Beijing-Tianjin-Hebei megalopolis intended as showcase for economic reform

Unlike bold southern experiments in growth economics, the Beijing-Tianjin-Hebei project is intended as new model for economic change

PUBLISHED : Friday, 27 June, 2014, 3:11am
UPDATED : Friday, 27 June, 2014, 5:44pm

Unlike other regional economic plans that focus mainly on development, the integration of the metropolises of Beijing and Tianjin with Hebei province will be more about implementing reform, analysts say.

A development plan for cooperation between the two cities and Hebei (known collectively by their traditional characters Jing-Jin-Ji) was recently submitted for approval by the State Council, following the personal intervention of President Xi Jinping.

Along with Premier Li Keqiang and other leaders, Xi is attempting to restructure the world's second-largest economy following three decades of breakneck growth.

The Jing-Jin-Ji integration programme "calls for measures to promote structural reforms on all fronts", said Jianguang Shen, chief China economist with Mizuho Securities, in a research report on the project.

"We believe the plan is paramount to promoting China's economic restructuring and consumption-driven sustainable growth."

The 216,000 square kilometre region surrounding the capital is home to more than 100 million people and has a combined gross domestic product of more than 6 trillion yuan (HK$7.6 trillion), making it the country's third main economic engine after the Pearl River Delta and Yangtze River Delta.

Urbanisation of the Jing-Jin-Ji region has been a goal since the 1980s, but conflicting interests have stalled progress.

Just why Xi is pushing the plan now is the subject of much analysis and conjecture.

The first reason put forward by analysts is that the new leadership had to find a solution to the "urban diseases" afflicting Beijing and Tianjin - hellish traffic jams and chronic air pollution arising from their rapid population growth.

The metropolises, two of the country's four most important cities directly under central government control, realised they could not tackle these problems without the cooperation of Hebei.

Another reason is that the central government is trying to restructure the economy away from its decades-old growth model that is heavily dependent on capital investment and export-oriented manufacturing. That model is increasingly unstable, and the economy is in desperate need of new momentum.

Finally, it is also possible that it is a tactic to end the inefficiency of neighbouring localities as they compete for similar businesses.

"The new leadership must tackle these long-standing problems, and the best way to solve them is through regional integration," said Yang Long , a professor of political economy at Nankai University in Tianjin.

At a symposium on the project in February, Xi told national and regional officials to focus on coordination and integration among the three regions, while balancing the needs of development, the environment, population and resources.

Economic planners hope the plan can provide momentum for more widespread development of areas surrounding the Bohai Bay, and possibly for the whole northeast.

They also hope the project will prove to be a successful experiment in sustainable, balanced and environmentally-friendly economic growth.

Shen said the Beijing-Tianjin-Hebei metropolitan area would become the urbanisation reform model for the rest of the country.

The leadership's ambitious plans to modernise cities will require greater spending on public housing and infrastructure, including mass-transit systems in urban areas, railways and highways connecting cities, and sewage and water facilities to connect newly developed areas.

"As such, we expect metropolitan areas will be created by allowing the free flow of labour and resources in the Beijing-Tianjin-Hebei area through unifying the hukou, or household registration, within the region," Shen said.

"Residents in the greater capital area could benefit from the same education and healthcare system. Another factor is migrating the headquarters of selected government departments, state-owned firms and government agencies to Tianjin and Hebei."

Other analysts pointed out that the Jing-Jin-Ji regional economy is relatively loose and unevenly developed compared with its southern rivals.

While market forces have played a big role in the integration of the two coastal regions, which enjoy more evenly distributed wealth, the greater disparities within the Jing-Jin-Ji are will bring greater resistance to reform and economic integration .

"The problem in this region has been a strong government and weak markets. The share of the state in Jing-Jin-Ji is too big and administrative intervention has been strong," said Zhang Gui, deputy director of the Centre for Beijing-Tianjin-Hebei Development Research of the Hebei University of Technology .

"We should streamline administrative approvals between the three places, such as making it easier for a company based in Hebei to obtain a business licence in Tianjin."

Louis Kuijs, chief China economist with Royal Bank of Scotland, said a key objective was to relocate some activities presently based in Beijing to the neighbouring region, to relieve congestion in the capital and, hopefully, achieve efficiency gains.

"It will be interesting to see how such an initiative of regional cooperation will be managed by the central government in the face of strong regional competition," Kuijs said.

Hongyi Lai, a professor of political economy at the University of Nottingham's School of Contemporary Chinese Studies, warned that integration should also provide a bigger role for market forces and a vibrant private sector with local and foreign participants.

Additional reporting by Victoria Ruan