BUILDING A MODERATELY PROSPEROUS SOCIETY IN ALL RESPECTS
- Regional Coordination
全面建成小康社会：区域协调发展
Abstract: In China’s modernization drive, coordinated regional development and the building of a moderately prosperous society in all respects have been two mutually reinforcing dimensions. The three shifts of China’s principal social contradiction have responded to evolving needs of its regional development. Throughout various stages, the strategy of coordinated regional development has promoted the building of a moderately prosperous society in all respects in its concept formation, implementation and upcoming completion, which has reinforced regional coordination in return. In striving to achieve the goal of building a moderately prosperous society, China has increased its economic base, balanced its regional development, narrowed regional disparities, and increased equal access to essential public services.
Keywords: coordinated regional development, building of a moderately prosperous society, achievement of modernization
JEL classification code: R11; E61P21
DOI: 1 0.19602/j .chinaeconomist.2020.01.04
To advance its modernization drive, China has coordinated regional development so as to build a moderately prosperous society in all respects by 2020. Given the reality of development imbalances, China must make sufficient material preparations on all fronts to achieve the goal of modernization by the mid-21st century and put a premium on coordinated and sustainable development. Regional coordination is both a task and an outcome of China’s efforts to build a moderately prosperous society in all respects.
1. Coordinated Regional Development Will Propel the Building of a Moderately Prosperous Society in All Respects
In the coming decades, China will remain in the primary stage of socialism characterized by significant regional disparities and uneven development. In coordinating its regional development, China must use the advantages and potentials of various factors and promote sound and sustainable social and economic development. Since the founding of the People’s Republic of China in 1949, China has implemented a strategy of coordinated regional development, identified the goal of building a moderately prosperous society, and made remarkable strides in achieving this goal.
1.1 Regional Development Strategy in Favor of Inland Regions since 1956
In 1956, the Eighth Communist Party of China (CPC) National Congress identified the primary contradictions facing Chinese society as the “contradiction between the need to build an advanced industrial country and the reality of a backward agricultural country, and the contradiction between the
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people’s demand for rapid economic and cultural development and the lack of it.” This contradiction characterized China’s social and economic development in the three decades from the founding of the People’s Republic of China in 1949 to the eve of the Third Plenum of the 11th CPC National Congress in 1978. In 1956, China was yet to establish an industrial system. Also, agricultural productivity in the central and western regions, in particular, remained very poor.
In 1949, the newly-founded People’s Republic of China inherited an extremely uneven pattern of regional development. Much of the country’s inland regions were devoid of modern industry. The economy was in tatters, and productivity was shaky. At that time, the priorities were to restore the economy and reverse the uneven distribution of productivity. In his On Ten Major Relationships,
Comrade Mao Zedong said that “we must not only make full use of industrial bases in coastal regions, but make great efforts to develop industries in inland regions to balance the layout of industrial
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development.” Political, military and economic blockades of China by Western countries, led by the United States, imperiled China’s national security. The threat of war forced China to move its industries “close to the mountains and at scattered and concealed locations,” and was focused on the southwest and northwest. In this stage, China’s regional development gave preference to interior regions, putting a premium on the balanced layout of productivity.
As a result, numerous construction projects began in China’s central and western regions. During the First Five-Year Plan (1953-1957), China carried out 156 key projects aided by the Soviet Union, and 694 large and medium-sized construction projects, and made investments of more than 10 million yuan. During the Third Front Movement period in the 1960s, China relocated industrial enterprises from coastal regions, which were believed easier to be attacked, to less accessible interior regions, i.e. the “Third Front,” to develop complete agricultural and national defense services in the hinterland.
Under its highly centralized planned economy, China shifted its industrial layout westward and established a complete industrial system, particularly its national defense industry and technology, in the central and western regions, resulting in rapid industrial and urban development in these areas. While striving to balance regional development, the central policymakers gave priority to fairness over efficiency.
Without a doubt, this regional development policy boosted China’s industrial development and reversed the uneven industrial layout that was a legacy from the pre-1949 era. The policy also expedited economic development in China’s central and western regions, particularly in regions populated by ethnic minorities, and narrowed the economic gaps between the interior and coastal regions. The creation of an independent and complete industrial and national economic system laid a solid industrial foundation for the country’s economic development after the reform and opening up in 1978. Industrialization is both the groundwork and the starting point of modernization. In this stage, China set the goal of modernizing its agriculture, industry, national defense, and science and technology, i.e. the “Four Modernizations.” Initial industrial development balanced the layout of productivity and laid the foundation for subsequent endeavors to build a moderately prosperous society.
