Shunde’s Reforms
Photo: Foshannews
By Henry Hing Lee Chan

Shunde’s Reforms

Aug. 05, 2019  |     |  0 comments


History of reforms in Shunde


In the 1970s, the Shunde county government announced an economic development policy of building agriculture-based industries and using agricultural industrialization to generate a surplus that will promote further industrialization. As a result, several agricultural-based industrial enterprises were set up. Shunde set up one of the country’s first compensation trade town and village enterprises (TVE), Dajin Clothing Factory, and its success prompted the setting up of other TVEs that engaged in the same trading model. Shunde became the pioneer in export compensation trade model, and almost all its villages had their TVEs.


In the 1980s, the Shunde government promulgated a three-way development strategy: develop an industrialization-led economic growth model, focus on collective ownership, and promote industry champions as a pillar of growth. The three-way model was so successful that it facilitated Shunde’s transformation from an agriculture-based economy to an industry-based economy and enabled Shunde to become the most prosperous county in Guangdong. As a result, Shunde became the leading “Guangdong four tiger cubs” economy (the other fast-growing cubs were Nanhai, Dongguan and Zhongshan).


Shunde’s economy took off in the 1990s. In 1991, its government revenue was the highest amongst all counties in China. In 1992, its total industrial output was 49.5% higher than the year before, an extremely rare feat in the world’s industrial development history. However, the economic success also brought along an agency problem and debt crisis. By 1992, Shunde had 259 TVEs with serious financial problems, 109 of which were close to insolvency. To solve these problems, the Shunde government put forward the idea of property rights reform.


In 1992, Shunde was assigned to be Guangdong’s comprehensive reform pilot county, and a series of comprehensive reforms focusing on property rights was introduced. Complementary administrative reforms in areas such as streamlining bureaucracy, simplifying administrative procedures, and establishing a business-friendly government structure that emphasized the development of the socialist market economic system, were implemented to support the property rights reform. The property rights reform started by privatizing state-owned enterprises (SOEs) that had fewer problems to avoid the impression that the government’s reform objective was to jettison money-losing businesses while keeping money-making ones. Some of the most successful local private businesses today, such as Midea Group and Galanz Group, can trace their origin to the 1992 property rights reform.


In 1999, Shunde was the first pilot city in China to experiment on means to become a modern city.


In 2009, Shunde implemented a large-scale administrative reform to streamline government operations further. About 41 party and government organizations were consolidated into 16 departments.


In 2018, Shunde was chosen as a “high-quality administrative development and innovative reform experimental zone”. The idea behind the appointment was to replicate successful economic and social reforms that attract and nurture advanced manufacturing industries to other localities in Guangdong province, and the focuses are on city administration and planning, land use, construction management, and a policy framework that nurtures the new high-tech manufacturing industry. International benchmarks will be used to ensure that the development model and policy framework adopt the best practices available.


The purpose of reforms is to achieve improvement and breakthroughs. Although the reform process will be met with many obstacles and there is no guarantee of success, history has shown that Shunde’s grit and willingness to tackle adversaries will enable it to rise above challenges and outperform itself.


Table 1. A partial list of awards won by Shunde


The spirit behind Shunde’s reforms


The Chinese government usually tests out reforms in pilot cities before pushing successful ones nationwide. Shunde is one of the said principal pilot cities chosen by both the national and provincial governments. Although Shunde has been successful in piloting many reforms and many cities followed its footsteps to implement similar changes, not many cities are able to replicate the results successfully. This divergence of results is attributable to the difference in attitude and mindset behind implementing the reforms, which affects how they are carried out. To find out more about how Shunde’s traditional culture influenced reforms implementation, please read “Shunde Lingnan-flavoured Culture”.


Shunde earned its role as a pivotal reform pilot centre through the ingenuity of its people. Unlike special economic zones, Shunde did not have much resource. However, it managed to transform from an agricultural-based county in the Pearl River Delta to an important manufacturing city in the Greater Bay Area (GBA).


The reason for its success can be attributable to several factors:


Shunde’s traditional value emphasizes humility, hard work, and pragmatism. The reform and opening up provided the perfect platform for this spirit to be showcased and its people aptly used this opportunity. Shunde understands the rationale behind the country’s reforms and development policies that leveraged on the county’s resource base. In the 1980s, it used cheap labour that resulted from farmers being displaced during rural industrialization and used the export compensation trade model to accumulate capital and build expertise in light industries. In the 1990s, it used its accumulated capital and human resources to build world-class manufacturing plants, and in the 2000s, it moved upscale into higher value-added manufacturing industries. The ability to grasp the central government’s reform spirit and to fit it into the local context is the key factor behind Shunde’s successful implementation of the ‘active government’ concept. The reforms implemented by Shunde are not just a result of policies of the central government but are also a response to local development needs.


The Shunde government takes on a leadership role in reforms. It cleverly handles the relationship between the government and the market by protecting property rights, respecting market discipline, and promoting market-friendly policies. When the economy slowed down due to bottlenecks, the Shunde government faced the problems squarely and pushed for reforms that overcame the bottlenecks. When the central government restructured the country’s machinery industry in 1979, Shunde’s nascent primitive agricultural machinery sector shifted to light industrial sectors like garment industry, and Shunde moved into export markets. In 1993, the property rights reform was a drastic measure implemented when the county faced the debt crisis as a result of agency issue within TVEs. In 2009, the comprehensive reform was an attempt at improving government efficiency and building a service-oriented government right after Shunde became the first county in China to have achieved more than 100 billion in GDP. The 2018 reform was introduced when China was entering a new norm, and Shunde needed to move into high value-added manufacturing.


