Over the past two years, the government has rolled out a flurry of new policies, leaving even many experienced investment promotion professionals feeling overwhelmed.

For example, even though the document on “building a unified national market” was released several days ago, many people are still unclear about its implications.

On the evening of April 28, Guchuan United held a live interview to provide a detailed interpretation of this landmark document, focusing specifically on investment promotion—how to understand it and how to respond.

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While offering strategies regarding the “National Unified Market,” this interview also conveyed a key message: policies never stand alone.

In other words, to understand national policies, one cannot look at a single document in isolation; instead, one must build a framework, incorporate related policies into that overall framework, and systematically adjust one’s cognitive system.

Policies wield immense power, but they are not “lone warriors.”

The core objective of the “National Unified Market” document is to address the fragmentation of resources caused by rampant local protectionism and to enable a market of 1.4 billion people to achieve true economies of scale.

Fair market competition will be further promoted in this process, which is certainly a positive development.

During previous visits to industrial parks for research and investigation, we found that localities do indeed grant preferential treatment to local enterprises while excluding high-quality companies from outside the region.

This is the “local protectionism” referred to in the “Opinions.” Such behavior poses a significant obstacle to the “national coordinated strategy.” If every region goes to great lengths to protect local enterprises, yet these enterprises lack any competitiveness on a national or global scale, they will collapse one after another when faced with external risks such as a pandemic.

Therefore, breaking down regional barriers will help better identify high-quality enterprises, provide them with better development opportunities, and foster market entities capable of competing with industry giants on the international stage.

—Li Jiayao

Senior Advisor, Tanikawa Industrial Research Institute

However, this will not only break down regional barriers in economically developed areas but also dismantle the protective barriers in less developed regions.

Driven by the market’s pursuit of efficiency, vast amounts of capital, industries, and talent will naturally concentrate in developed regions, which may lead to some concerning issues—

further exacerbating regional development imbalances

Increasing living pressures in developed regions, leading to even greater internal competition

The emergence of even larger monopolistic conglomerates

Given this, why does the government still insist on pushing forward with this policy?

It is a matter of weighing the pros and cons, but more importantly, the timing is right.

In China, the government not only influences the distribution of the economic pie but also participates in its creation. A single policy can directly impact the development of an entire industry, which is why people generally pay close attention to policy developments.

Essentially, the introduction of policies is about setting expectations to bring positive impacts to the market.

Therefore, policies are always strategic in nature and involve advance planning.

Regarding potential issues with “building a unified national market,” the government has actually been preparing for them long in advance. To truly understand this policy, it must be viewed systematically within the broader policy framework.

Focus on the Main Theme of “High-Quality Development”

Establishing a Framework for Policy Understanding

Efficiency, equity, security, and sustainable development are the four core pillars of high-quality development; they are interrelated and inseparable.

First, efficiency and equity.

To understand the “national unified market,” it must be viewed within the policy framework of rural revitalization, common prosperity, and anti-monopoly efforts—all three of which have already been strategically laid out in advance.

Rural revitalization is a strategy proposed in the report to the 19th CPC National Congress in 2017 and was deployed even before the comprehensive victory in the battle against poverty. The 2021 Central Document No. 1 provided a systematic plan for the rural revitalization strategy and established the National Rural Revitalization Administration.

The Rural Revitalization Strategy aims to help rural areas find a development path distinct from that of cities, ensuring they can develop differentiated competitive advantages and forge a development trajectory separate from urban areas.

As for whether a rural area should become a hub for integrated urban-rural development or a cornerstone for ensuring food security, this must be determined through a case-by-case analysis based on specific factors such as geographical location and resource endowments.

While advancing the Rural Revitalization Strategy, the state has placed common prosperity on the agenda to address the issues of “growing the pie” and “sharing the pie” within the market economy system, proposing the concept of “tertiary distribution.”

On June 10, 2021, the Central Committee of the Communist Party of China and the State Council issued the “Opinions on Supporting Zhejiang in Building a Demonstration Zone for High-Quality Development and Common Prosperity,” clearly identifying the resolution of regional disparities, urban-rural gaps, and income inequalities as the primary focus.

Regarding anti-monopoly efforts, the Central Economic Work Conference held at the end of 2020 directly listed “strengthening anti-monopoly measures and preventing the disorderly expansion of capital” as a priority. Anti-monopoly work consequently reached a peak in 2021, and specific examples should be readily apparent to everyone.

We advocate for corporate innovation, and the core of this is to subject enterprises to competitive pressure. This competition must not be limited to production costs; rather, it must be reflected primarily in technology and innovation.

In recent years, many domestic enterprises lacking competitive advantages have been overwhelmed by foreign companies. This may be because, before China opened its doors to the world, domestic enterprises faced too little competitive pressure . Only by truly stepping onto the global stage to compete can a spirit of innovation be fostered.

