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Innovation needed to expand economic space

By Jin Bei | 2015-11-03 | Hits:
(Chinese Social Sciences Today)

“The Belt and Road” initiative provides immense economic momentum to inland provinces such as Gansu.

Currently, China’s economic development is hindered by overexploitation of natural resources, imbalanced population distribution and urbanization, and a surplus of low-tech mass production.


The strategic space of the Chinese economy has undergone rapid transformation in tandem with the fast expansion of its scale. “Strategic space” refers to the active domain of various economic activities and related interest frameworks of natural resources. The strategic space of regional economic development involves various economic factors, technology, culture, and geopolitics. Since the 1980s, radical industrialization stimulated and sustained by hyper-materialism has indeed enlarged and transformed the strategic space of regional economy.

Yet, it also resulted in spatial “congestion” and “stenosis.” “Congestion” refers to the near exhaustion of spatial capacity caused by excessive economic activity and hyper-actions. “Stenosis” refers to the static state of economic activity and the behavior of economic agents caused by certain constraints. At the moment, four questions concerning the strategic space of regional economy are worthy of our attention.

The past three decades of miraculous economic growth have been heavily reliant on massive exploitation of natural and spatial resources. Every region has sought to drive economic growth by making the best out of its location and natural resources. A plethora of mining, land development and housing projects as well as economic development zones, have resulted in spatial and traffic congestion, environmental degradation and water shortages, although they have lent momentum to the upgrading of production capacity and local landscape.

Meanwhile, some regions are experiencing the opposite—oversupply of natural resources, housing vacancies and difficulties in    attracting investment. Low population density is their primary challenge. It also means that many regions across China do not have enough population to fill up the cities based on urban planning schemes. To be more specific, many small and medium-sized cities in Northeast China are hampered by low population density and a deficiency of economic factors. To meet population targets set by the central government, officials of many counties and cities have to expand the domain of their administrative jurisdiction, merge with neighboring cities, counties or towns, or integrate into districts of larger cities. Judging from the surface, China seems to have a great number of densely populated metropolises. Yet, this is purely a statistical illusion. The imbalanced utilization of strategic space in different regions suggests that domestic economic development has been overwhelmingly dependent upon rapid and massive input of various resources that is incompatible with the intensity of economic activities.

Overexploitation of mineral, land and environmental resources has jeopardized the strategic space of regional economies. Resource reserves have not materialized into prosperity but weakness. For example, neither the coal-rich province of Shanxi nor the strongholds of resource-intensive industries in Northeast China have ever realized vibrant economic growth. In such regions, deterioration of strategic space directly affects profitability of business operations. In other words, massive input of various resources was hardly converted into sustainable profitability, although one-shot returns were not impossible.

In fact, many regions were held back by unprofitable industries. Needless to say, sustainable profitability and flexibility of economic activities are crucial to economic growth. Moreover, it is possible to implement development plans that are conducive to the formation of low-density economic space. For each region, constant development can only be realized if the interplay between human activities and natural and cultural environments is vigorous enough to help local businesses achieve sustainable profitability and flexibility.

Technological development
In an obvious sense, massive exploitation of resources does not lead to optimization of strategic space and profitability. Sluggish technological development is one of the many root causes of this predicament. Domestic industry leaders are swift to set up and expand business in economic areas with a vast marketspace. Adept at “imitative innovation,” they are preoccupied with mass production of cost-effective commodities and expansion of market share. The sheer size of their business may usher in financial triumph in the short run, but such a bluntly utilitarian approach means Chinese products have narrow profit margins, weak technology, and are largely homogenous and readily displaceable.


In fact, excess capacity is the direct result of torpid technological development. To optimize the strategic space of domestic industries and products, there is no way around in-depth research and development on technology and wholesale, multi-dimensional industrial upgrading. Moreover, technological development should be steered toward green awareness, refinement and sustainability in addition to accumulation of wealth. In this way, can the strategic space of domestic industries, technological development, and regional economy be optimized.

Cultural influence
Historically speaking, culture has a deep influence on strategic economic space. Modern industrial civilization is both globally oriented and locally bound. Local culture is likely to play a more crucial role in industrialization. The early and middle stages of industrialization are similar across different countries. In economics, early industrial structure was referred to as the “standard pattern.” However, countries took radically different paths in later stages of industrialization.

Generally speaking, industrial civilization has five pillars: manufacturing, mining, trade, real estate and finance. Of them, the first plays the most decisive role in shaping economic and social landscapes. Each manufacturing country has its distinct culture with diverse regional variations. In this vein, each region in China needs to foster a unique local culture conducive to the expansion of strategic economic space in a long run.

Geopolitical factor
Resource utilization, industrial and technological development, and evolution of regional culture cannot be separated from transformation of larger geopolitical and economic landscapes. Historically speaking, regional reality has varied with the geopolitical situation of the entire country. China has been at the center of global economy for centuries. Yet, Western maritime powers got a head start on industrialization and then became the core countries of the global economy. Consequently, other countries, including China, were relegated to peripheral status. Currently, international economy and geopolitics have been undergoing  profound transformation. Empowered by advanced transportation engineering and e-communication technology, Eurasia is becoming increasingly connected, and the maritime transportation network continues to expand. China’s “the Belt and Road” initiative is an active response to such a profound transformation.


Moreover, China has convenient access to the Pacific and Indian oceans as well as the vast territorial space of central Eurasia, Russia and Mongolia, giving the country an enviable competitive edge in developing both maritime and continental economies. As scholars of geopolitics point out, “the fact that China is both sea-oriented and land-oriented is of paramount geopolitical significance.” The country’s substantial economic growth has set the stage for the third-largest geo-strategic zone in the world—a dually oriented East Asia. In this light, eastern and western provinces as well as the hinterland of China will undergo dramatic change in their strategic economic space. Each region can expect more room for growth in the new geopolitical landscape forged by China and neighboring countries. The key is that we need more innovative strategic thinking on regional economy that is compatible with the “new normal.”

Jin Bei is a professor at the Chinese Academy of Social Sciences (CASS) and a CASS Member.