In a recent interview with the reporter, Liu Xinghua, a distinguished professor of Tongji SEM, stated that Guangzhou, as one of the core cities in the Pearl River Delta, should build an innovation development ecosystem in coordination with other surrounding cities with a broader international perspective and keen strategic insight; in particular, it should coordinate with Hong Kong and Macao to attract more international factor resources and jointly expand the incremental market and economic aggregate.

Guangzhou can achieve high-quality development by, among others, seizing the opportunity of supply-side structural reform in the financial sector and relying on the important institutional innovation platform – China (Guangdong) Pilot Free Trade Zone Nansha Area of Guangzhou (Nansha FTZ) to promote high-standard opening-up.

Guangzhou’s high-quality development requiring a shift of focus from “quantity” to “quality”

The 19^th National Congress of the Communist Party of China (CPC) put forward that “China’s economy is now transitioning from rapid growth to high-quality development.” The 20^th National Congress of the CPC further elaborated on the connotation of high-quality development and made important strategic arrangements for accelerating the creation of a new development pattern and pursuing high-quality development.

Professor Liu said that high-quality development is not only a necessity for economic development but also an overall requirement for the development of all economic and social aspects; it is not only a requirement for economically developed regions but also a general requirement that all regions in China must implement; it is not a temporary requirement but a long-term general requirement.

“If development focuses on meeting people’s basic needs, then high-quality development focuses on delivering a life of better quality for the people; in fact, the latter is more challenging and arduous than the former,” said Professor Liu.

High-quality development has a deeper significance in Guangzhou.

According to relevant data, Guangzhou’s GDP reached RMB 2.88 trillion in 2022, with per capita GDP of RMB 154,400, 1.8 times the national average. The 2023 Guangzhou Municipal Government Work Report proposes that Guangzhou’s GDP is expected to grow by more than 6% in 2023 to approach RMB 3 trillion.

“Guangzhou believes that achieving high-quality development is a matter of shifting the emphasis from ‘quantity’ to ‘quality’ rather from meeting people’s basic needs to providing them with a life of better quality.” According to Professor Liu, one of the key points for Guangzhou to achieve high-quality development is that it should take the lead in making breakthroughs in the synergy of an efficient market and a well-functioning government and realize the agile governance of a super-large city in the digital era, thereby optimizing the allocation of various factor resources and fostering innovation in science and technology, business models and management.

Expanding incremental space instead of developing stock space

How can Guangzhou, a big metropolis with a permanent population of nearly 20 million and GDP of around RMB 3 trillion, find the incremental space for high-quality development?

Mayor Guo Yonghang of Guangzhou recently stated at the Guangzhou High-Quality Development Conference that Guangzhou will unswervingly advance “putting industry first and building the city based on manufacturing”.

“Guangzhou must make the strategic decision to develop high-end manufacturing, but it should not be overly concerned about the proportion of manufacturing value-added in GDP,” said Professor Liu. He mentioned that specialized and high-end producer services are necessary to support high-end manufacturing. The development level of producer services does not only determine a city’s industrial structure, production scale, production efficiency and innovation capability but also determines its radiating and driving effects on surrounding cities.

Professor Liu said, “This applies not only to cities but also to countries. Currently, the manufacturing value-added in the U.S. accounts for about 10% of its GDP and about 15.3% of global manufacturing value-added; the manufacturing value-added in China accounts for about 28% of its GDP and nearly 30% of global manufacturing value-added. However, the U.S. has powerful global economic competitiveness thanks to its high-end manufacturing and advanced producer services.”

During the latest global revolution in science and technology and industrial transformation, big data, the Internet of Things, artificial intelligence, 3D printing and other technologies are penetrating into various links of the industrial and supply chains and will fundamentally change traditional R&D methods, manufacturing methods, modes of trade and forms of industrial organization.

Professor Liu said, “Guangzhou is running out of land resources, and in the future, it will not have enough urban space to accommodate a large number of manufacturing enterprises. In spite of obstacles, Guangzhou’s high-cost old village renovation is progressing with the goal of improving the city’s spatial structure, revitalizing and reusing low-efficiency stock land, expanding the space available for high-quality industrial development, increasing the supply of urban public service facilities, and thereby fostering Guangzhou’s sustainable development. It should instead focus on developing high-end manufacturing and advanced producer services rather than merely increasing space for manufacturing or competing with other neighboring cities for available manufacturing resources.”

“Guangzhou should arrange and expand its industrial development space for the future. Guangzhou should coordinate with surrounding cities such as Dongguan and Foshan to build an innovation development ecosystem; in particular, Guangzhou should coordinate with Hong Kong and Macao to attract more international factor resources and jointly expand the incremental market and economic aggregate.” Professor Liu contended that Guangzhou should make full use of its inherent advantages, pursue a distinct course for growth and establish more substantial and valuable industries. This is fundamental to high-quality development.

