Download Effect of Regional Export-oriented Growth Pole: A Framework of Theoretical Analysis

Effect of Regional Export-oriented Growth Pole:
A Framework of Theoretical Analysis
RAO Guangming WU Zhongjun
Research center of economy of Upper Reaches of the Yangtze River of CTBU, P.R.China 400067
[email protected]
Abstract: Based on the understanding of export-base theory and neo-geogrphical trade theory and
consideration of China’s experiences of export-oriented growth in the past 30 years of reform and
opening outside, the author in this paper discusses theoretically the effect of regional export-oriented
growth pole that export-oriented economic growth produce the polarization effect of regional
development in some place of the region. It often occurs where there exists perfect industrial clustering
value-chains and modern logistic platforms. And its functions can be realized to raise the
competitiveness of the relative region through multinational corporation headquarters assembling and
urban-rural connections of economy and trade among the relative region. The effect of regional
export-oriented growth pole comes from the synergy of endogenous variables of domestic supply of
goods and services and exogenous variables of international demand of consumption, as well as that of
endogenous variables of domestic demand of factors and exogenous variables of international supply of
resources. The dynamics of the effect of export-oriented growth pole can be described as three stages of
accumulation of resources, spillover of benefits and harmonious development.
Key Words: Effect of regional export-oriented growth pole, Derivation, Nature, Dynamics
1. Instruction
Since China’s reform and opening to outside of the world in 1978, the miracle of China occurs with
the economic growth rate of over 9 % anaully in the world economic development. The basic engine of
stimulating China’s economic growth is its foreign trade with the growth rate of 14.94% annually. In the
east part of China, such as the delta regions of the Yangtze river and the Pearl river, the economic
growth is promoted mostly by the foreign trade, especially the export growth. For example, Shanghai’s
export in volume is increased from USD 3.58 billion in 1986 to USD 113.57 billion in 2006, and
Guangdong’s export in volume is added from USD 4.25 billion to USD 301.95 billion in corresponding
period. Shanghai’s export covers 11.72% of China’s total export in volume while Guangdong covers
31.16% in 2006. This shows that export growth makes Chinese economic development and the east
China’s economic growth is stimulated basically by their foreign trade, especially their export growth.
But what is the basic rule of the regional export-oriented economic growth? And how does it work in
regional economic development? Different people have different ideas.
Adam Smith analyzed the relationship between division of labour and productivity, derived an
model of “vent for surplus”, which shows that the increase in productivity is from division of labour,
and the level of division of labour is limited by the need of market. If the need from other countries
happens, the need of market can be enlarged by foreign trade, and this will make full use of domestic
spare capacity of land and labour, which brings domestic economic growth by export of the surplus of
products to foreign countries. According to the export base theory, which was raised by Douglas
C.North (1955) and modified by Tiebout(1956) and Romans(1965) a county's or community's economy
may be bifurcated into two sectors: an export or basic sector and a non-export or nonbasic sector. The
basic sector that trades outside its boundaries brings money into the local economy, which provides
impetus for future economic development. The nonbasic sector, on the other hand, supplies local
consumption of goods and services whose activity depends upon basic sector export sales. External
demand for a region's exportable goods and services injects income into the local economy, which in
turn augments local demand for non-exportable goods and services (Krikelas 1992). Julie L. Hotchkiss,
Robert E.Moore and Mark Rockel (1994) examined the role of export expansion in the economic growth
of countries at different stages of development and found that exports contribute to growth through both
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a sector-externality effect and a factor-productivity effect for middle income countries, but only through
a factor-productivity effect for low income countries. With the development of econometrics, empirical
methods are introduced to analyze the interlinks of export and economic development by Balassa
1978
Feder (1983) Grossman and Helpman(1990), and Zhu Zhongdi 2006 and Kong
Qunxi(2006),etc. In a word, the literatures above focus mainly on the linkages of export and economic
growth from the perspective of countries. This paper will dicuss the linkage of export growth and
economic development from the perspective of domestic regions and its dynamics on the base of the
nature research and roadmap description of the export growth and regional development, which is called
the effect of regional export-oriented growth pole.
