On January 6, the General Office of the State Council issued the "Overall Plan for Comprehensive Reform Pilots on the Market-Based Allocation of Production Factors." This landmark document sets the tone for future development.

The document states that production factors such as land, labor, capital, technology, and data must gradually undergo market-oriented reforms. Solutions to obstacles encountered during the reform process will be identified through exploration in pilot cities.

Economists often liken capital (finance) to “water,” while factors such as land, labor, and technology are essentially the “flour.”

Since the goal is to grow the economic pie, we cannot have a "watery broth"; we must not only add water but also ensure there is enough flour.

From land to labor, and from capital to technology, this sequence reflects the relative importance of each factor. At present, land and human resources remain the core.

In assisting governments and industrial parks with investment promotion efforts, GuChuan United has increasingly observed that, particularly in economically developed regions, shortages of industrial land are becoming more frequent.

Regarding the land factor, the "Plan" states:

1. Explore granting pilot regions greater autonomy in land allocation. Allow eligible regions to explore mechanisms for the inter-provincial transfer and use of surplus quotas from the urban-rural construction land increase-decrease linkage program.

2. Encourage the supply of industrial land through methods such as long-term leasing, lease-to-own arrangements, and flexible-term land grants. Support the reasonable conversion of different types of industrial land and improve policies regarding land use changes, consolidation, and exchanges.

3. Encourage pilot regions to refine and improve the criteria for identifying urban low-efficiency land through detailed evaluations of the conservation and intensive use of construction land. Encourage the vacating and clearing of urban low-efficiency land through measures such as lawful negotiated reclamation, contractual exchange, and cost-based incentives and penalties.

4. Support pilot regions in combining efforts with the new round of rural homestead land system reform pilot programs to allow the conversion and market entry of existing collective construction land for new uses in accordance with planning requirements, provided such actions are conducted on a voluntary, compensated, and lawful basis.

If a city is selected as a pilot, the scope for land reform will become very significant.

Previously, if a city needed new construction land but that required the use of farmland, it was difficult to proceed because no one could violate the constraints of the “three red lines” (ecological protection red line, permanently protected basic farmland, and urban development boundary).

Now, with the "inter-provincial transfer of quotas," we can ensure that the total national arable land area does not decrease while enabling economically developed regions to support less developed regions—a move that aligns with the spirit of common prosperity.

For example, a city in the Yangtze River Delta region that needs to occupy additional farmland can purchase surplus quotas from provinces in central and western China. This effectively allows those provinces to assist in protecting an equivalent area of permanent farmland of comparable quality.

Some areas in central and western provinces are still in a critical phase of consolidating the achievements of poverty alleviation. Whether they can integrate into the “concentric circles” of metropolitan area development nearby is key to realizing rural revitalization.

Improving rural infrastructure and public service provision requires sufficient financial support. “Inter-provincial quota allocation” will become a key channel for addressing this funding challenge.

Furthermore, the Plan provides policy support for pilot cities to reclaim “inefficiently used land.” Systems such as Zhejiang’s pioneering “output-per-mu” performance evaluation framework will help improve land use efficiency.

This also serves as a reminder to pilot cities:

Even with the acquisition of precious “allocation quotas,” they must not slow down the pace of “replacing old industries with new ones” but must actively promote industrial transformation and upgrading. On one hand, this enhances the “value” of land; on the other, it facilitates the relocation of certain industries to central and western regions, thereby fostering a virtuous cycle of industrial development.

Now let’s examine the “Plan’s” description of labor factors:

1. Support eligible pilot regions in implementing mutual recognition of cumulative residency periods for household registration within urban clusters or metropolitan areas, as well as mutual recognition of residence permits. Pilot a household registration system based on actual place of residence to ensure the provision of basic public services at the place of actual residence.

2. Promote the reasonable and orderly mobility of management personnel in Party and government agencies, state-owned enterprises and institutions, and social organizations, provided that talent recruitment does not rely on “labels” such as honorary titles or academic ranks, and does not poach high-level talent from central, western, and northeastern regions during their contractual periods.

3. Support researchers in public institutions in taking leave to engage in innovation and entrepreneurship in accordance with relevant national regulations. Strengthen the development of professional teams for technology transfer, explore the establishment of evaluation and incentive mechanisms for personnel involved in the commercialization of scientific and technological achievements and intellectual property management and operations, and refine professional title evaluation standards for technology transfer and commercialization.

