Social Sciences in China (Chinese Edition)

No.2, 2017

 

Cooperation on International Production Capacity and the Reshaping of China’s Economic Geography

(Abstract)

 

Wu Fuxiang and Duan Wei

 

Since the Chinese economy is currently facing the twofold problem of dealing with excessive production capacity and cracking the Heihe-Tengchong Line paradox, China has set up a model of the transregional flow of capital among two countries and three regions to carry out a theoretical analysis of the reshaped “Belt and Road” initiative given China’s economic geography and its strategy of international cooperation in production capacity. The findings indicate that industry distribution is skewed toward the right of the Heihe-Tengchong Line, worsening the mismatch between individual economic rationality and the collective rationality of society and weakening the effect of policies of regional integration. Moreover, China’s industry distribution is characterized by a bell-shaped curve between the extent and the benefits of agglomeration. Objectively, this necessitates a shift from Krugman’s model of “from dispersion to agglomeration” to Helpman’s model of “from agglomeration to dispersion.” For this reason, the reshaping of China’s economic geography requires a twopronged approach involving cooperation in international production capacity and the management of negative lists plus realization of spatial functional complementation between the spillover effect of capital flows and the growth effect of capital accumulation. The rebuilding of an international production system with China as the main force will strengthen China’s leading position in the “Belt and Road” value chain.