Growth push for six provinces to focus on manufacturing, green development

China's decision to provide more impetus to the growth of its central region will help the nation sustain high-quality development, narrow the regional divide and facilitate the economy's transformation in a greener and low-carbon direction, according to analysts.

A meeting of the Political Bureau of the Communist Party of China Central Committee, the Party's core leadership, reviewed on March 30 a policy document on promoting the high-quality development of the country's central region in the new era.

The meeting, presided over by Xi Jinping, general secretary of the CPC Central Committee, urged the region to develop a modern industry system underpinned by an advanced manufacturing sector, strive for green development, work toward high-quality opening-up, and enable more coordinated growth between urban and rural areas.

It was the latest move from the nation's top leadership to empower the growth of the region, which comprises Anhui, Henan, Jiangxi, Shanxi, Hunan and Hubei provinces.

Chen Weidong, head of the research institute of Bank of China, said the meeting further clarified the direction of the central region in future economic growth, with the region being an important pillar to sustain the nation's medium-high growth rate.

The central region's share of overall national GDP has risen from 18.8 percent in 2005 to 22.2 percent in 2019, he noted.

The COVID-19 pandemic, which hit the central region hard last year, and Hubei province in particular, took its toll on the region's growth last year.

According to the National Bureau of Statistics, the central region's economy expanded 1.3 percent year-on-year, which was below the national average of 2.2 percent.

"With the pandemic effectively put under control, the trend for the region's economic upgrading, transformation and quick growth will not be altered. It will continue to be an important regional powerhouse for China's economic growth," Chen said.

China first outlined a road map to spur the growth of the central region in a policy document jointly issued in 2006 by the CPC Central Committee and the State Council.

The National Development and Reform Commission issued a five-year blueprint to promote the rise of the central region in 2016, which made clear the strategic orientation of the region as a center for advanced manufacturing, a key area for the new type of urbanization, the core area for the development of modern agriculture, the demonstration zone for ecological civilization and an important support area for all-around opening up.

At a symposium he presided over during an inspection tour of Jiangxi province in May 2019, Xi outlined measures from eight aspects, including promoting the high-quality development of the manufacturing sector, improving independent innovation capacity in key areas and enhancing the business climate.

The measures stressed by Xi at the meeting were focal points in the nation's 14th Five-Year Plan (2021-25).

Narrowing gap

Chen, from the Bank of China research institute, highlighted the significance of carrying forward the region's growth in narrowing the gap among different areas, building a national unified market and fostering a new development paradigm, saying that the region is competitive in terms of both population and its strength in science and technology.

The region's population, which accounts for 26.6 percent of the national total, means it will be an important part of the overall domestic market. "Thus the quicker rise of the central region will facilitate the development of a strong domestic market," he said.

He added that the rise of the central region will be evident from aspects such as the upgrading of industries, green development and high-level opening-up.

The quicker rise of the central region will help build a new growth engine, promote coordinated regional development and offer strong impetus to high-quality economic growth and the "dual circulation "development paradigm, in which the domestic market is the mainstay and the domestic and foreign markets reinforce each other, he added.

Other analysts have hailed the significance of decisions adopted at the meeting on March 30, which included steps to accelerate the development of modern infrastructure and logistics systems in the central region and to follow a new path of green and low-carbon development and step up the concentrated use of energy resources.

Tommy Wu, lead economist at Oxford Economics, a think tank in the United Kingdom, said the development of modern infrastructure and logistic systems in the central region would boost productivity in the region and could help attract and facilitate the expansion of various industrial and service sectors.

"As production costs increase in the coastal regions, more enterprises will be willing to move part of their operations inland to take advantage of lower production costs," he said.

"But these regions need to equip themselves first, with the right infrastructure to capitalize on this future trend. Modernizing infrastructure and logistic systems is the right formula."

"For China to advance from a middle-income country toward a high-income country, no regions should be left behind," he added.

The growing attractiveness of the central region to businesses has also directly benefited some logistics service providers.

Tang Na, general manager of Sinotrans Logistics Central China Ltd, a courier service provider based in Hefei, Anhui province, said the region's increasingly robust manufacturing sector has been bringing more opportunities for logistics companies.

The company's business has been expanding consistently, with more high-end products including cars and intelligent home appliances reaching overseas markets with the company's service, he said.

Wang Han, chief economist at the brokerage Industrial Securities, said the potential for the upgrading of industry chains, the development of green industries and the use of the latest technologies is immense in the central region compared with eastern areas, due to its relatively low level of industrialization.

However, a pressing challenge for policymakers is to overturn the trend of increasing outflow of talent from the region to coastal areas, as the competition for talent will be the key to development of a cutting-edge manufacturing sector, he said.

New opportunities

Chen, from the Bank of China institute, said the Belt and Road Initiative has created new room and opportunities for the central region to expand opening-up, which has offered new impetus to the growth of the region.

So far, the State Council has given the green light to four of the six provincial areas in the central region to establish pilot free trade zones as part of broader steps to expand the region's opening-up.

Chery Holding Group, an automaker based in Wuhu, Anhui, has been one of the largest beneficiaries of the enhanced opening-up policy.

The company has been exploring two-way trade, a model through which it exports vehicles overseas before getting other commodities－instead of currency－with equivalent value imported to China, since 2019.

Wang Zhibin, who is in charge of Chery's cross-border e-commerce business, said the group recorded two-way trade volume of about 900 million yuan ($137 million) last year, and the policies of the pilot FTZ could enable the company to build up its two-way trade platform to serve more of the province's exporters and importers and help local manufacturers to expand further.

China's commitment to peak its carbon emissions by 2030 and attain carbon neutrality by 2060 is also set to usher in systemic and far-reaching reform, with the central region set to play a key role, some analysts said.

Wu, the economist, said that the progress of using green energy will probably be slower in the central region than in coastal regions because coal energy is cheaper, given the proximity to resources.

"But I can see that there are still opportunities for the use of cleaner, more efficient coal technology as China gains traction in launching a national carbon market," he said.