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The Strategy of Promoting the Establishment of Main Function Zones: Background and Significance


By Hou Yongzhi, Zhang Junkuo & Liu Feng, Development Research Center of the State Council

Research Report No. 148, 2007

Since the founding of New China, especially after the implementation of the policy of reform and opening-up, China's regional economic development has gained great achievement. However, certain inconsistencies and problems are also accumulated in this process, and the most prominent ones are space development in disorder, inefficient space allocation of resources and factors and partly impaired relationship of the harmonious coexistence between human beings and nature. As a result, China's outline of the Eleventh Five-Year Plan puts forward the strategy of the establishment of main function zones. This proposal serves as a major innovation of the management thought and strategy of China's national land space development, enriches and deepens the strategy of regional coordinated development, and is of great practical significance.

I. Current Regional Strategies and Policies Are Insufficient to Secure the Realization of Coordinated Development of Regional Economies

1. Three stages for the evolution of regional strategies and policies

From the beginning of the First Five-Year Plan to now, the evolution of China's regional strategies and policies has mainly experienced three stages: (1) The period between the early 1950s and the Third Plenary Session of the Eleventh CPC Central Committee was in support of the development of interior regions; (2) The period between the early stage of reform and opening-up and the turn of the century was for the encouragement of the pioneering development of coastal regions; (3) The period between this new century to present is to promote the coordinated development of different regions.

(1) The period of supporting the development of interior regions. Strictly speaking, clear regional development strategies were not laid out in this period; instead, there were only industrial distribution policies. The guiding principle was that "the industrial bases in the coastal regions must be fully utilized. However, in order to balance the distribution of industrial development, interior industries must be vigorously developed.1" The fundamental idea was that industrial distribution, in main consideration of national politics and security of national defense, was promoted into the interior regions by making best use of coastal industrial bases and proper external supports and resorting to mandatory planning, thus forming the pattern of relatively balanced national industrial distribution and complete and independent systems of each economic cooperation region. As to the main measures, first, the proportion of interior regions was increased in the allocation of fixed asset investment; second, old businesses in the coastal regions were moved to interior regions by means of coercive orders. An example of the first measure was indicated by the fact that during the First Five-Year Plan, among 156 key projects assisted by the Soviet Union for construction and 538 key projects designed by China, 2/3 were in the northeast and interior regions and the other 1/3 in the coastal regions (1/5 of the 156 projects were in the coastal regions); investment in the 11 provinces and city, including Liaoning, Heilongjiang, Jilin, Beijing, Shanxi, Hebei, Henan, Hubei, Sichuan, Shaanxi and Gansu, accounted for 55.5% of national capital construction investment. The latter measure was represented by the fact that in 1964 and 1965 for the construction of the "Three Lines"2, 174 projects were transferred from Shanghai, Beijing, Tianjin and Liaoning which boasted comparatively good industrial development conditions.

(2) The period of encouraging coastal regions to make a lead-taking development. China's reform and opening-up marked a turning point of its emphasis upon the regional economic development. The main indication was that in the latter half of the 1980s, "the development strategy of coastal regions" has been clearly released. Its guiding principle was "to allow and support part of the people and regions to become rich first through honest labor and lawful operations and encourage these people and regions to help those that remain poor.3" The fundamental idea was that in main consideration of accelerating economic growth and increasing rapidly comprehensive national strength, the coastal regions could take the lead in developing themselves by making best use of their geographic advantages and development bases and cultivating special policy environment to attract domestic and foreign advanced production factors into the coastal regions and then the development of the interior regions would be driven by that of the coastal regions. As for the main measures, first, to set up a series of special zones. The special economic zones of Shenzhen, Zhuhai, Shantou and Xiamen were established in 1980, 14 coastal cities were opened in 1985, Pearl River Delta, Yangtze River Delta and South Fujian Delta were designated as the economic open zones, the special economic zone of Hainan was founded in 1988 and Pudong New District was set up in 1992; second, a chain of favorable policies to the coastal regions, such as reduction and exemption of enterprise income tax, delegating the approval and establishment right of investment project to lower administrative organs, raising the proportion of local share of foreign exchange earned, opening financial services (permitting overseas financial institutions to set up headquarters or branches in the coastal regions), cultivation and development of capital market (setting up stock exchanges in Shenzhen and Shanghai); and third, to encourage institutional innovation in the coastal regions and allow the coastal regions to break through the limitations of relevant laws and policies of the central government.

(3) The period of promoting coordinated development of different regions. In the mid-1990s, two major issues arose from China's regional economic growth including the widened regional gaps and the converged regional industrial structures. With an aim to addressing these two problems, the central government put forward clearly the thought of coordinated development of regional economies in formulating The Ninth Five-Year Plan for National Economic and Social Development and Outlines for 2010 Perspective Target. Later, in accordance with the thinking of "Two Overall Concerns" by Deng Xiaoping, the central government put forward respectively the strategy of western development in 1999, the strategy of revitalization of northeast China and other old industrial bases in 2003, and the strategy of the promotion of the rise of the central region in 2005. Afterwards, in light of the requirement of fully implementing a scientific outlook on development, the 11th Five-Year Plan has further improved and systemized the strategy of coordinated development of different regions. According to the authors that the strategy of coordinated development of different regions is actually a system of a package of strategies which includes the facilitated development of the western regions, the revitalization of northeast China and other old industrial bases, the promotion of the rise of the central region, the encouragement of pioneering development of the east region, the support of the development of old revolutionary areas, ethnic areas and border areas, the acceleration of the establishment of main function zones as well as the promotion of the healthy development of urbanization. It should be pointed out that although the thought of coordinated development of regions was laid out in the Ninth Five-Year Plan, its strategic formation was after the proposal of the strategy of western development was raised. For this reason, the starting point of promoting coordinated development of regions should be at the turn of the century. Another point for attention is that currently, among the strategies of coordinated development of different regions, some have come into being and are being implemented (e.g. the strategy of four blocks) and the other might have basic thoughts but without implementation plans (e.g. the strategy of promoting the establishment of main function zones).


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1Mao Zedong: On the Ten Major Relationships published in 1956

2In 1964, with an aim to better formulate the Third Five-Year Plan, the central government adjusted the distribution of productive forces in terms of the first line, the second line and the third line in accordance with the national economic development and economic pattern at that time. The first line was located in the strategic forefront; the third line in the strategic backside of China. Within the region between the first and second lines, certain places were marked out as the regional third lines according to the regional situation. The former ones are called the major three lines and the latter ones the small three lines.

3The Proposal of the CPC Central Committee for Formulating the Ten-year Planning and Eighth Five-year Plan for National Economic and Social Development.