Picking the right channel

In 10 years, or even longer, the Belt and Road Initiative will influence the entire global economic landscape.”

China’s economic growth may not be as rapid as it was, but the good news is that central and western parts of the nation are contributing more momentum with their development paths, according to senior international consultant Dereck Ji.

In the first half of this year, GDP growth in these regions has exceeded expectations on average, while figures for the east, which is undergoing restructuring, have been lower than forecast, said Ji, senior partner of Roland Berger Strategy Consultants.

“The rise of the central and western regions is due to policy incentives to develop them, as well as the transfer of industries from the east due to the nation’s ongoing economic restructuring,” he said.

“Moreover, as these regions’ economy was relatively weak in the past, now, as they meet new development opportunities, the rapid growth stands out.”

Data show that in the first half, central and western provinces have made great strides in economic growth.

For example, Chongqing, the Tibet autonomous region and Guizhou province have all seen year-on-year rises in GDP of more than 10 percent, while the national rate was 6.7 percent.

Ji said the cities of Guiyang, Chengdu, Zhengzhou and Wuhan have seen particularly strong growth.

“The main reason is that local governments have specified their own advantages and opportunities, and have designed scientific and tailored development strategies,” he explained.

Zhengzhou, capital of Henan province, for example, has unveiled a development strategy that aims to build the city into an international logistics center by 2049.

“They have decided to … build two channels,” Ji said.

“One is air logistics, creating links to other cities around the world, and another is continental railway and highway channels such as the Zhengzhou-Europe rail line.”

This, he said, is a sign that authorities have recognized the potential of developing a “channel economy”.

A channel economy is the Chinese term for when a government looks to develop the local economy by improving transportation links such as air routes, railways and highways.

The goal is to increase exchanges of people between regions and the world, thereby boosting trade, tourism and other industries.

Ji said creating a channel economy would allow cities in China’s central and western regions to transform from isolated inland areas to open logistics hubs.

When logistics are developed, international trade is developed, he added.

Zhengzhou is also trying to foster emerging industries, including smartphone manufacturing, new energy

senior partner of Roland Berger Strategy Consultants

vehicles and cross-border e-commerce, and aims to have such industries making up about 70 percent of its industrial sector by 2020.

Ji said a channel economy could be a solution for many cities, especially in light of China’s Belt and Road Initiative, which comprises the Silk Road Economic Belt and 21st Century Maritime Silk Road and is designed to improve connectivity between Asia and the rest of the world.

“In 10 years, or even longer, the Belt and Road Initiative will influence the entire global economic landscape,” he said.

“With the Belt and Road being built, there will be a new trade channel complimentary to the existing marine trade route, and countries along the routes will deepen exchanges in economy and culture. Plus, cities on the routes, such as Zhengzhou, will be very important.”

A channel economy would also fit with the development goals in Northeast China, which used to be an industrial center three decades ago but is now almost bottom of the pile in terms of GDP growth.

“The Belt and Road will have an effect on the northeast, as there are channels from there to Moscow and onto Europe. If these channels are built, then products from northern China can be sent through here, and Harbin (the capital of Heilongjiang province) will become a port city. So the first step is to build channels.”

For inland cities unable to instantly develop a channel economy, Ji suggested they nurture specialized industries to realize economic growth and then build channels for its products.

For example, Guizhou in the southwest is being developed as a big data center, in line with the Internet Plus strategy, which aims to integrate the mobile internet, cloud computing and big data into modern manufacturing.

Moreover, he said, central and western cities looking to transfer industries from the east should be careful to opt for industries that do not pollute too much or consume too much energy.

“Chongqing has done quite well, as it’s taken over the computer industry from Kunshan city in the eastern province of Jiangsu.” The western city is now the world’s largest PC manufacturing center.

Ji recommended cities study best practice from around the world, but make plans based on local conditions.