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2.
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Derivation of effect of regional export-oriented growth pole
In the article titled with “the stages of economic growth: a non-communist manifesto”, W. Rostow
(1960) said that the take-off, as revolutionary changes, awaited not only the build-up of social overhead
capital and a surge of technological development in industry and agriculture, but also the emergence to
political power of a group prepared to regard the modernization of the economy as serious, high-order
political business. During the take-off, the rate of effective investment and savings may rise from 5 % of
the national income to 10% or more, new industries expand rapidly, yielding profits a large proportion
of which are reinvested in new plant; and these new industries, in turn, stimulate, through their rapidly
expanding requirement for factory workers, the services to support them, and for other manufactured
goods, a further expansion in urban areas and in other modern industrial plants. New techniques spread
in agriculture as well as industry, as agriculture is commercialized, and increasing numbers of farmers
are prepared to accept the new methods and deep changes they bring to ways of life. In the opened
economy, investment, domestic consumption and export are three powers to stimulate regional
economic growth. At the initial period of regional development, investment is the leading power to
promote the regional economic growth by supporting infrastructure construction and public services as
well as social welfare insurance. Then, after the preparation of basic conditions finished, export, as an
economic denominator, may come to the stage to spur the regional economic growth continuelly. With
accelerating growth of regional economy and immence increase of income per capita of the region by
export, the savings may rise more than before to reinvest the new industries to expand the regional
economy. meanwhile, domestic consumption can also join in stimulating the regional economic
development. That is, export can be the great power to drive the regional economic growth in some
degree.
From the perspective of spatial economics, the regional economic development can be realized by
growth pole spillover, called the dynamics of spread and backwash. An economic growth highland
surranding with backwarded areas appears in some place of the region if superpositioning with better
locations and preferential policies, spurring with a propulsive Industry, or/and industrial clusterings in
some place of the region. Accordingly, the head-drop occurs on the base of developing gap between the
highland and the hinterland. A potential energy from the head-drop can in turn promote the benefits
spreading from the growth highland to the backwarded areas and resources backwashing from the
backwarded areas to the growth highland between the core and the periphery of the regional growth.
This is called growth pole spillover, firstly raised by a french scholar, Francois Perroux (1950). In his
view, the growth pole refers the porpulsory industry based on their externality of the forward, backward
and circumferential relationship between industries, which can create the opportunities for other
industries to grow by supplying resources or mid-products or services for them and absorbing
technological and economic spillover from them. And so these propulsory industries give a great
contribution of their increase in productivity to the regional economic growth, which the latter is much
bigger than the former. Boudeville (1966) modified the propulsory industries into the geographic areas
of polarization, referring to those metropolitan economy of overall urban and rural areas. In fact, the
growth pole spillover can be concluded as the economy of location, scale and exteranlity.
Based on the opened economy, when export becomes the propulsory power of the regional economic
growth, and the driving forces of spreading and backwashing of the regional growth pole root in export
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growth, the regional export-oriented growth pole comes into being. In other words, the regional
export-oriented growth pole spillover can be described as that export growth gives power to form the
economic highland of regional development by economy of location, to gather driving forces of
spreading and backwashing of the regional growth pole with externality of both a sector-externality
effect and a factor-productivity effect, and to promote the regional economic growth immencely by
economy of scale of satisfying the demand of the global market.
3. Nature of effect of regional export-oriented growth pole
Just as shown in figure 1, the nature of effect of regional export-oriented growth pole can be
dicussed in two aspects in the opened economy.
3.1 Agglomeration of headquarters spillover
Economic globalization and multinationalization create competitively demand of the global
marcket in scales through stable supply chains of products and services and flexible modes of resources
allocation. Export growth to satisfy the massive demand of the global market can be stimulated by
agglomeration of headquarters. Firstly, the headquarters of the enterprises locate where transportation
and information hubs are existed and transportion and information costs of products and services can be
reduced in some degrees. Secondly, the headquarters of the enterprises economically gather at the joint
of the supply chains where the upstream suppliers and downsteam purchasers both have the shortest
paths to link with the core enterprises because of the effect of division of labour and specialization in
production. The joint area becomes the highland of regional economic growth supported by industrial
clusterings and zone economies as well as metropolitan areas appearing based on population
accumulation, which brings about export growth in larger scales.