1.2 Policy Preference for Coastal Regions amid Change of Principal Contradiction in 1981
During those decades from the Third Plenum of the 11th CPC Central Committee in 1978 to the dawn of the new century, China’s social and economic development was characterized by the new
principal contradiction identified in the Sixth Plenum of the 11th CPC Central Committee in 1981, i.e. the “contradiction between people’s growing material and cultural needs and underdeveloped productivity.” 3
This principal contradiction was manifested in each aspect of China’s social life during the primary stage of socialism. In this stage, Chiana’s leaders decided to concentrate all the country’s resources on increasing productivity and the economy and to increase the economic base as the first steps in building a moderately prosperous society in all respects.
In the reform and opening up after 1978, the central leadership decided to shift its priority to achieving a modernized form of socialism, with economic development as the central task, and established a strategic policy of opening up to the rest of the world and revitalizing the economy at home. Comrade Deng Xiaoping put forward a strategic vision to “let some regions and people to prosper first before assisting others in achieving common prosperity. …We should develop [the] coastal regions first before getting [the] coastal regions to support [the] interior regions.”(Literature Research Office of the CPC Central Committee, 2004)
Guided by Deng Xiaoping’s idea, the central leadership adopted the strategy to give priority support to the coastal regions with excellent locations and economic conditions, and drive further economic development in central and western regions through the spillover effects of the development of eastern region. Meanwhile, the leadership introduced a “three-step” strategy for national development. In 1987, the 13th CPC National Congress identified the building of a moderately prosperous society as the second step of the “three-step” strategy. In this manner, China pursued an imbalanced regional development strategy in favor of its coastal regions.
During this stage, the central government issued policies to spur regional development. In the Sixth Five-Year Plan (1981-1985) and Seventh Five-Year Plan (1986-1990) periods, in particular, China created special economic zones, coastal port cities and bonded areas in the eastern region to unleash the area’s market dynamism, turning the eastern region into an engine for China’s rapid economic growth and the improvement of the country’s comprehensive national power.
By 2000, China’s gross domestic product (GDP) per capita reached 850 US dollars, exceeding the target of 800 dollars, and about 70% of China’s population led a generally prosperous life. The low-level and uneven prosperity though laid the groundwork for building a “moderately prosperous society in all respects” as the ultimate goal. In this stage, efficiency and profit maximization dominated China’s regional development agenda, resulting in an economic imbalance between the eastern, central, and western regions. Recognizing the widening regional disparities, the Fifth Plenum of the 15th CPC National Congress held in October 2000 called for building a moderately prosperous society in all respects in the new century.
1.3 Strategy for Balanced Regional Development: Changing the Primary Social Contradiction after the 19th CPC National Congress in 2017
So far over the two decades from the dawn of the 21st century to the completion of building a moderately prosperous society in all respects by 2020, China’s social and economic development has been characterized by the principal contradiction identified at the 19th CPC National Congress in 2017, i.e. “What we now face is the contradiction between unbalanced and inadequate development and the
4 people’s ever-growing need for a better life.” Recognizing this principal contradiction, the central leadership adopted the strategy of balanced regional development for the new era. The two decades from 2000 to 2020 are the final stage in China’s building of a moderately prosperous society in all respects.
At the turn of the 21st century, China’s economic growth started to take off, but regional disparities
continued to widen and this alerted the central leadership to the need to make adjustments to the plan. Therefore, the Ninth Five-Year Plan adopted the concept of balanced regional development. Afterward, China enacted a host of policy initiatives to coordinate its regional economies; these focused on the development of the western region (1999), the old industrial base in the northeast (2003), the central region (2004), and the eastern region (2006), i.e. the “four segments.” In 2011, China implemented national planning for the main functional aspects of the plan. In this stage, China’s regional coordination strategy created a favorable environment and conditions for narrowing regional gaps and achieving shared prosperity in the four regions.