Shunde’s key to successful reforms was having a capable policy implementation team. Shunde has emphasized the importance of having a competent and enlightened leadership since the 1978 reform. It invested time and effort to nurture three specific teams at an early stage. These teams — the party cadres, entrepreneurs, and grassroots committees — executed reforms on the ground. The party cadre translated central and provincial government policies into local policies and executed them. It localized the reform’s spirit and made local-friendly policies that increased the chance of the policies’ success. The entrepreneur group had the business experience and means to speedily try out reform measures put forward by the cadre group, and since there was a strong belief that the economy drives social development, most of the reforms, which were economic in nature, garnered the support of private entrepreneurs. The entrepreneurs’ understanding of the market proved to be invaluable, and they provided useful input regarding policy formulation. The grassroots committee was also an important success factor behind Shunde’s reforms. Even at an early stage, Shunde realized that economic reforms always carry a social implication. Since most of the complementary measures supporting the reforms were social in nature, an effective grassroots organization was critical to ensure the effective implementation of the reform.


Shunde always uses its accumulated economic resources to launch social reforms (for more information, please refer to “Shunde’s City Governance”), build a safe and stable living environment and instil a sense of confidence in government reforms. The society understands that reforms are only a means to achieve social development, and its unwavering support for development strategies provided a reliable safety net for the continuity of both economic and social reforms. The consistency in believing in the reforms is remarkable in Shunde. Shunde has always adhered to a manufacturing-led economic growth model that prioritized manufacturing. It has also subscribed to a livelihood-centric city development model which emphasized on the economic aspects of social reform. Thanks to this longstanding coherence between strategic belief and policy support, Shunde has developed rapidly.


Future reforms in Shunde


Focus on the “create two spaces, promote three directions, build five themes” strategy. This comprehensive strategy was introduced by Shunde in 2018. “Create two spaces” refers to creating a physical and regulatory space for businesses to exercise their creativity and grow their business. The goal is to build a society where it is easy to start and grow a business and provide an environment that provides transparency and best practices. “Promote three directions” refers to promoting smart manufacturing, innovative globalization and green development to lead industries towards mid- to high-value. “Build five themes” refers to building the new Shunde along five themes: to be high-tech, cultural, beautiful, harmonious, and prosperous.


The reform focuses on implementing seven major tasks: strengthening innovation drive to build a high-tech Shunde, adhering to plans to ensure that urban construction leads to modernization, remodelling village-level industrial parks and using the transformation to revitalize and develop villages, preserving culture to build a strong and modern cultural zone, adhering to green development plans to build a beautiful Shunde, establishing a healthy and pervasive grassroots governance culture to build a harmonious Shunde, and assembling a disciplined administration team.


Successfully transform village-level industrial parks and create a space for high-quality development. Village-level industrial parks are a double-edged sword. On the one hand, they are the main obstacle impeding Shunde’s growth and the source of safety production and environmental pollution problems. On the other hand, they provide the potential and opportunity for Shunde’s future development. In 2018, the upgrading of village-level industrial parks became the top priority for the Shunde government, and in April 2018, the Shunde government convened a town hall meeting to announce the transformation of village-level industrial parks. Shunde created a ‘government-led, market-oriented’ redevelopment model which aims to build new green and modern industrial zones from decrepit old areas.


To transform village-level industrial parks, Shunde must phase out obsolete and polluting production facilities and promulgate measures to encourage innovative small- and medium-sized enterprises who can create high value-added business models to stay in the new industrial park. The government should proactively assist businesses and encourage high-end talents to relocate and work at Shunde. It must help promising local enterprises to raise capital and meet expansion requirements and attract investments that can serve as pillars in the industrial value chain. The new industrial park rejuvenation program offers a host of opportunities to transform Shunde’s economy.


Take the lead in building Guangdong province’s high-quality administrative development and innovative reform experimental zone. On 19 September 2018, Shunde is approved by Guangdong province to build a reform and innovation experimental zone for high-quality development. The primary purpose of the zone is to promote replicable reforms that will help provincial development. Shunde is given the administrative power to try out solutions that can solve legacy problems caused by its past, unregulated speedy growth, and also chart the path towards a greener, more sustainable and more equitable growth. The provincial government’s encouragement to establish a “Shunde model” that can be adopted by other localities in Guangdong is an acid test for Shunde, as well as a vote of confidence on its ability to think out of the box and make meaningful reforms. Guangdong province requested that Shunde focus its economic development based on advanced manufacturing, and accelerate the transformation of government functions and institutional innovation.


Shunde is to explore areas like land use, spatial planning and construction to further optimize an innovative and business-friendly environment, so as to accelerate the formation of an institutional and administrative framework that promotes a modern and high-quality economy. The provincial government requested Shunde to benchmark its achievement against international best practices. Taking the lead to become Guangdong province’s high-quality reform and innovation experimental zone is an extremely rare opportunity. In relation to this reform, Shunde aims to again use market forces as a key driving force, ensure that it complements the GBA strategy, focus on transforming village-level industrial parks, and focus on high-quality development of the manufacturing industry.


Conclusion


Shunde’s reform and development efforts will move full speed ahead. The cultural spirit behind the reforms has been a strong driving force towards Shunde’s development, and this element will continue to support future reforms and promote Shunde as an important player in the GBA. Shunde has built a tested policy implementation team that is highly capable of pushing innovative policies, a strong private entrepreneur team that is market savvy and has extensive experience both at home and overseas, and a grassroots leader team with high public approval. These three pillars, together with favourable intrinsic motivations towards reforms, will lay a good foundation for the future development of Shunde. The creations of a fair and efficient business environment, as well as a conducive and liveable environment for high-end migrant talents, are the key to attracting companies and talents. Shunde’s accumulated knowledge and experience on reforms will make it indispensable in the GBA.




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