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Breaking Barriers

Former vice commerce minister argues that repetitive construction projects and homogeneous competition stand as major obstacles to China constructing a single mass market

By NewsChina Updated Mar.1

Wei Jianguo

The annual Central Economic Work Conference held in Beijing from December 16-18, 2020 identified expanding China’s domestic demand as the main task for 2021.  

The meeting stated that forming a strong domestic market is an important bolster in building a new development pattern. Consumption, savings and investment need to grow rationally. 

Wei Jianguo, vice chairman of the China Center for International Economic Exchanges and former vice minister of commerce, said in an exclusive interview with NewsChina that it is time to address copycat construction projects and homogeneous competition across the country to unleash the potential of China’s mass market. 

NewsChina: What is the role of a single mass market for China’s new development pattern? 

Wei Jianguo: The role of China’s mass market is reflected in two areas: huge market capacity and the large economy. Over 1.4 billion people aspire to live better lives. The many second- and third-tier cities and those in central and western China have huge demand for development. There is also enormous demand for both individual and productive consumption. 

The domestic market will be the main body of China’s mass market. It’s expected to form open, sound and secure supply and industrial chains. Meanwhile, China’s mass market should be attractive to the outside world. In other words, market demand will boost domestic economic growth and drive economic recovery in other countries. 

NC: What are the main obstacles China faces in forming a mass market? 

WJ: Over the past years, we see time and again that many places benefit themselves at the expense of their neighbors. There are administrative barriers between different cities. For example, some cities have requirements on the height, width and emissions standards of vehicles. Even if vehicles comply with national standards and are legal to drive on highways, they are not allowed to enter some cities. Against the backdrop of the Covid-19 pandemic, some cities rejected deliveries from hard-hit areas. In addition, cities commonly set barriers for tax revenues, logistics and human resources. 

In the past, we were on alert for low-level copycat construction projects. Some local governments, however, argued that high-level ones like scientific projects are not superfluous. As a result, many of these white elephant projects were undertaken. They were a stupendous waste of land, capital and human resources. 

Some projects churned out products but the price war drove up production costs and slashed earnings, resulting in a vicious cycle. They actually worked against ongoing supply-side reforms. 

Cities in China’s urban clusters including the Yangtze River Delta and the Beijing-Tianjin-Hebei region are more competitive than complementary, which decreases the competitiveness of city clusters overall.  

Some cities do not make the most of local characteristics and development advantages. They rushed to develop modern technology and the digital economy. This homogeneous competition has impeded the formation of a dynamic mass market. 

NC: What are the motivations behind copycat projects and homogeneous competition? 

WJ: There are four main reasons. First, some local government officials and entrepreneurs are out for quick success and instant profits. Second, many localities see copycat construction projects as a way to address employment and social problems across the board. Third, some local governments did not grasp the central government’s overall economic strategy and development layout. They were overwhelmed by regional protectionism. Fourth, some local governments lacked a rational, big-picture approach to development. For example, when officials visited other cities, they did not take full consideration of their own conditions to find long-term, stable, secure and open industrial and supply chains. 

NC: How can we solve these problems? 

WJ: We need to stop superfluous construction projects and homogeneous competition as soon as possible. Benefiting oneself at the expense of your neighbors and encouraging a closed market should be avoided. In addition, the central government has to adopt more regulatory policies and eradicate copycat infrastructure projects and homogeneous competition from the start. Key projects that are beneficial to society should be identified and given the go-ahead.  

Nowadays, cities across the country are striving to promote urban planning and development. An overall rational plan should be considered when examining and approving urban construction projects, which should become the yardstick to measure the progress of China’s mass market. 

NC: What is your advice for regulatory policies? 

WJ: To begin with, the National Development and Reform Commission and its local bureaus should scrutinize new projects more prudently and kill those that fail to meet standards. Local governments should not pursue redundant projects under the pretext of developing the local economy. Second, administrative examination and supervisory authorities should be more active in creating legal and institutional constraints on copycat projects and homogeneous competition. Third, more precise and concentrated top-level design should be given priority. As a result, localities will know what to do next. 

NC: Nowadays, data can be a barrier. For example, it is required to register local health code apps when traveling between cities. Will it impede the formation of a mass market? 

WJ: I think a city’s data should be recognized by other cities in the absence of uniform national data. For example, data regarding health code apps. 

In addition, it is necessary to maximize the role of data and make it available to more institutions and enterprises such as customs data and import and export data. Data is still not being shared between government departments. Alongside China’s drive to build a mass market nationwide, it is urgent that data is made available to more agencies. 

The Central Economic Work Conference proposed relaxing restrictions on market access, promoting fair competition, protecting intellectual property and constructing a uniform mass market. It is crucial to build an international business environment based on the market and rule of law. Big data is key to realize this. Data access and transparency are crucial to constructing the modern market economy system. I think the central government will come up with more detailed guidelines on its implementation. 

NC: Unified planning and control by the central government seem to be contradictory to the market-oriented allocation of resources. How do you see that? 

WJ: The central government proposed integrating top-level design and local development with its own characteristics. Local development should not run counter to the mass market proposed by the central government. There is a lot of work to do, and it is crucial to combine economic development with macro perspectives to build a perfect institution with Chinese characteristics.