Yangtze River Delta pushing for innovative economic development

The central government’s recent instructions on promoting higher quality integrated development in the Yangtze River Delta have had strong repercussions in Shanghai, Jiangsu, Zhejiang and Anhui.

In order to make the Yangtze River Delta a truly leading demonstration area for the implementation of new development concepts and a globally competitive world-class urban agglomeration, governments at all levels have adopted a series of concrete measures in planning, cooperation, strategic coordination and market integration.

According to the spirit of the 19th CPC National Congress, the key to high-quality development is innovation-driven development, which is the transformation of old and new kinetic energy.

In turn, the new kinetic energy will stimulate the development of the new economy.

In this sense, to understand the higher quality integrated development in the Yangtze River Delta, we must lay out a grand plan in the areas of science and innovation resources (new kinetic energy) and emerging industries (new economy) agglomeration, sources and radiation.

A key part of achieving this is to build the Yangtze River Delta into a core area of higher quality and integrated development, because technology and innovation resources and emerging industries have strong agglomeration characteristics.

The three provinces and one city in the Yangtze River Delta cover nearly 360,000 square kilometers. It is obviously unrealistic to gather technology and innovation resources and new industries in such a vast region.

Like the urban agglomerations in Guangdong-Hong Kong-Macau Greater Bay Area, nine cities in southern Guangdong, Hong Kong and Macau are not only the essence of the Pearl River Delta, but also enjoy the highest level of development in China. Meanwhile, technological innovation and emerging industries are the most concentrated, new kinetic energy is most likely to be gathered, and new economy is most likely to be born in such an area.

Therefore, from the perspective of the integration of technology and innovation resources and the development of emerging industries, the Yangtze River Delta must consolidate similar core areas. In fact, the essence of the problem is planning and construction of the Hangzhou Bay urban agglomeration.

Nowadays, the key issue is to raise China’s second Bay Area economy to a national strategy. The State Council presides over its development plan, just as it does for the Guangdong-Hong Kong-Macau Greater Bay Area urban agglomeration development plan.

The importance of the core area is concentrated in the following aspects:

First, the core region has the advantage of gathering talents. In the context of innovation-driven and transformational development, the “war” of talents in some cities in China demonstrates the fact that all these cities have a strong desire for talents. On the other hand, it also highlights the predicament of lots of cities in attracting talents. What do discovery, invention and the subsequent industrialization depend on? The new economy is the result of the trial and error of entrepreneurs and investors.

Secondly, there is the wisdom and hard-work of a large number of scientists, engineers, and skilled workers.

Concentration of talent

Why is the concentration and source of the new economy and technological innovation now mainly focused on the Great Bay Area?

In addition to the special location conditions in the Bay Area, with its own universities and research institutes, these areas are able to meet the higher requirements for quality of life of talents.

They generally include a pleasant climate and friendly environment. They can meet diverse needs such as education, medical care, culture, convenience of living and transportation. At the same time, these conditions are rarely seen globally. New York, San Francisco, and the Tokyo Bay area are places that meet these conditions. In China, Guangdong-Hong Kong-Macau Greater Bay Area and Hangzhou Greater Bay Area also have these conditions.

Therefore, to achieve integrated development of higher quality in the Yangtze River Delta, it’s necessary to accelerate the planning and construction of urban agglomerations around the Hangzhou Bay in the near future and construct the other core areas, such as the Yangtze River agglomeration with Nanjing as the center in the medium and long term.

Second, the core region is most likely to foster innovation. If the number of innovative and entrepreneurial talents is set within a certain range and time, then the success rate of their trial and error is decided by the innovative ecology of entrepreneurship and industry. Just like Silicon Valley, Silicon Creek and Shenzhen Bay, which have bred many successful start-ups, we cannot deny that the innovation ecology there has unique advantages.

Ecosystem is about ecology. It refers to the interlinked and dependent ecological chain that is composed of innovative subjects, innovation links and innovation factors within a certain region.

The combination of innovation chains among different elements and industries forms a regional innovation ecosystem.

Innovation ecology is a new innovation paradigm, and new scientific and technological innovation will be produced with a certain probability.

Unlike previous mechanical, target, and precise innovation paradigms, this new paradigm is characterized by diversity, openness, self-organization and dynamics. If the previous innovation paradigm is compared to a target “market” or “factory,” then the paradigm of innovation ecology is the “rain forest” where many “species” are living together, and new “species” are likely to be created.

In the “rain forest” innovation ecosystem, new scientific and technological innovation will be produced with a certain probability (usually a small probability). The quality of innovation ecology is reflected by this probability.

Third, the institutional mechanisms in the core region are best adapted to the requirements of high quality development. With regard to the institutional mechanism for high-quality development, the focus is still on handling the relationship between the government and the market.

The core area mentioned in this paper is the region with the highest degree of marketization in China’s economy, and the development and effectiveness of the market mechanism is also the highest.

Moreover, as far as the innovation ecology is concerned, the relationship between the government and the market here is the relationship between the government and the “rain forest” and is not exactly equivalent to the relationship between the government and the market.

Some said the market is very inefficient when it comes to innovation. This view may shock many people.

At the beginning, we do not think that the government is an indispensable factor in innovation. However, personal experience tells us that public institutions have assumed a far more important role than is generally thought.

If their experience is correct, then it can be said that in the field of resource allocation, the market plays a decisive role; in the innovation ecosystem, the government plays a better role.

Here, the role of the government is concentrated in two aspects. Through the efforts of public agencies, the government can provide better quality public services, especially public services that meet the needs of entrepreneurship and innovation. Further on, the government can reduce the cost of transactional systems by eliminating various barriers.

Chen Xian, former Executive Dean of Antai College of Economics & Management, Shanghai Jiao Tong University (SJTU), is professor and doctoral supervisor at the Department of Economy, SJTU.