Research and analysis

China: yangtze river economic zone proposal

Published 13 May 2014

0.1 Summary

Li Keqiang uses visit to Chongqing to urge establishment of gigantic Yangtze River Economic Belt ‘super-zone,’ covering almost half of China’s population. Details on the new zone are scarce, but Li’s backing now makes it part of the Chinese economic lexicon.

0.2 Detail

Premier Li Keqiang paid a surprise visit to Chongqing last week. At first his itinerary puzzled observers: rather than fly direct to Chongqing, he first stopped off at lesser-known Yangtze River port Wanzhou, then covered the last 300km by boat. The seniority of Li’s delegation dazzled the media: he came with Vice Premier Zhang Gaoli, PBOC Governor Zhou Xiaochuan, senior leaders from NDRC and 10 other provinces.

All became clear the next day, when Li used a public meeting to promote the concept of a ‘Yangtze River Belt Economic Zone.’ The proposed ‘super-zone’ would link the existing Yangtze River Delta SEZ (16 cities in Shanghai, Zhejiang and Jiangsu) with the Chongqing-Chengdu (Chengyu) economic corridor, as well as a swathe of Yangtze-river cities and provinces in between. The affected territory incorporates almost half of China’s population and 41% of its GDP. The presence of Zhang, Zhou, and NDRC leaders indicates concrete government support for the concept.

0.3 What exactly would this new zone do?

Details are scarce, but the idea of the zone is to break down physical and administrative barriers to economic cooperation along the length of the river. Whilst the Yangtze River is already the world’s busiest inland river, Li thinks it has even greater potential, and wants to see a range of infrastructure investment (think damming and dredging) as well as better administration. On the administrative side, the ambition is less inter-provincial competition, and more higher-level, co-operative economic planning. The zone and its high level backing will also strengthen the hand of local governments in the competition for resources from the centre.

0.4 Economic stimulation and the new Silk Road

The discussion occurred against the backdrop of the lingering economic slowdown in China’s costal area. Li hopes that the Yangtze River Economic Belt will release inland China’s enormous market potential. Western China is still in need of massive infrastructure investment, which is often financed by murky loans.

Observers have mixed feelings about the new Belt. Official media glorified the idea, but one commentator gave a pessimistic view: “SEZ succeeded in the past because America, Korea and Japan formed a market for cheap products in coastal China; if the government ignores market needs, it won’t deliver growth by simply drawing circles on the map.”

Li explained that the belt is also about linking all of China to global markets. “The Yangtze Belt is open to the global market in the east,” said Premier Li, referring to Shanghai’s long-established function as China’s window. “But it also opens to the west when connected with the Silk Road Economic Belt.” (whereby China is reconnecting itself to Central Asia through trade and joint investment in infrastructure). Because of its location and direct railway links with Europe through Central Asia , Chongqing wants to position itself as the strategic transit point linking the Yangtze and Silk Road Economic Belts.

0.5 Comment

Detailed plans have yet to be published. Success is not guaranteed, and will be measured over the coming decades, not years. There are also questions about whether the river really has capacity to take on more freight as Li envisages. And cross-provincial cooperation may be hindered by local officials’ inclination to protecting their own fiefdoms. But Li’s high profile push for the ‘Yangtze River Belt Economic Zone’ means it should soon become a solid part of the Chinese political-economic discourse.

0.6 Disclaimer

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