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China economy

Authorities in Xi Jinping’s former power base to measure industrial productivity by the acre

Zhejiang province rolls out new assessment scheme in line with president’s push for a cleaner, more efficient growth model

PUBLISHED : Friday, 02 February, 2018, 8:50pm
UPDATED : Friday, 02 February, 2018, 10:59pm

Authorities in an east China province once governed by President Xi Jinping have rolled out a new system for measuring the productivity and efficiency of industrial firms against six criteria, including how much revenue they generate per acre of land they occupy.

The scheme, in the affluent coastal province of Zhejiang, was first tested more than a decade ago and extended to selected large-scale companies last year, the provincial government said in a document issued last week. It is expected to be rolled out across the province by 2020.

While the authorities gave few precise details of how the scheme actually works, its intentions are clearly in line with Xi’s broader goal to drive China’s economy forward in a cleaner, more efficient manner, rather than focusing solely on headline growth rates.

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Companies will be measured on their output value and taxable revenue per unit of land they occupy, as well as their productivity, energy consumption, emissions, and research and development investment, the document said.

At the end of each year, firms will be ranked into one of four groups according to their performance, with rewards and penalties handed out to the best and worst. The incentives might include such things as an enhanced credit rating or government funding, while in the worst cases, companies could have their premises and land repossessed.

Compared with China’s more industrial regions to the north, Zhejiang is a relatively clean and green province, with about two-thirds of its gross domestic product coming from the services sector. As a result, it has been a popular destination for private investment.

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On the downside, it is desperately short of energy resources and arable land – it had less than 9 acres per hundred people in 2017, or about a third of the national average. Unsurprisingly, therefore, the local authorities are keen to maximise the efficiency of every plot of land they have.

In its document, the provincial government said it expected firms involved in the new scheme to outperform industrial averages not only for output value and taxable revenue per unit of land occupied, but also energy efficiency and investment spending.

At the Communist Party of China’s 19th national congress in October, Xi urged governments across the country to prioritise economic efficiency and profitability over headline GDP growth.

An article published in the official Zhejiang Daily this week said companies outperforming under the new system were like “beautiful birds that eat less, breed more, fly far”.

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In an interview with state broadcaster CCTV, Yun Jie, a researcher at the Chinese Academy of Social Sciences, said he believed the new system could work well in Zhejiang, which is known for its innovation in governance, but questioned how effective it might be in less forward-thinking provinces.

Zhejiang’s economy grew by 7.8 per cent in 2017 – outstripping the national figure of 6.9 per cent – and the government has set a target of about 7 per cent for this year. With a GDP of more than 5 trillion yuan (US$793.9 billion) it was China’s fourth richest province last year.

Xi served as its governor and later party secretary from 2002 to 2007.