Problems and Challenges for the Jing-Jin-Ji Area

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Our analysis suggests that the Jing-Jin-Ji area has strong economic linkages with the Northeast Asian economies. In particular, Beijing and Tianjin has been fairly economically integrated with the two countries. Foreign investments have played a substantial role in strengthening the economic linkages. To enter the Chinese market and exploit the cheap labor and resources, Japanese and Korean corporations relocate labor-intensive functions or industries to the Jing-Jin-Ji area and sell the finished products in China or export back to the home economies. Japanese and Korea corporations have also heavily invested in some capital and technology intensive industries but focus on assembly functions, creating huge demand for intermediates goods from the home countries. As Japanese and Korean corporations increase their resource commitments in China, they started to transfer other high profile functions such as regional headquarters, research and development and technical services, to the Jing-Jin-Ji area. The new international division of labor established by Japanese and Korean multinational corporations has gradually integrated the Jing-Jin-Ji area with the Northeast Asian economies.

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BJ-TJ-HB SH-JS-ZJ

GD

0 5000 10000 15000 20000 25000 30000 35000 40000

1978 1980

1982 1984

1986 1988

1990 1992

1994 1996

1998 2000

2002 2004

GDP(RMB 100 million)

0 5000 10000 15000 20000 25000 30000

1978 1980

1982 1984

1986 198

8 199

0 1992

1994 1996

1998 2000

2002 2004 GDP per capita(RMB Yuan) china

BJ-TJ-HB SH-JS-ZJ GD

Figure 20 GDP and per capita GDP in Jing-Jin-Ji area, the Pearl River Delta and the Yangtze River Delta

Sources: Collection of Statistical Data in the New China, 1949-2004.

4.2 Industrial Structural Convergence

It is widely believed that Beijing, Tianjin and Hebei share similar industries. The convergence of industrial structure in the Jing-Jin-Ji area is associated with local protectionism, irrational imitation, inter-regional competition, lack of coordination and the legacy of commanding economy.

Table 4 Industries with Higher Ratios of Value-added in the Jing-Jin-Ji area

Beijing Tianjin Hebei

Telecommunication and electronic equipment

（19.07%）

Ferrous metal smelting and pressing

（18.29%）

Electricity, steam and hot water production and supply（15.46%）

Transportation equipment

（9.48%）

Petroleum refining and coking

（6.10%）

Chemical materials and products

（3.17%）

Petroleum and natural gas extraction

（22.53%）

Electronics and

telecommunication equipment

（18.08%）

Ferrous metal smelting and pressing

（9.39%）

Transportation equipment

（7.56%）

Chemical materials and products

（5.11%）

Electricity, steam and hot water production and supply（4.91%）

Ferrous metal smelting and pressing

（27.62%）

Electricity, steam and hot water production and supply

（11.01%）

Nonmetal mineral products

（4.57%）

Chemical materials and products

（4.49%）

Food processing and manufacturing

（3.25%）

Transportation equipment

（2.84%）

Sources: Beijing Statistical Yearbook2006，Tianjin Statistical Yearbook2006 and Hebei Economic Yearbook2006.

As shown in Table 4, the top six industries in Beijing, Tianjin and Hebei are very similar. They share four of six top industries, including transportation equipment, chemical materials and products, ferrous metal smelting and pressing, electricity,

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steam and hot water production and supply. Telecommunication and electronic equipment is the most important manufacturing industry in both Beijing and Tianjin.

The convergence of industrial structure in the Jing-Jin-Ji area has led to strong interregional competition for markets and resources and has enhanced the difficulties in regional coordinative development. Furthermore, the weaker spatial division of labor within the Jing-Jin-Ji area will harm the economic efficiency and the upgrading of industrial structure.