Market-based land allocation can unleash greater vitality, but it requires people. The household registration reform mentioned in the first point is intended to help major metropolitan areas attract talent and expand their scale.

Although measures have been added to protect talent in central, western, and northeastern regions, the overarching trend of population mobility is now difficult to reverse.

The policy of supporting researchers in public institutions to take leave for innovation and entrepreneurship aims to promote the industrialization of scientific research achievements and resolve “bottleneck” issues.

For example, the United States provides research funding to many universities every year; once results are achieved, professors may go on to start their own businesses. While this may indeed appear to involve a “loss of state-owned assets,” this is precisely how the U.S. has built its technological leadership.

Entrepreneurship certainly requires capital—but where does it come from?

1. Innovate equity-debt hybrid products on the New Third Board market to diversify investment and financing tools for small and medium-sized enterprises.

2. Explore deeper cooperation between banking institutions and external equity investment firms to develop diverse technology-focused financial products.

3. Support high-quality technology-based enterprises in raising capital through IPOs or listing on stock exchanges. Improve intellectual property financing mechanisms and expand the scale of financing secured by intellectual property.

4. Encourage insurance companies to actively develop technology insurance businesses and, in accordance with laws and regulations, develop products such as intellectual property insurance and product development liability insurance.

5. Support eligible domestic and foreign investors in establishing financial institutions—such as securities, futures, fund management, and insurance firms—in pilot regions in accordance with laws and regulations.

We must provide the knowledge-based community with more opportunities to raise capital in the financial markets through intellectual property. Only then can the market foster competitive SMEs capable of driving industrial transformation and upgrading through technological innovation.

Whether domestic or foreign capital, we can make use of it.

▲ SAIF, the largest shareholder of Sinovac Biotech, was strategically established by Japan’s SoftBank and the U.S.’s Cisco, holding a 15.07% stake. Pictured is the COVID-19 vaccine produced by Sinovac Biotech.

Recently, Sinovac Biotech, a leading COVID-19 vaccine manufacturer, released its financial report for the first half of 2021, reporting a net profit of $8.6 billion. However, netizens discovered that its largest shareholder is actually a foreign institution, which upset many people because they felt most of the profits were being reaped by foreign capital.

In reality, there is no need for such concern. Only a sufficiently open market can accommodate enough room for trial and error, and only then can we reap the byproduct: innovation.

This is an inevitable outcome of the era of globalization. As long as companies retain control, we can enjoy the comprehensive economic benefits brought by technological breakthroughs.

When it comes to resolving "chokepoint" issues, making money is actually secondary.

Amid the broader context of global supply chain restructuring, land remains the most stable and effective asset. By linking people to land, a city’s ability to attract talent directly determines the extent to which its land potential can be unlocked.

The market-based allocation of land and labor resources constitutes the revitalization of our domestic assets. This is where we have the most experience and confidence, so it is the main focus and takes priority.

Meanwhile, the market-based allocation of factors such as capital, technology, and data—promoting the stock and bond markets to serve the real economy and fostering technological innovation—represents the true source of incremental growth. Although results may be slow to materialize in the short term, persistent long-term investment and continuous trial-and-error will inevitably lead to breakthroughs.

In the long run, this is equivalent to “trading space for time.”

Land represents space—it is our foundation. What we gain by trading space is the time needed to build high-quality industries and robust technological capabilities. The moment we transform these industries and technologies into our own foundation, replacing the status of land, will mark our true victory.

Overall, the "Comprehensive Reform Pilot Program for the Market-Based Allocation of Production Factors" will bring significant benefits to metropolitan areas and core cities.

Many constraints on developed regions will be eased, increasing urban flexibility and comprehensively enhancing carrying capacity. This will drive urbanization and the development of metropolitan areas, attract more factors of production to developed regions, and accelerate the integration of less developed regions into these metropolitan areas.

It remains unclear which cities will be included in the “Comprehensive Pilot Program for the Market-Based Allocation of Production Factors.”

Several national central cities are likely to be included, while other provincial capitals and cities with independent planning status should feel a sense of urgency. As for ordinary prefecture-level cities outside of Suzhou, it will be extremely difficult for them to make the list.

Will your city make the cut? The answer will be revealed in the first half of the year.