The 18th CPC National Congress in 2012 marked a new stage for the Chinese economy with new characteristics of regional development. “We must coordinate all the activities of the nation like moves on a chessboard, which is the key for development in the 13th Five-Year Plan period,” said Comrade Xi Jinping. “Coordination is the means, target, and metric of development. By addressing the issue of uneven regional development, we should turn gaps into potentials.” (Literature Research Office of the CPC Central Committee, 2016)
Comrade Xi Jinping called for a new approach to regional development, i. e. “from regional clusters to broader regional cooperation.” His regional development strategy was underpinned by the Belt and Road Initiative, the Beijing-Tianjin-Hebei integration, the Yangtze River Economic Belt, and the Guangdong-Hong Kong-Macao Greater Bay Area. With a great resolve to “win the battle against poverty,” China increased aid to impoverished regions. Regional coordination is pivotal to addressing uneven and inadequate development as the principal contradiction in the new era.
2. Building a Moderately Prosperous Society: A Key Step towards Balanced Regional Development
China has set the goal of building a moderately prosperous society in all respects by 2020, which is an essential step before China unveils the next chapter of its modernization and national rejuvenation. By 2020, China must achieve moderate prosperity in all regions and narrow regional development gaps - gaps not only in terms of GDP and growth, but more importantly, in terms of people’s standards of living and their access to essential public services.
2.1 Regional Coordination in Terms of Economic Base and Layout
2.1.1 Transition from uneven regional growth to more balanced growth
Since 1949, China’s eastern, central, western, and northeastern regions have accounted for changing shares of the national GDP, as shown in Table 1. As mentioned before, we have identified three stages in the building of a moderately prosperous society in all respects, i.e. the initial stage (1952-1977), the development stage (1978-1998) and the final stage (1999-2018).
In the first three decades after 1952, the eastern region accounted for an average of 38% of China’s total GDP—an amount that was artificially suppressed. The focus of China’s industrial layout shifted from the eastern region to the central, western and northeastern regions, which then experienced rapid economic and industrial development.
However, since the reform and opening up in 1978, policy preferences and market forces have led to a transfer of economic activity, production factors and industries back to the eastern region, whose share of the national GDP increased from 40% to 50% in two decades. In contrast, the percentage of the national GDP contributed by the central, western and northeastern regions dwindled. Amid rapid yet uneven economic growth, regional gaps widened. Against this backdrop came the concept of building a moderately prosperous society in all respects that gives equal priority to economic growth and regional coordination.
After the dawn of the new century, China strove to narrow regional development gaps through a host of policy maneuvers. However, in the first decade after 2000, the eastern region still accounted for up to 59% of China’s total GDP. Widening regional gaps became the most prominent contradiction in building a moderately prosperous society in all respects. After the 18th CPC National Congress in 2012, the percentage of national GDP contributed by the central and western regions started to rise (Figure 1). Policy guidance led to more balanced growth and smaller gaps between the eastern, central and western regions. Significant regional gradient effects and coordination laid a solid groundwork for achieving common prosperity.
2.1.2. Growth of absolute regional gaps slowed and relative gaps narrowed
The GDP per capita offers a more reasonable assessment of regional development gaps, as shown in Figure 2. During the first three decades after 1952, the GDP per capita was similar across the four regions; the highest GDP was in the northeast, though it was still very low in absolute terms. In the 26 years from 1952 to 1978, China’s national GDP per capita only grew by 3.2 times. The adjustment of the regional productivity layout at the expense of efficiency stymied China’s economy and was counterproductive to building a moderately prosperous society.
From 1978 to 2000, China’s absolute regional development gaps widened, but the national economic aggregate increased as the eastern region took the lead in development. In 2000, China’s GDP per capita was 20.6 times that of 1978 and 66.7 times that of 1952. From 2000 to 2018, China’s implementation of a balanced regional economic development strategy slowed the expansion of absolute gaps between the
four regions. The maximum relative gaps between the four regions decreased from 2.5:1 in 2000 to 1.8:1 in 2018. As can be seen from the absolute values, the regional gaps between the central, western and northeastern regions decreased to the lowest level by 2018. These three regions have thus approached an equilibrium state of regional development.
To further investigate the relative regional development in China from 1952-2018, we have adopted the regional gap coefficient variation curve model as suggested by Liu (2016). By examining China’s regional economic development and GDP per capita at both national and provincial levels, we have plotted the regional gap variation curve as shown in Figure 4.
