Business / Opinion

Economic wisdom from the margins

By Ed Zhang (China Daily) Updated: 2014-03-10 07:09

Places where rapid changes occur are easy to spot. They often demonstrate the following features:

First, local leaders are strong. Not only do they have good credentials in education, but they have also been toughened by previous reform tasks. They are well informed about the global market, the financial system and the latest developments in science and technology.

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Most importantly, they are more creative in formulating development plans. They are experts in using national policies to serve local goals.

Second, local economies are more open to investors from home and abroad. There are more businesses run by people from outside the region, including quality manufacturers from overseas, and more services to cater to the needs of newcomers. The most valuable aspect of a local economy is the specialty, or the niche product, with which it differentiates itself from the rest of the country.

A local economy needs a continuous influx of young professional workers. They will be attracted by the new opportunities and relatively low living costs. The local labor structure will be more balanced, supported by many vocational schools and mid-skill workers.

Third, the local government has to ensure that real estate development is not allowed to become the dominant business - and that it must not rely entirely on the selling of land rights for fiscal revenue.

In China, too much real estate money will crowd out, more than anything else, the entrepreneurial pursuits in other industries and services. Shanghai, which has the highest housing prices in China and whose largest private companies are concentrated in the real estate industry, is unlikely to serve as a base for many pioneering endeavors.

Fourth, there will be a high level of connectivity, not only with the global market but also with industries, large and small, in the region nearby.

The author is editor-at-large of China Daily.