With only 1.1 percent of the land area and 6.5 percent of the population in China, the Yangtze River Delta is responsible for 20 percent of the nation's GDP and more than 20 percent of its total export volume.

As a regional hotbed for attracting foreign direct investment, the delta utilized 50.1 percent of the aggregate foreign investment in China in 2007, up 18.4 percent from a year earlier.

With its strong growth momentum, the Yangtze River Delta is also expected to overtake the New York and Tokyo and become the world's No 1 metropolitan region by 2018, according to a recent report from the Research Center on Metropolitan Regions of China at Shanghai Jiaotong University.

However, after 30 years' rapid industrial development, the region, especially the 16-city megalopolis surrounding Shanghai, is meeting the greatest challenges ever from the over exploitation of natural resources and environmental pollution.

Shanghai, for example, has outgrown its capacity for the further development of labor-intensive manufacturing industries, due to its high land and labor costs, as well as growing pressure to provide environmental protection. The need for industrial transfer and upgrading is greater than ever before, both for the benefit of business expansion and the sustainable development of the entire region.

With their similarities in their level of economic development and with complimentary industrial structures, cities within the Yangtze River Delta have good opportunities for inter-regional cooperation and industrial transfer.

Experiences from the Great Lakes of North America, the BosWash (Boston-Washington corridor) and Tokyo Megalopolis have all shown that the vicinity of geographical locations, proximity of economic development and business cultures can pave the way for promoting industrial cooperation within a region.

The Yangtze River Delta is a perfect case in this regard. As a matter of fact, many cities in northern Jiangsu province and southern Zhejiang province used to be separated from the economic prosperity of the central cities within the delta. But if the manufacturing enterprises in those business hubs could start to relocate into the less developed areas, it can both promote the development of the second- and third-tier cities while contributing to the sustainable development of key business hubs.

That means cities like Shanghai, Suzhou, Wuxi, Nanjing and Hangzhou, which are all key industrial cities in the delta region, can expect to accelerate their industrial upgrading to focus more squarely on the development of hi-tech and service industries.

In fact, we have already seen some of the benefits unfolding. Shanghai, in particular, is fast becoming both a regional and international financial, trade and logistics center, serving the modern industrial heartland of the delta region. It is also raising its profile as the headquarters and R&D center of many multi-national companies. With a much higher growth rate in the service sector and comprehensive functions of operational and capital management, R&D, sales and logistics services, the city is able to support the development of the manufacturing industries in the neighboring regions, such as textile, machinery, and paper and food making.

Moreover, many manufacturing enterprises in the developed regions have started to move outside the delta and into inland provinces like Anhui and Jiangxi, where are considered as the pan-Yangtze River Delta, as an alternative for refueling their growth under mounting environmental and resources pressures.

However, environmental protection should remain as top priority during the industrial transfer, as the transfer of businesses should not be achieved at the cost of the environment.

By upgrading the existing facilities and employing new technologies, enterprises during their relocation could cut down on industrial pollution which otherwise would once again pose serious threats to the environment. Only in this way could it become a new opportunity for both the sustainable development of businesses and the economic prosperity of the entire region.

The author is director of the Institute of Urban and Regional Planning, East China Normal University. The views expressed in the article are his own