Agglomeration of
headquarters
spillover
Urban
economy
Zone
economy
Regional exportoriented growth
pole
Globalization
Global
market
Export
growth
Rural
industries
Agric ultural
districts
Graphic line:
Rural
economy
Urban and rural
development
harmonization
Transaction
line
Value-added
line
Figure-1 Nature of effect of regional export-oriented growth pole
3.2 Urban and rural development harmonization
In the process of export base development of the region, the highland of regional economic growth
created by export growth usually forms in urban areas, where transaction cost is always in low level,
while the the hinterland surranding it is backwarded rural areas. Sustainble export growth will be
distorted by the developing gap between the highland and the hinterland which is becoming larger in the
developing mode of nonequillibium. It is essential to harmonize the development of urban and rural
areas by integrating rural development into urban development on aspects of free movement of factors
and high-efficiency of resources allocation. Firstly, the rural spatial economic growth can be spurred by
developing agricultural districts in scale so as to meet the demand of agricultural products and services
of the global market, which, in theory, is named an agricultural sector-externality effect. Secondly, the
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rural industries can be developed by processing trade of agricutlrual materials and rural resources
supported with the technical spillover from other industries. Surplus labours from the rural areas can be
transferred into non-agricultural industries for employment, which is called factor-productivity effect in
theory. In a word, export growth is midwifery for industries of modern agriculture, modern
manufacturing and modern services through urban and rural development harmonization.
Generally, the effect of regional export-oriented growth pole is supported strongly by the agglomeration
of headquarters spillover and the urban and rural development harmonization.
4. Mechanism of effect of regional export-oriented growth pole
The mechanism of effect of regional export-oriented growth pole can be shown in figure 2.
Service
economy
Zone
economy
Headquarter
economy
Technical
advance
Industrial
cluster chain
Export
contribution
GDP
growth
inf rasturctures
Cutom
clearance
Sustainable
development
of export
growth pole
Export
bas e
Goods
&
services
export
：
Logistic
platform
Logistics
eff iciency
Global
market
Grphic line
supply
Modularization networking
demand
Globalization
Figure-2 Mechanism of effect of regional export-oriented growth pole
In the opened economy, the international demand induces the enterprises’action to supply the
relative goods and services to the international market by their headquaters arrangement through the
export bases linked with urban and rural areas. Aiming at the demand of international market and the
minimum of transaction costs, the industrial clusters based enterprises’assembling appear in the
industrial zones and form the zone economy. Processing trade orienting to the international market can
be carried into business by supplying services of R&D, product designing, processing, marketing,
maintenance and repair, etc. The relative infrastructures and logistic platforms are set up to raise the
efficiency of transportation. The level of trade facilitation such as custom clearance and port efficiency
are upgraded for the purpose of smoothing the channel of export of goods and services. That is, the
value-added chains of industrial clusters through the export bases is the transmission chains of the effect
of regional export-oriented growth pole, trade facilitation based on modern logistic platforms are
strongpoints and the international demand is the driving force to spur the effect of regional
export-oriented growth pole into reality to rise competitiveness of the region’s development.
5. Dynamics of effect of regional export-oriented growth pole
As described in figure 3, the evolution of effect of regional export-oriented growth pole is realized
through spread and backwash between the core of the highland and the periphery of the hinterland of the
export growth region, which is the synergy of endogenous variables of domestic supply of goods and
services and exogenous variables of international demand of consumption, as well as that of endogenous
variables of domestic demand of factors and exogenous variables of international supply of resources.
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The dynamics of the effect of regional export-oriented growth pole can be described as three stages of
accumulation of resources, spillover of benefits and harmonization of development.
