Hub-Periphery Development Pattern and Inclusive Growth: Case Study of Guangdong Province
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Hub-Periphery Development Pattern and Inclusive Growth: Case Study of Guangdong Province XUBEI LUO NONG ZHU 2019S҃39 CAHIER SCIENTIFIQUE CS 2019s-39 Hub-Periphery Development Pattern and Inclusive Growth: Case Study of Guangdong Province Xubei Luo, Nong Zhu Série Scientifique Scientific Series Montréal Décembre/December 2019 © 2019 Xubei Luo, Nong Zhu. Tous droits réservés. All rights reserved. Reproduction partielle permise avec citation du document source, incluant la notice ©. Short sections may be quoted without explicit permission, if full credit, including © notice, is given to the source. CIRANO Le CIRANO est un organisme sans but lucratif constitué en vertu de la Loi des compagnies du Québec. Le financement de son infrastructure et de ses activités de recherche provient des cotisations de ses organisations-membres, d’une subvention d’infrastructure du gouvernement du Québec, de même que des subventions et mandats obtenus par ses équipes de recherche. 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Les cahiers de la série scientifique (CS) visent à rendre accessibles des résultats de recherche effectuée au CIRANO afin de susciter échanges et commentaires. Ces cahiers sont écrits dans le style des publications scientifiques. Les idées et les opinions émises sont sous l’unique responsabilité des auteurs et ne représentent pas nécessairement les positions du CIRANO ou de ses partenaires. This paper presents research carried out at CIRANO and aims at encouraging discussion and comment. The observations and viewpoints expressed are the sole responsibility of the authors. They do not necessarily represent positions of CIRANO or its partners. ISSN 2292-0838 (en ligne) Hub-Periphery Development Pattern and Inclusive Growth: Case Study of Guangdong Province * Xubei Luo †, Nong Zhu ‡ Abstract/Résumé The hub-periphery development pattern of the Guangdong economy, to some extent, is a miniature of that of the Chinese economy. The Pearl River Delta, drawing from its first-nature comparative advantages in factor endowments and proximity to Hong Kong SAR, China, and Macau SAR, China, and the second-nature advantages as first-movers in the reforms in attracting and retaining domestic and foreign resources, has developed into a regional economic center. This paper examines the pattern of inter- and intra-provincial migration and that of the concentration of production, to explore the challenges and opportunities for the success of “double transfer.” The paper suggests a four-prong approach, to improve the business environment, support the realization of latent comparative advantages, increase the skill level of the labor force to support the upgrade of the production structure, and protect the vulnerable, to support the inclusive growth of the economy in Guangdong in a sustainable manner. Keywords/Mots-clés: Migration, Chine JEL Codes/Codes JEL: J61, O11, R12 * The authors would like to thank Ehtisham Ahmad, Ahmad Ahsan, Shahrokh Fardoust, Chorching Goh, Sanjeev Gupta, Khalid Ikram, John Litwack, Teresa Ter-Minassian, Meili Niu, Kezhou Xiao, Chunlin Zhang, and participants at the conference of Financing Local Investments within a Sustainable Development Strategy for P.R. China (organized by Asia Research Center, London School of Economics & Sun Yat-Sen University, January, 2015) for valuable comments. † The World Bank ‡ INRS-UCS, University of Quebec 1 Introduction Since the late 1970s, institutional and economic reforms have played a crucial role in the unprecedented development of the Chinese economy. The reforms have provided the basis for the transition to market economy and facilitated the integration of the domestic market with the international market. The interdependence of institutional reforms and opening up policies strengthened each other. Through incrementally reforming the centrally planned system to improve incentives and increase the scope of the market in resource allocation, and through building new institutions to support a market system before old institutions were destroyed, China’s transition has achieved a remarkable success (Boublil, 1997; Démurger, 1997; Qian, 2003; Wilmots, 1997). Thanks to the advantageous factor endowment and favorable policy inclination, the coastal region soon took off. Export-oriented and globalized industries are largely concentrated in the coastal region and low tech and resource based industries are mainly located in the inland region. Disparities within the province increased as the economy rapidly developed. The dynamics of the coastal provinces and the relative stagnation of the inland provinces configure a center-periphery regional growth structure (Lu, 2008; Naughton, 1999; Chen and Fleisher, 1996). Guangdong province, once an economic backwater, is a pioneer in the process of reforms and opening up (ElSayed et al., 2006).1 The economy of Guangdong is export-oriented, and largely supported by inflow of foreign direct investment (FDI), of which a significant share is from Hong Kong SAR, China and Macau SAR, China to the Pearl River Delta (PRD), and migrant labor. The province hosts three of the four Special Economic Zones established in the early 1980s (Shenzhen, Zhuhai, and Shantou, along with Xiamen in Fujian province). The special tax policies and financial incentives provided to the Special Economic Zones have stimulated the development of the foreign and domestic private companies and changed the structure of the economy. The development of the economy of Guangdong (particularly PRD) started with a “three-plus-one” trading mix (custom manufacturing with materials, designs or samples supplied and compensation trade) and developed to diverse ownership. The large inflow of FDI created strong demand for migrant labor. The long-term development of the economy of Guangdong is conditioned by the sustainable upgrade of the industrial structure and that of job creation to attract and retain the needed skills as well as provide workers (including migrant workers) adequate access to social services of good quality. In recent years, partly related to the global crisis, the slowdown of the GDP growth rate and the decline of net inflow of migrant workers, reflected as an emerging shortage of migrant workers (MingGongHuang), in some cities in Guangdong, led to the hot debate of whether the development pattern of Guangdong has reached a turning point (Liang and Wu, 2003; Meng et al., 2007; Wang and Fan, 2006; Zhu and Wang, 2006). The objectives of this paper are to present a comprehensive picture of the hub-periphery development pattern of the economy in Guangdong as a miniature of that of China and examine the opportunities and challenges for sustainable inclusive growth. It focuses on areas that merit particular policy consideration in supporting the continuous upgrade of the economic structure through “double transfer” - transfer industries from the PRD to the rest of the provinces; and 1 The open-door policy began with the establishment of the first special economic zones (SEZs) in 1980 in three cities (Shenzhen, Zhuhai and Shantou) in Guangdong province and one city (Xiamen) in Fujian province, then the preferential status of the SEZs soon rolled out to 14 other coastal cities in 1984, to the three deltas in 1985, to Hainan in 1988, to Pudong in Shanghai in 1990, and then gradually to 11 border cities and eventually to all capitals of the inland provinces and autonomous regions during the 1990s. 2 transfer labor in the lagging regions from the primary sector to the secondary and tertiary sectors, including transfer of high-skilled labor to the PRD. The paper is structured as follows: The next section focuses on the hub-periphery development pattern between the PRD and the rest of the economy. Section 3 highlights the large concentration of FDI using statistics from the China Statistical Yearbooks. Section 4 examines the massive inflow of migrant workers in the province, with a focus on the unique composition of the migrant labor force in different cities drawing from the 5th and the 6th national population census data. Section 5 examines the industrial specialization and spatial concentration of the capital-, labor-, and resource-intensive industries in the province. Section 6 discusses, in the context of “double