Since the founding of the People’s Republic of China in 1949, China has experienced three peaks in its regional economic gaps; these occurred in 1960, 1978 and 2005. As the chart shows, these regional gaps have experienced a few cycles of widening and narrowing. After the implementation of the regional coordination strategy, the regional disparities have further reduced since 2012 to the lowest level in the People’s Republic of China’s history. Implementing a more balanced approach to regional development has expedited the building of a moderately prosperous society in all respects.
2.2 Policy Effects: Smaller Regional Gaps and Equal Access to Basic Public Services
While building a moderately prosperous society in all respects, China must measure the changes in its development in various regions in a scientific, objective and accurate manner. The goal of economic activity is to deliver better standards of living to the people, as manifested in the growth of material wealth. To achieve this goal, a country should develop its low-income regions into middle-income
7 and high-income regions, and narrow regional development gaps (Jin, 2018). In 2012, the 18th CPC National Congress vowed to “double China’s GDP and per capita urban and rural incomes over the level of 2010.” In this sense, per capita GDP and income are the key metrics to be used in measuring the
success of building a moderately prosperous society in all respects.
Rising GDP and urban and rural income per capita have led to smaller regional gaps and more balanced regional development. As China enters into a rational era of regional development, people start to seek happiness in addition to material abundance—happiness in the physical and psychological senses that requires many conditions other than material prosperity (Jin, 2018).
These conditions can be reflected in equal access to public services. In building a moderately prosperous society in all respects, China must make up for its weak areas by ensuring equal access to public services and thus coordinate its regional development. Public finance should strive to ensure equal access to public services, and fiscal income and spending per capita, especially spending, may reflect the level of public services available to each individual. Most studies employ the equality of fiscal spending as a proxy for access to essential public services, which is otherwise hard to measure.
To measure regional development gaps, this paper uses the following figures: the regional GDP per capita, income per capita, the variation coefficient and range ratio of national fiscal income and spending per capita, and the regional fiscal spending per capita.
2.2.1 GDP per capita and urban-rural income per capita
In 2012, the 18th CPC National Congress vowed to complete the building of a moderately prosperous society in all respects by 2020. Using the per capita GDP and income per capita of 2010 as benchmark values, we have calculated the target values needed to achieve this goal by 2020, as shown in Table 3. As can be seen from this table, China’s eastern region took the lead by doubling its GDP by 2018, while the central and western regions then were yet to achieve their 2020 target values. Overall, China’s central and northeastern regions have been very close to the 2020 target values, while the western region has fallen far away. Whether the western region manages to catch up is the key to achieving the goal of building a moderately prosperous society in all respects.
Judging by national and provincial GDP per capita and income per capita, we can see from Figures 5 and 6 that by 2018, China’s GDP per capita stood at 64,644 yuan, and income per capita reached 28,228 yuan; both of these figures reached the targets for the building of a moderately prosperous society in all respects ahead of the specified year of 2020. However, the national per capita is not equal to shared prosperity. In reality, development in the four regions remains uneven and is relatively slow in the western region. After achieving shared prosperity at the national and regional levels, China should also increase its GDP per capita and its income per capita in various provinces and regions to ensure that no one is excluded from shared prosperity.
As can be seen from the chart, 19 provinces and regions were yet to reach the 2020 target of per capita GDP in 2018. Among them, Gansu Province had the lowest GDP per capita, i.e. 31,336 yuan. Eighteen provinces and regions were yet to reach the 2020 target of urban and rural income per capita, and Tibet registered the lowest income per capita of 17,286 yuan. Local governments should decompose the goal of shared prosperity by 2020 into local targets and improve policy-making to narrow the gaps in regional and urban-rural development and thus achieve shared prosperity.
2.2.2 Comparison of access to basic public services
Based on the methodology for measuring public service gaps put forward by the Research Group of the Society of Public Finance of China (SPFC) in its “Study on the Equal Access to Public Services” (2007), we have analyzed the regional gaps according to the two indicators of variation coefficient and range ratio of fiscal income and spending per capita in various regions. Specifically:
Based on the above equations, we have calculated the variation coefficient and range ratio of fiscal income and spending per capita for China’s various regions since 2000; the results are shown in Figures 7 and 8.
