Rethink urged for Yangtze economy

Delta region should support SMEs and value-added businesses, a forum hears

The Yangtze River Delta region needs to upgrade its industries and provide greater support to small and medium enterprises (SMEs) to maintain the region's competitiveness, according to experts at an economic forum in Shanghai.

The two-day forum this week, organised by the Shanghai Academy of Social Sciences, was attended by more than 100 officials, economists and scholars from the region.

Xu Hongyuan , director of the Development Research Department at the State Information Centre, said the region should start rethinking its economy.

'As the conflicts between population, environment and economic development become more obvious with the speeding up of the industrialisation process, in the future the Yangtze River Delta region must shift its focus from labour- intensive industries to higher-value-added industries which rely more on capital and technology,' he said. High energy consumption and low labour efficiency in the region posed great challenges for sustainable growth.

Mr Xu also noted that better co-operation was needed among cities within the region to avoid local protectionism and duplication of infrastructure.


Some experts at the forum called for a better and more-regulated funding channel for private SMEs. Illegal private funding has thrived in the region because of the government's recent curb in bank lending.

The government should extend more policy support for the delta's SMEs, perhaps by setting aside a special fund for such enterprises, said Zhou Daojiong , chairman of the China Committee of the Pacific Economic Co-operation Council think-tank.

A recent survey conducted by Zhejiang Statistics Bureau on about 800 private SMEs in the province found that 26 per cent of them have felt cash-flow problems and 22 per cent of them are seriously affected by funding difficulties, according to a report in the 21st Century Business Herald.

Chen Huai , director of the Policy Study Centre of the Ministry of Construction, pointed out that China's exchange-rate policy could constrain the region.


'China will have to make its choice between paying the price of a high operating cost for the economy as a whole and maintaining the price competitiveness of its low value-added export economy in the region,' Mr Chen said. 'This choice is necessary because the country is paying a dear price to buy oil under a pegged exchange rate and surging oil price.

'Can we justify our taxi drivers [having to pay for] expensive fuel because we need to maintain a low-price strategy to support our export-oriented economy in the region?'


Mr Chen suggested a possible revaluation of the yuan - a move that he said was necessary to reduce the cost of energy imports and promote upgrading and restructuring of industries in the region.