told China Daily the most important issue in the regional co-operation was the removal of barriers arising from the borders of the administrative regions.

But this would not be an easy task, warned Chen, pointing to the continuing powerful influence of local governments in the regional economy.

The governments are trying to tackle the issue, but this may take a long time.

"Breaking the regional blockade" was one of the fundamental principles agreed in June, along with "creating a fair and open market environment to promote the reasonable flow of production elements."

High-ranking government officials at June's Pan-Pearl River Delta forum and a regional trade fair which ended on Saturday all pledged to work to develop a unified, equal and barrier-free market in the region.

Another demanding task which calls for the determination and efforts of the government regional economic structural planning co-ordination, according to Chen Guanghan.

With the complementary nature of their various resources, the 11 members should further rationalize economic division in the region, he said.

Under the regional framework, Hong Kong is set to become the region's logistics and financial hub, and Macao the gaming and trade services centre, while Guangdong's role as a manufacturing base will be reinforced, said Guangdong Provincial Communist Party Secretary Zhang Dejiang.

The Guangxi Zhuang Autonomous Region has stressed its geographic proximity to members of the Association of Southeast Asian Nations, one of Asia's important trading blocs in Asia. Fujian points out its advantage in economic co-operation across the Taiwan Straits.

As Guangdong has benefited from manufacturing facilities relocated from Hong Kong, Macao and Taiwan over the past two decades, officials of many of the other eight mainland members of Pan-Pearl River Delta said they would welcome more factories relocated from Guangdong, Hong Kong and Macao.

Co-ordination among govern-ments in the planning of the economic structure is necessary to avoid intense competition among various members, and redundant construction, Chen said.

Niu Wenyuan, head of the Chinese Academy of Social Sciences' strategic research team for sustainable development, said regional co-operation and consolidation are the solution to these problems, something which international experience has revealed.

China's growth has been driven by various "points," including special economic zones and coastal "open" cities, over the past two decades, but the problems of redundant construction and intense competition have arisen.

The "points" should be connected to become larger regions to change the situation, Niu said.

As one of 10 areas for co-operation, the establishment of an economic layout featuring common development is also included in the Pan-Pearl River Delta framework agreement.

Another strong barrier to co-operation, which is seen as an easier starting point is infrastructure and transportation, including road and railway connections, to ensure the smooth flow of goods and services.

At the Pan-Pearl River Delta forum in June, Minister of Communications Zhang Chunxian said 30,000 kilometres of highways and main roads will eventually crisscross the pan-PRD region, compared with the current 19,000 kilometres. Road network expansion would also include the proposed bridge linking Hong Kong, Macao and the city of Zhuhai, Guangdong.

Deputy Minister of Railways Wang Zhaocheng said railway operation coverage in the region would be extended to 29,000 kilometres by 2020 from 19,000 kilometres at the end of last year.

With all the efforts, said You Ningfeng, vice-governor of Guangdong, "in this region, I think, the ultimate goal is to establish a mutually-beneficial unified market."

It would take a long time to achieve the goal, given economic differences among the members and the fact that Hong Kong and Macao, as the Special Administrative Regions (SARs) of China, are independent tariff zones and governed under the principle of "one country, two systems," he said.

The unification of regional markets should help push forward the unification of the entire country's market, Li Jiange said.

As the supporting working mechanism, administrative chiefs of the members will hold joint conferences every year. Secretary-generals of the governments of the mainland members and related officials from the special administrative regions will strengthen co-ordination, with pan-delta working offices to be established in the governments of the 11 members.

The 11 members also have agreed a pan-delta forum and the associated pan-delta economic and trade fair will be held every year in rotation among them.

As the initial progress in the Pan-Pearl River Delta co-operation, besides the June general framework agreement, the members have signed separate agreements on co-operation in road transportation, agriculture, labour, environmental protection and education.

Guangdong has signed agreements on co-operation in tourism with neighbouring Guangxi and Hunan. Chambers of commerce in the 11 member regions have also signed a framework agreement.

During the four-day Pan-Pearl River Delta fair, 847 deals worth 292.6 billion yuan (US$35.26 billion) were signed, including six on government-promoted co-operation projects and 841 between companies.

The next Pan-Pearl River Delta forum and trade fair will be held in Southwest China's Sichuan Province.

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