Regional economic development policies and their impact on the port sector

In the late 1990s, the 10 coastal provinces and municipalities were home to 10 percent of the Chinese population but generated about half of China’s gross domestic product (GDP). The ensuing Go West program of geographic rebalancing, adopted in 2000, aimed to fuel the economic growth of the 12 central and western provinces through direct fiscal transfers, tax preferences, and expanded development finance. When China’s labor surplus began to shrink in 2010, soaring wage rates on the coast pushed industries to relocate to less-urbanized central regions, where the costs of labor and land were lower (Lemoine et al. 2014). This trend was compounded by the contraction of international trade in the aftermath of the 2008 global financial crisis. In response, the central government launched an economic stimulus plan, with most expenditures being directed inland. These internal and external factors led to the center of gravity of China’s growth shifting inward at an accelerated pace, causing productivity to converge across regions and regional disparities to narrow.

Since 2006, the foreign trade of the central region has grown at an average rate of 17.2 percent annually, 8.2 percentage points higher than the national average. At the end of 2017, the region’s foreign trade was valued at US$236.77 billion (6 percent of China’s total foreign trade value).

China’s rapid economic growth has also been fueled by steady urbanization over the past three decades. By 2020, the country’s urban population had quintupled, reaching 60 percent of the total population (from 19 percent in 1980). The spatial transformation of the country occurred together with sectoral transformation of the economy—about half a billion rural residents moved to urban areas to seek jobs in manufacturing and services in special economic zones (SEZs) and export-oriented industries (World Bank 2020). Consequently, the first cities to capture economies of scale and specialization during China’s export-led growth were on the coast or close to waterways leading to international waters. Growing cities became increasingly connected with each other and with the rest of the world, further increasing productivity through agglomeration effects.

From 2010 on, China started to rebalance its economy toward services and innovation, shifting from a resource- and energy-intensive growth pattern to more efficient use of resources (World Bank and Development Research Center of the State Council of the People’s Republic of China 2014). The concept of ecological civilization endorsed by the central government in 2015 provided a framework for adjustments to China’s development pattern in the medium to longer term, including low-carbon growth, green development, pollution reduction, and development of a circular economy1 (Hanson 2019). China’s most recent five-year plans give due consideration to key areas of policy and regulation, finance, and institutional and technological innovation (box 2.1).

REGIONAL ECONOMIC DEVELOPMENT POLICIES AND THEIR IMPACT ON THE PORT SECTOR

China’s regional economic development policies have deeply affected port development. The main policy instrument in the early stages of China’s development was the establishment of SEZs to attract foreign direct investment, expand China’s exports, and accelerate the infusion of new technology.

SEZs are typically served by specific infrastructure such as roads, power, and water. The basic concept includes the following characteristics: (1) a