3 Chinese provinces agree to develop giant biz belt

China plans to form a giant industrial belt with 160 million people linking three inland provinces around the midsection of the Yangtze River. The plan is to develop the region into an optical electronic industry complex for key items such as LED.

According to the Chinese daily Economic Observer Tuesday, the heads of Hubei, Hunan and Jiangxi provinces officially signed a plan on the "construction of strategic cooperation between cities of the midstream Yangtze River.” The idea is to unify the economic development programs that the three provinces have been implementing independently into a single development system. The economic scale of the three provinces is 806.4 billion U.S. dollars based on gross regional production as of 2010, which is equal to about 80 percent of the Korean economy`s value of 1.01 trillion dollars.

The leaders of the three provinces agreed on integrative economic development, establishment and implementation of industrial arrangements (distribution of industries), advancement of transportation networks, and securing of water resources. To this end, they will develop their capitals of Wuhan, Changsha and Nanchang into an economic belt in the form of a triangle of three rectangles, and build expressways that interlink them to allow travel within two hours.

To secure central government support, they plan to submit the plan to the "Two Meetings (Committee of the Chinese People`s Political Consultative Conference and the National People’s Assembly)" and elevate it as a national agenda. Hubei Province Gov. Li Hongzhong said “We will continue to push for a development model integrating the three provinces.”

The three provinces are at crossroads of railroads between Beijing and Guangzhou, Beijing and Shenzhen, and Shanghai and Kunming, and share the Yangtze River. Since they have a well-organized transportation network, they are also considered the best locations for integrative development.

Moreover, they have similar industrialization ratios of 41 to 46 percent, while are focusing on the cultivation of the optical electronic industry. As such, many experts have suggested the development of an integrated economic bloc there, but because they were competing with each other so intensely, they have been unable to do so.

If the plan on the integration of the provinces materializes, the new economic belt will likely complete with the Yangtze triangle economic bloc focused on Nanjing and Hangzhou in the downstream section of the Yangtze River. As the central government is proactively pushing for the relocation of production facilities from the coasts to the inland areas, Korean companies operating in Shanghai who seek to move into China can likely locate their operations within the three provinces as focal point.

Hunan Province has attracted industrial facilities to the delta region of the Pearl River, which resulted in a year-on-year rise of 35.8 percent in processing trade volume in the first half of last year. Since the three provinces are to focus on the optical industry as their flagship sector, companies in the region could also directly compete with Korean corporations, heralding both crisis and opportunity for Korean players.

koh@donga.com