5.1 Stage of accumulation of resources
It is the initial stage of the effect of regional export-oriented growth pole. Export in small volume,
instability of export growth and low level of export contribution to regional GDP growth are the
characteristics of the effect of regional export-oriented growth pole in this stage. The productivity is in
low level with the limitation of old technology, backwarded infrastructures and expensive logistic cost.
Only the labor-intensive products have the relative competitive advantage in the world market. The
contribution of export growth to regional GDP growth is in low level of less than 10% since no
sector-externality effect and factor-productivity effect in work. The effect of regional export-oriented
growth pole is in pregnant by accumulation of resources. The motivator to spur the effect of regional
export-oriented growth pole is to inject investment of productive factors and accumulation of resources
for revitalizing the infrastructures, raising the level of productive technologies and strenthening R&D
for the reduction of transaction costs.
Export
contribution
High
level
Middle
level
Initial
level
0
accumulation
of res ources
spillover of
benefits
harmonious
development
stage
Figure-3 Evolution of effect of regional export-oriented growth pole
5.2 Stage of spillover of benefits
It is the developing stage of the effect of regional export-oriented growth pole. Export in large
volume, fluctuation in export growth and high level of export contribution to regional GDP growth are
the characteristics of the effect of regional export-oriented growth pole in this stage. After the
development of the stage of accumulation of resources, the regional low-income level has been raised
obviously and more savings are invested to raise the level of productive technologies and capabilities for
exports. Accordingly, the relative infrastructures and logistic facilities have improved substantially,
which support strongly the export growth. The capital-intensive and technology-intensive products as
usually called manufacturing products are becoming more competitive in the world market, and export
growth’s contribution to regional GDP growth has a rise to reach 30%-80% or even higher, which
becomes the propulsory power to spur the regional economic growth since the sector-externality effect
and factor-productivity effect are in works in some degree. The effect of regional export-oriented growth
pole plays a major role in regional development by spillover of benefits while the investment and
domestic consumption play a subordinate role. But the risks from abroad are accordingly formed that the
high growth of export brings about more and more trade disputes which attack the tendency of export
growth. On the other hand, the fluctuant in growth of export will also give side-effect to domestical
regional development by distorting its economic growth through overly dependence on export. And so
how to make export growth develop in a sustainable way is the big challenge at the developing stage of
spillover of benefits of the effect of regional export-oriented growth pole.
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5.3 Stage of harmonization of development
It is the harmonious stage of the effect of regional export-oriented growth pole. Proper volume in
export, stable trend in export growth and moderate level of export contribution to regional GDP growth
are the characteristics of the effect of regional export-oriented growth pole in this stage. After the
development of the developing stage, export growth is in a stable way, and its contribution to regional
GDP growth stay at the level of 30% or so. The contribution shares of domestic consumption and
investment to regional GDP growth reach about 30% or so separately because the income per capita has
been raised greatly and local people have a stronger capacity of consumption in the region. The
technology-intensive and knowledge-intensive products have revealed competitiveness in the world
market. The sector-externality effect and factor-productivity effect coming from export growth are still
in works but not so strong as before. The driving forces of regional development are from the synergy of
export growth, domestic consumption and investment, the effect of regional export-oriented growth pole
to spur the regional development is realized by agglomeration of headquarters spillover as well as
harmonization of urban and rural development through integration of market at home and abroad.
Conclusion
The effect of regional export-oriented growth pole often occurs where there exists perfect industrial
clustering value-chains and modern logistic platforms. And its functions can be realized to raise the
competitiveness of the relative regions through multinational corporation headquarters assembling and
urban-rural connections of economy and trade among the relative regions. The effect of regional
export-oriented growth pole comes from the synergy of endogenous variables of domestic supply of
goods and services and exogenous variables of international demand of consumption, as well as that of
endogenous variables of domestic demand of factors and exogenous variables of international supply of
resources. The dynamics of the effect of regional export-oriented growth pole can be described as three
stages of accumulation of resources, spillover of benefits and harmonization of development.
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