In Professor Liu’s opinion, Guangzhou’s ability to achieve high-quality development is dependent on innovation-driven development and high-standard opening-up.

“Guangzhou, with some of the best universities and national research institutes in the Pearl River Delta, is the region’s and the country’s leader in technological innovation capabilities in manufacturing, and its vibrant private economy has led to numerous innovative business models. As a result, Guangzhou has possessed the fundamental elements for industry-academia-research-application integration and innovative development,” said Professor Liu. He expressed that on this basis, Guangzhou should vigorously promote the industrial application of scientific and technological advances, accelerate the creation of an innovation system conducive to the integration and mutual promotion of advanced producer services and high-end manufacturing, further raise total factor productivity, and take lead in the modernization of the industrial system in the Pearl River Delta and even the whole country.

Highlighting the “leading and driving” role of institutional innovation

The high-standard opening-up policy has stimulated the new vitality of Guangzhou, a millennial commercial hub.

Currently, the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area has been implemented for four years as an important programmatic document for high-level institutional opening-up in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA). Based on the major principle of deepening reform and opening-up, Guangzhou adheres to the linkage of foreign trade, foreign investment, outsourcing, foreign economic and trade cooperation, and foreign talents, seizes the essence of deepening reform and opening-up and continues to create new landscapes in opening-up.

“China’s high-standard opening-up now involves the institutional opening-up by adopting relevant rules, regulations, management, and standards, in addition to the import and export of goods and the movement of people. Located at the vanguard of opening-up, Guangzhou continues to be the country’s leader in high-standard opening-up.” Professor Liu contended that Guangzhou should possess a broader global perspective and strategic vision, form strategic complementarity with the GBA and international markets and achieve high-quality development through the internal and external linkages of industries, funds, technologies, talents and management, in order to contribute to the new pattern of development that is focused on the domestic economy and features positive interplay between domestic and international economic flows.

“Cities in excellent bay area city clusters around the world mostly exhibit the characteristic of a collaborative division of labor.” According to Professor Liu, Hong Kong must continue to cement its position and play its role as a fully functional comprehensive free port and international financial center, however, it is constrained by factors such as limited development space and total population. In the future, while maintaining its development characteristics, Hong Kong should rely on mainland cities in the GBA as its hinterland to attract more quality factor resources in global markets; on the other hand, mainland cities should strengthen their partnerships with international metropolises like Hong Kong to activate various factor resources and achieve high-quality development.

Professor Liu mentioned that the strategic goal of the GBA’s top-level planning and design is to bring into play the comprehensive advantages of Guangdong, Hong Kong and Macao, deepen cooperation between the mainland and Hong Kong and Macao and further enhance the supporting and leading role of the GBA in national economic development and opening-up; therefore, the accelerated development of each city in the GBA should not be homogeneous competition or a scramble for existing resources but should be coordinated development to jointly expand the incremental market.

In fact, Nansha FTZ is an important platform for open innovation and a new growth pole for Guangzhou, with enormous development potential in the future.

“Exploring institutional innovation under high-standard opening-up is one of Nansha FT’s important functions in order to drive technological innovation, industrial innovation, management innovation and business model innovation in Guangzhou and even Guangdong.” According to Professor Liu, Guangzhou is currently relying on the construction of the major strategic platform of Nansha to advance supply-side structural reform in the financial sector.

“From the perspective of modern finance, Nansha FTZ itself is a crucial platform for advancing supply-side structural reform in the financial sector, promoting the interconnection between domestic and overseas financial markets and driving financial innovation to support innovation in various aspects. Therefore, it should make breakthroughs in major financial platform construction, financial opening-up and innovation and characteristic finance development. It’s crucial for Guangzhou as a whole to fully utilize instruments such as financial leasing, sci-tech finance, debt-equity combination financing and supply chain finance to promote sci-tech innovation and industrialization.” Professor Liu also suggested that Guangzhou should rely on the policy and location advantages of Nansha FTZ to establish a headquarters base for producer services, actively bring in professional and distinct foreign financial institutions and various intermediary institutions that have sound operations and excellent qualifications and improve supporting measures and infrastructure construction, with the aim of giving full play to its capabilities in the institutional opening-up by adopting relevant rules, regulations, management and standards.

In Professor Liu’s opinion, overall, Guangzhou should maximize its policy advantages to build Nansha into a pilot demonstration area for supply-side structural reform, in order to attract and optimize the allocation of funds, talents, technologies, data and other factor resources. Professor Liu said, “It is now Nansha of China, not Nansha of Guangzhou. Nansha is a major recipient of national strategies as a state-level new area, a state-level development zone and an area of a pilot free trade zone. It assumes more responsibilities and has more opportunities for development. Guangzhou should advance the development and construction of the central urban area and Nansha New Area in a coordinated manner, accurately empower advanced manufacturing and strategic emerging industries and blaze a path of high-quality development against the backdrop of high-standard opening-up.”

Source: 21st Century Business Herald, February 24, 2022