As the chart shows, the variation coefficient and range ratio of regional fiscal income and spending per capita have been decreasing since 2000. Smaller variations and less volatility of the fiscal income and spending per capita indicate decreasing regional gaps. Since essential public services in various regions are all supported by public finance, fiscal spending per capita better reflects the level of public service gaps across the regions. We used a comparison of fiscal spending per capita since 2000 and fiscal spending per capita in 2018, to identify the levels of public service gaps in various regions, measure the progress made toward achieving shared prosperity, and assess the level of coordinated regional development.
Since 2000, all four regions have seen increases, per capita, in their fiscal spending and improvement of public services. Despite regional differences, public service inputs have been increasing in all
regions, particularly in the central and western regions. Table 4 and Figure 10 provide detailed accounts of fiscal spending per capita in 2018, including total public spending and sector-specific spending on public security, education, science and technology, culture, sports and mass media, social security and employment, public health and family planning, energy conservation and environmental protection, as well as urban and rural community services. The data have been consolidated from local fiscal spending data of 2018.
As can be seen from the chart, fiscal spending per capita was the highest in the eastern region and the lowest in the central region. Sector-wise, China spent the greatest amount of money on education and the least on culture, sports and mass media. Specifically, the eastern region boasted the highest per capita spending on many public services, particularly education, science and technology, and community services. Public security spending per capita was the highest in the western region, most of which shares borders with other countries and faces public security pressures from terrorist, separatist, and extremist forces.
The northeast spent more than other regions on social security and employment on a per capita basis due to the burdens of its traditional economy, heavy industries, and state-owned enterprise reforms. However, the northeast spent the least on science and technology on a per capita basis at roughly 25% of the national average, resulting in its lack of innovation. The central region spent less than the other regions on energy efficiency and environmental protection, but it has served as a destination for industrial relocation from the eastern region. Unless the central region spends more to improve its energy and environmental performance, it may experience grave problems.
Currently, there is no official standard regarding the amount of fiscal spending on the above items to reach the level of a moderately prosperous society. However, a comparison of per capita spending on various items across regions reveals the level of essential public services in each region. Equal access to essential
public services is a core element of building a moderately prosperous society in all respects. Coordinated regional development requires equal access to essential public services with higher standards.
3. Coordinated Regional Development: A Key Step towards Modernization
At a new historical juncture, the 19th CPC National Congress in 2017 drafted a grand blueprint for China’s development from 2020 to the mid-21st century, stating that “We should not only complete the building of a moderately prosperous society in all respects and achieve the first centennial goal, but open a new chapter of building a modernized socialist country in all respects and head toward the second centennial goal,” and “From 2020 to 2035, we should strive for another 15 years to achieve socialist
5 modernization at the basic level.” In the decisive stage of building a moderately prosperous society, we should review our successful experiences, as, in the coming 15 years, China should continue to coordinate its regional development, expedite equal access to essential public services, encourage certain regions to lead in development and modernization, and achieve socialist modernization on a nationwide scale.
3.1 Promote Equal Access to Public Services to Balance and Promote Regional Development
In its process of building a moderately prosperous society in all respects, China should strive to narrow regional development gaps, deliver moderate prosperity to all regions by 2020, and address the principal social contradiction of “uneven and inadequate” development by reducing regional gaps. However, the reduction of regional disparities in terms of both economic and social development is a complex, arduous, and long-term project.
Therefore, equal access to essential public services is vital to regional coordination both at present and in the future. We should focus on improving people’s standards of living in less developed regions, narrow interregional social development gaps, deliver equal access to essential public services and welfare to people in all regions, and improve people’s standards of living and their quality of life.
We should identify the scope and standards of essential public services, increase fiscal transfer payments and support from the central government, and enhance county-level fiscal inputs to essential public services, particularly in the less developed regions. As a fundamental requirement of socialism, equal access to essential public services will increase people’s sense of gain and happiness and allow them to share in the dividends of reform, opening up, and development. The universal coverage of essential public services will expedite the creation of a unified socialist market economy, and thus lay the groundwork for basically achieving socialist modernization.
3.2 Foster an Integrated Domestic Market and Chinese-Style Globalization
Unveiled at the 19th CPC National Congress in 2017, the strategy for coordinated regional development in the new era calls for a greater synergy and integration of regional development at all levels. After accomplishing the goal of building a moderately prosperous society, we should coordinate development across China’s regions, economic belts, urban and rural areas, and regions of different types, and strive to foster a unified national market with the free flow of market factors, and unleash development dynamism and potentials in all regions.
