State Council fosters city cluster around Chengdu and Chongqing

Editor's Note: Encouraged by the clustering effect of some of the country's coastal industrial towns, the Chinese central government has decided to build the Chengdu-Chongqing city cluster as a new economic power engine in the country's inland areas. In this Policy Review page, economic advisors suggest that proper coordination and cooperation will be needed to make the clustering program really work to replicate the success of the cities.

The central government's decision to foster a city cluster based around Chengdu and Chongqing, the two largest business cities in Southwest China, is expected to create a new growth engine for the country's sputtering economy, analysts have said.

But for the engine to work, a top-down coordination mechanism should be fashioned, they said.

The Chengdu-Chongqing City Cluster Development Program was endorsed at an executive meeting of the State Council, China's cabinet, which was presided over by Premier Li Keqiang two weeks ago.

As slowing growth hits the country's coastal areas, the blueprint pledges to build up city clusters to spearhead growth and the exploitation of China's vast western regions.

Compared with city clusters in other parts of China, which for geographic reasons typically come under one provincial government, the Chengdu-Chongqing city cluster has two "cores" which fall under a provincial and a municipal government.

The new city cluster covers an area of 183,000 square kilometers, equivalent to the size of North Dakota in the upper Midwestern United States.

Home to 40 million urban residents, the new Chinese city cluster encompasses 11 cities - 10 in Sichuan province, including its capital Chengdu, plus the province's neighbor Chongqing, which was separated from Sichuan and elevated to be China's fourth municipality directly under the central government 19 years ago.

"It's the country's strategic choice to craft an economic power engine in inland areas following the success story in developing city clusters in eastern and coastal regions," said Luo Ling, president of the Sichuan Research Institute of Industrial Development.

"It will reshape the country's economic landscape."

Chongqing headed the country's economic growth last year, with its gross domestic product surging by 11 percent year-on-year, while the national figure contracted to 6.9 percent. Chengdu also posted nearly 8 percent GDP growth in 2015.

The central authorities expect both municipalities to be the bellwethers in regional integration, given that there is imbalanced urbanization level and overlapped industrial layout within the city cluster, according to Luo.

But at present there is more competition than cooperation between Chengdu and Chongqing, he said. For example, Chongqing has a solid background of developing its automobile industry, but Chengdu and Ziyang, another Sichuan city also included in the city cluster, are seeking to boost their vehicle industry.

"It is imperative to set up a coordinating organization at the State level to steer the development of the Chengdu-Chongqing city cluster," said Luo, adding that this will help ensure the free flow of capital, technology and talent in the region.

In particular, as the city cluster sits in the upper reaches of the Yangtze River - the third-longest river in the world, but the longest to flow entirely within one country - such a coordinating authority will better implement plans of ecological conservation and environmental protection, he said.

Li Yong, a senior researcher of the Regional Economy Research Center of the Chongqing Academy of Social Sciences, too, said that there is homogeneous competition and a lack of synergy in terms of industrial development in the nascent city cluster.

"Chongqing and Sichuan province should join hands to make an industrial cooperation scheme for the 13th Five-year Plan (2016-20) period to unlock the local potentials for complementary development," Li said.

Li, who had participated in the drafting of the city cluster development program, said he proposed that the Chongqing and Sichuan sides pool resources to build two world class industrial clusters - automobile and information technology.

For instance, Chongqing will become the spare parts provider for all of the Sichuan and Chongqing areas, while Chengdu will focus on automobile innovation, Li proposed.

"Chengdu and Chongqing should also coordinate their development in environmental protection, smart manufacturing, modern logistics, tourism and finance," Li said. "All this calls for top-level coordination."

For the Chengdu-Chongqing city cluster to thrive, Li suggested a coordinating committee, preferably chaired by a vice-minister of the National Development and Reform Commission, and composed of different department chiefs from Sichuan and Chongqing, to be launched as soon as possible.