Many local enterprises in various regions have thrived within their “small, self-contained cycles,” yet they possess little in the way of technological advantages. Only by building a unified national market can we further foster healthy competition among enterprises.

—Ma Donghai

General Manager, Tianjin Branch, Tanikawa & Co.

The “unified national market” emphasizes efficiency, while rural revitalization, common prosperity, and anti-monopoly efforts strike a balance in terms of fairness.

Then there is the balance between efficiency and safety, and between efficiency and sustainable development.

Given the uneven pattern of regional economic development, the construction of a “unified national market” must also guard against the transfer of high-pollution, high-energy-consumption, and obsolete production capacity to central and western regions.

Although such industrial relocation may indeed yield some short-term benefits from the perspective of maximizing economic efficiency, in the long run, the downsides will certainly outweigh the advantages.

In recent years, hazardous chemical projects have been accelerating their shift from the eastern coastal regions to the central and western regions. Particularly following the “March 21” accident in Xiangshui, this transfer has accelerated further, with receiving regions relaxing approval requirements at every stage, leaving behind numerous safety hazards.

Furthermore, some regions, in pursuit of economic development, have accepted every enterprise that comes knocking, not only exacerbating the trend of overcapacity in low-end industries but also leading to severe unorganized emissions and open-air operations, resulting in widespread pollution.

We cannot expect the market to resolve such issues on its own; the state has already established clear boundaries regarding safety and sustainable development.

Take supply-side structural reform, for example: its purpose is to address the issues of low-end overcapacity and weak competitiveness. Based on respect for the objective laws of supply and demand, it uses policy to drive change and achieve synergy between the market and the government.

Similarly, the “dual carbon” goals aim to drive industrial and energy restructuring by managing carbon emissions across supply chains. The national unified markets for energy and the ecological environment, as mentioned in the “National Unified Market” initiative, are also being advanced within this framework.

It is evident that supply-side structural reform, demand-side management, and the “dual carbon” goals represent a balancing act for the “National Unified Market” in terms of security and sustainable development.

A Perfect "Comeback" Amid "Headwinds"

Policies Have Been in Place for Some Time

As mentioned earlier, in China, the government not only influences the distribution of the “pie” but also participates in its production. A single policy can directly drive the development of a region or an industry.

To achieve coordinated development between economically developed and underdeveloped regions while balancing efficiency and equity, it is essential to provide policy preferences to underdeveloped regions to help them develop industries with competitive advantages.

In traditional industries, it is virtually impossible for central and western regions to compete with the eastern regions. Such opportunities exist only in emerging sectors.

Although the "Opinions" have sparked heated discussion, it will still take some time for relevant policies to be implemented. Investment promoters would do well to seize this window of opportunity and, based on top-level planning, proactively break down regional barriers.

From an investment promotion perspective, the most critical task is to identify local comparative advantages from various angles. By considering carrying capacity, industrial foundations, and the completeness of industrial chains, regions can pinpoint their unique strengths relative to neighboring areas.

Localities can attract high-tech enterprises to collaborate with local firms, thereby enhancing the technical capabilities of local businesses and encouraging them to increase R&D investment. This approach will improve production efficiency and product quality, ultimately strengthening the core competitiveness of the industrial chain.

— Chang Shuang

Deputy General Manager, Tanaka & Partners Tianjin

So, with the changes in human production and lifestyle in recent years, as well as the transformation of the global energy structure, have any new growth sectors emerged that are suitable for development in central and western China?

You’ve probably guessed it: new energy and the digital economy.

It is worth noting that these two sectors are highly aligned with sustainable development. Even more encouraging is that China is at the forefront of global development in both of these fields.

Therefore, the construction of a “unified national market” must also be situated within the policy framework for the development of the digital economy and the new energy industry.

In the field of new energy, the 14th Five-Year Plan outlines the construction of nine large-scale clean energy bases, seven of which are located in the western regions.

The “East Data, West Computing” initiative, officially launched this March, aims to build a “computing power network” based on the digital economy, enabling the “local consumption” of clean energy—such as solar and wind power—generated in central and western regions and transforming it into industrial output.

These elements are all interconnected.

When combined with carbon emission management and carbon trading, the national unified markets for energy and the ecological environment mentioned in the "National Unified Market" are all interconnected.

To summarize.

Regarding the “National Unified Market,” on the one hand, we must understand the policies themselves and identify the root causes of local protectionism as well as the solutions—this is precisely the focus of this live interview by GuChuan Lianxing.

On the other hand, we must place it within the broader policy framework to establish a comprehensive understanding.

First, efficiency and equity: including policies such as the Rural Revitalization Strategy, common prosperity, and anti-monopoly measures;

Second, efficiency, security, and sustainable development: including policies such as the “dual carbon” goals and supply-side structural reform;

Third, specifically regarding central and western regions: these must be understood within the broader framework of new energy and the digital economy.

By integrating these elements with global implications, we can establish a comprehensive policy framework that prevents us from being led astray.