Inside the Modern Dragon
China: A 21st Century Engine of Change
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Hefei -- Provincial Leadership and Economic Planning
Hefei—the capital city of Anhui Province—is a modern city with a population of 5 million.
Strategically located between the Coastal economic zones and the Western frontier, Hefei is historically recognized as military defense stronghold. In 1992, China named it as one of its “open cities.” And today, Hefei is a center of economic development and innovation. In 2008 alone, the city’s trade volume increased 23.4 percent over the previous year with $5.43 billion in exports.Hefei is known as one of four national science and engineering bases thanks to its 200 scientific research institutes, 59 higher education institutions and three large-scale development zones.
Though it is located in one of the poorest regions, Anhui Province, Hefei city has a strong economy with a large and growing GDP per capita. The local and provincial government is intent on advancing with a leap-frog development program and a streamlined regulatory process for foreign investment.
Visiting the city in May 2009, I caught a glimpse of the complex delegation of authority and coordination between central and provincial governments.
Socialist Market Economy: Planned + Market Economy
We met with Sheng Zhigang, Hefei’s Vice Mayor. He spoke about the structure of China’s economy.
“The government should be active,” Mr. Sheng said through a translator. China incorporates the notion of Adam Smith’s “invisible hand” of a market economy while maintaining some command using a very visible hand. Another way to refer to this combination is adopting a market economy using a scientific approach. Scientific development aims for sustainable and humanistic growth, which produces a “harmonious society.”
“Everything should be focused on people,” Mr. Sheng said.
“The market economy is under macro control—or regulation—of the central government,” Mr. Sheng said. “We allocate resources to the market; and the market decides the allocation of resources.” He added that the central government has very powerful tools to regulate, such as taxes, physical regulations and very specific plans at the national level.
National-Provincial Coordination
It is interesting to listen to Mr. Sheng speak. He appears to have significant sway over policy, at least at the provincial level. He is also vice-chairman of Hefei's Chinese People's Political Consultative Conference (CPPCC), a branch of the National People’s Congress that takes on consultation, diplomatic and supervisory roles.
There is significant cross-over between national and provincial policymaking as well as allocation of public and private resources. Vaguely worded directives by the central government give provincial leaders much leeway in implementing the details, according to the Economist Intelligence Unit (2009). Yet the central government maintains control. For example, the Communist Party of China (CPC) appoints municipal leaders to their positions.
It is not clear how this all plays out with public-private partnerships. Financing and credit play a important roles in deciding which firms receive capital and which do not. Many firms are limited partnerships, obscuring the picture further. And state-owned enterprises are still active, though they are apparently being phased out.
Hefei
See also:
Strategic Rise of the Services Industry in Hefei
Economic updates:
Leap-frog development: In the first half of 2011, Hefei’s high-tech industry grew 47.4 percent compared to the first half of the previous year, according to the city’s reports. High-tech is one of China’s strategic emerging industries, along with electronic information and new energy.
Economic growth: Overall, the city said Hefei’s economy grew by 17 percent in the first half of 2011. That compares with an estimate of 9.5 percent annual growth for the broader Chinese economy by the IMF
SOEs Profit Up: Hefei’s State-owned enterprises increased their profits by 56 percent in 2010 and had a sales revenue of 23 percent above the previous year, according to the city. Reportedly, state assets are “required to quit profit-making” within three years.