We should set a limit on the number of state-level zone plans and preferential policies, improve the layout of land development beyond the boundary of administrative jurisdictions, and promote crossregional cooperation on all fronts. Economic circles and belts should share resources, complement each other’s strengths, and work closely together to guide the cross-regional flow of production factors. In particular, the Belt and Road Initiative (BRI) will present opportunities to the central and western
regions. As a manifestation of Chinese-style globalization, the BRI calls for removing non-economic barriers, such as ethnic and religious barriers, to the free flow of human capital across countries and regions, and overcoming the drawbacks of economic globalization (Li, 2017).
We should empower all regions of China to participate in globalization under the BRI, increase the synergy between the BRI and China’s national development strategies, and identify regional development priorities in the context of the BRI. Regional infrastructure development should contribute to economic interactions between various regions at home and with other countries. By integrating various economic belts, we could remove regional barriers and foster the integrated economic drivers supporting socialist modernization.
3.3 Encourage Differentiated Regional Development Based on Local Advantages
The early development of the eastern region was a key experience in China’s regional development since China’s reform and opening up in 1978. With numerous economic development models and experiences, the eastern region has contributed to China’s coordinated development and prosperity. The 18th and 19th CPC National Congresses once again called for “supporting the eastern region to lead in development” and encouraging “localities with adequate conditions to lead in modernization and contribute to nationwide reform and development.” These principles are conducive to China’s prosperity and international competitiveness.
After accomplishing the goal of building a moderately prosperous society in all respects, we should encourage regions with sufficient conditions to achieve m odernization and transition towards innovation-driven growth. Such regions will set examples and create conditions for other regions to follow. We should also encourage regions to pursue differentiated development based on their local conditions.
According to “realm economics” (Jin, 2019), China’s regional differences are influenced by local cultural values and behavioral rules. The same systems and policies, when applied in various regions, will lead to different results. The reason lies in the role of realms. Regional economic development, cooperation and liberalization are underpinned by economic rationality and, more importantly, by profound and extensive cultural values and institutional realities that require further research to unravel. Future research should be carried out to investigate the frontier issues and key challenges that may arise and thus forecast the evolution of realms.
3.4 China’s Socialist System as Fundamental Assurance for Coordinated Regional Development
The Fourth Plenum of the 19th CPC Central Committee reaffirmed the Committee’s strategic commitments to improving China’s socialist system and modernizing the country’s national governance. The Chinese socialist system should underpin coordinated regional development. We have identified five major experiences that occurred during China’s regional coordination and building of a moderately prosperous society, as listed below:
(1) The central leadership of the Communist Party of China has ensured political stability for building a moderately prosperous society in all respects along the socialist path; (2) China’s socialist system has been capable of mobilizing all the stakeholders and resources needed to accomplish large projects. This institutional advantage offers assurance for building a moderately prosperous society and implementing regional coordination policies; (3) China has adopted the concept of innovative, balanced, green, open, and shared development, promoted social governance and ecological civilization based on participation and shared benefits, and striven to modernize in all respects. Such development concepts have undergirded China’s wide- ranging endeavors to build a moderately prosperous society in all respects; (4) China has implemented a host of regional coordination policies that have been compatible with its unique national conditions and were based on the complex internal structure of its economy and diverse cultural and institutional attributes. As part of China’s valuable experience in reform, opening
up and development, China’s leaders called for “letting some people and regions to prosper first,” “giving priority to efficiency while taking fairness into account,” and “achieving common prosperity.” Specifically, Chinese leaders decided to open special economic zones, promote partner assistance, and reduce poverty for target groups and regions, among other initiatives. Such innovations have undergirded the building of a moderately prosperous society in all respects; and (5) China has fostered an all-around special economic layout based on the “four segments” and “four strategies.” Regional coordination strategy offers spatial assurance for the building of a moderately prosperous society in all respects. In balancing regional development and building a moderately prosperous society, China has made continuous explorations, reforms and innovations.
We should therefore continue to take stock of our experiences and practices, step up institutional innovation, strengthen and modernize our national governance, and achieve socialist modernization after building a moderately prosperous society.
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