Guangdong
looks for closer delta embrace
By Wu Zhong, China Editor
HONG KONG - Guangdong, the wealthiest mainland China province, is considering
under the guidance of newly appointed provincial Communist Party chief Wang
Yang whether to integrate with Hong Kong and Macau to form a special
cooperative zone, similar to a free trade area (FTA), with the ultimate aim of
turning it into a "world-class metropolitan belt".
The plan comes as Guangdong seeks a new pivot to sustain its development as it
loses its competitiveness amid rapid increases in labor and land costs.
Wang, 53, widely tipped as a protege of Premier Wen Jiabao, last December,
replaced Zhang Dejiang as Guangdong party chief two months after being elected
as a
Politburo member when he was head of the
party in Chongqing municipality. Zhang is tipped to be promoted to Vice
Premier.
Shortly after arriving in his new office, Wang urged Guangdong officials to
"further emancipate their minds" and conceive of new ways to deepen reforms so
that Guangdong could continue to lead other regions in opening up to the
outside world.
"To emancipate the mind" was a slogan used by paramount leader Deng Xiaoping in
the late 1970s to urge officials to break the ideological shackles of Maoist
dogmas and so pave the way for the launch of capitalist-style economic reforms.
In part because of its proximity to Hong Kong and Macau, Guangdong took the
lead in the country's reforms of the period, becoming the first province to
benefit from Deng's "opening-up" policy. Of the four special economic zones
Beijing approved in 1980 to pilot market-oriented economic reforms, three -
Shenzhen, Zhuhai and Shantou - are in Guangdong. The only other one is Xiamen,
in Fujian province, facing Taiwan.
Investment that poured in from neighboring Hong Kong turned Guangdong's Pearl
River Delta into a re-export-oriented manufacturing center, greatly boosting
overall economic growth in the province.
Guangdong's gross domestic product (GDP) reached 3.06 trillion yuan in 2007,
ranking it first among China's 31 provinces and municipalities and accounting
for 12.4% of the country's total GDP of 24.66 trillion yuan. Because of its
strong re-export-oriented industries, Guangdong has led the country in foreign
trade for the past 22 years, with exports and imports totaling US$630 billion
in 2007, or nearly one third of the country's total.
As China has gradually opened other provinces, particularly after its entry
into the World Trade Organization, Guangdong is increasingly facing challenges
from other regions, in particular from the Yangtze River Delta led by Shanghai.
While Guangdong still ranks as top province for total GDP, it came only third
in terms of per capita GDP in 2007 ($4,273 according to government figures
based on the exchange rate at the end of last year). Ahead of it were two
provinces in the Yangtze delta area - Zhejiang, at $4,883, and Jiangsu, at
$4,428. Guangdong has a larger permanent population, at more than 94 million,
compared with Zhejiang's 50.6 million and Jiangsu's 76.2 million).
Further relative decline is threatened as rapid increases in land and labor
costs and a tougher government policy toward environmental protection are
causing many Hong Kong-invested labor-intensive manufacturing businesses in the
Pearl Delta to close or move inland or to other countries. Some reports have
estimated that some 10,000 out of more than 50,000 Hong Kong-invested
businesses in the Pearl Delta may be gone this year.
It is under such circumstances that Wang proposed closer ties with Hong Kong
and Macau to form a special cooperative zone. Ambitious and inspiring as the
idea may be, the greatest challenge to its implementation would be how to find
some way, or ways, to narrow the great differences between the political,
economic and social systems in the three places. Under "one country two
systems", Hong Kong and Macau continue the systems they inherited from British
and Portugal colonial rule, respectively.
Twenty-three provincial authorities and think-tanks in Guangdong are now
jointly conducting feasibility studies on forming the Guangdong-Hong Kong-Macau
special cooperative zone, Hong Kong's pro-Beijing Wen Wei Po daily reported.
Hong Kong and Macau support the idea and would give their full cooperation in
the feasibility study, it added.
Because Guangdong is not an independent tariff area like Hong Kong or Macau, it
is being called a special cooperative zone instead of an FTA, and the
feasibility studies will focus on how to remove current barriers to facilitate,
to the greatest extent, the free flow of people, goods and capital among the
three places. Analysts say such an ambitious plan needs Beijing's blessing.
Under "one country two systems", there are still restrictions limiting travel
by mainland people to Hong Kong or Macau. The Chinese currency, the yuan, has
yet to become fully convertible and under China's strict foreign exchange
control policy, there are still tough restrictions on capital outflow from the
country. Thus, for the special cooperative zone to become a reality, Guangdong
needs to ask the central government for special treatment to break the current
policy barriers.
"Right now, it is absolutely free for people, goods and capital to flow to
Guangdong from Hong Kong and Macau," an economics researcher with the Guangdong
Provincial Academy of Social Sciences says. "Restrictions are only one way, on
the part of Guangdong. So if Beijing could lift the restrictions for Guangdong,
the special cooperative zone could certainly be a real thing."
As their economic growth becomes increasingly dependent on mainland China, Hong
Kong and Macau would only benefit from further integration with Guangdong and
thus the two special administrative regions are happy to see any progress along
this line.
The timing of Wang's proposal is also very good. This year marks the 30th
anniversary of the economic reforms and opening up launched by Deng. China's
leaders are obsessed with how to deepen reforms and open up so they can leave
their mark on history. In practice, given its current development level, China
really needs some new thinking for further advancement. Hence novel and bold
ideas are encouraged.
Wang himself is now one of the 25 members of the Politburo. He would win extra
credit to become a brighter rising political star in China if he could persuade
other policy-makers to support his idea to make the Guangdong-Hong Kong-Macau
special cooperative zone come true.
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