4.3 Lower Level of Marketization

Compared to the southeastern provinces in China, the Jing-Jin-Ji area is much lagged behind in economic reforms. State-owned economy still dominates in some cities, discouraging the marketization process. For instance, in 2005, state-owned and state-controlled enterprises contributed more than 56% of industrial value added in Beijing. The shares of state-controlled enterprises in Tianjin and Hebei were 47.09%

and 38.59%, respectively. The Jing-Jin-Ji area heavily relies on the large state-controlled enterprises, causing the underdevelopment of private-owned

enterprises. The insufficient role of market forces has made the regional economy less competitive.

4.4 Lower Level of Openness

Although it has engaged in the process of globalization, the Jing-Jin-Ji area has not fully taken advantages of international resources and markets. In 2004, Jing-Jin-Ji utilized 7.53billion US dollars FDI, accounting for 9.02% of total FDI in China.

Guangdong and the Yangtze River Delta utilized 16.84% and 33.05% of total FDI in China. In 2005, the ratio of realized FDI in Beijing, Tianjin and Hebei was 4.19%, 7.37% and 1.55%, significantly lower than that in Guangdong and the Yangtze River Delta. In 2004, the ratio of exports to GDP in Jing-Jin-Ji region was 22.43%, also substantially lower than the national level of 35.88%. Tianjin had the highest ratio of exports in GDP, reaching 55.5%. The ratio of exports in GDP in Beijing and Hebei was 14.49% and 8.75%, respectively (Figure 21). The lower level of openness would discourage inflows of advanced technology and high value added production

functions. It will also discourage enterprises to play an active role to participate in the globalization process and to benefit from the openness.

0 0.02 0.04 0.06 0.08 0.1 0.12 0.14 0.16 0.18

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 Year Ratio of FDI

in GDP

Beijing Tianjin Hebei

0 0.1 0.2 0.3 0.4 0.5 0.6

1978 1983 1988 1993 1998 2003

Year Ratio of

export in GDP Beijing

Tianjin Hebei

Figure 21 Ratios of Realized FDI and Exports in GDP

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4.5 Shortage of Water Resources and Environmental Pollution

A serious challenge facing the Jing-Jin-Ji area is the shortage of water resource.

Currently, per capital water resource is roughly 300 m³ in the Jing-Jin-Ji area, significantly lower than the low limit of international standard of 1000m³. It is only 1/8 of the national average and 1/30 of the world average. Meanwhile, the Jing-Jin-Ji area has developed a water-consuming industrial structure, such as telecommunication and electronic equipment, ferrous metal smelting and pressing, chemical materials and products and beverage. The other challenge for the sustainable development in the Jing-Jin-Ji area is environmental pollution, including air pollution and water pollution.

The heavy and resource based industries are the causes of environmental pollution.

4.6 Wide Regional Economic Disparity

As analyzed, the Jing-Jin-Ji has a core-periphery spatial economic structure, suggesting the wide regional economic disparity. Beijing and Tianjin form the

economic core and Hebei is the periphery. Large gaps in economic development exist in the Jing-Jin-Ji area. In 2005, Per capita GDP in Beijing, Tianjin and Hebei was 37058 Yuan, 31550 Yuan and 13017 Yuan, respectively. Tangshan is the most developed city in Hebei and its per capita GDP was 22679 Yuan. Per capita GDP in the northern cities of Chengde and Zhangjiakou was less than 10000Yuan.

Urbanization level in cities of Hebei is also significantly lower than Beijing and Tianjin (Figure 22). As the development of large cities in the Jing-Jin-Ji area, the regional disparity will further widen. The increasing regional economic gap would make it rather difficult to coordinate regional development in the Jing-Jin-Ji area.

0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000

Beijing Tianjin

Shijiazhuang Tangshan

Baoding Langfang

Cangzhou Qinhuangdao

Zhangjiakou Chengde

Xingtai Hengshui

Handan 0 10 20 30 40 50 60 70

GDP per capita (yuan)

Urbanization level (%)

Figure 22 Per Capita GDP and urbanization level by City in the Jing-Jin-Ji area Sources: Beijing Statistical Yearbook 2006, Tianjin Statistical Yearbook 2006, and Hebei Economic Yearbook 2006.