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Territorial containment of a functional world city phenomenon

The purpose of the previous section was to establish the underlying features of the Zhujiang Delta city system vis-à-vis world city characteristics. Understandably, being at the bottom of the world city hierarchy and located on its periphery, not every world city characteristic is represented in the Zhujiang Delta urban system. This is because the periphery, unlike the core of world capital accumulation, is only partially integrated with the world economic system. There are other underlying reasons; for example:

• Economic reform policies since 1978 have not been a total deviation from China's strategy of agro-development, with basic needs as its guiding principle.

• China's open policy is a revival of a traditional policy of frontier zone management and territorial containment.

• As regionalism in the Zhujiang Delta region grows with economic prosperity and outside connections, the inhabitants of the Zhujiang Delta region are inclined towards further integration with the world city system and are looking for the possibility of upward movement in the hierarchy; but the government at the core will exercise every possible means of stopping this centrifugal tendency.

As outlined in the first section, China, because of its unique political and cultural position, did not closely follow the main stream of development thinking. Instead, it has always attempted to address its own problems in its own ways and find a "Chinese" solution. In the 1960s it went for agro-development rather than a city-based strategy. From 1978 onwards, many Western scholars have described China as having reversed its former strategy in favour of a development strategy oriented to the coastal cities. A careful analysis of the Chinese economic reforms will indicate that this may not be the case.

Economic reforms actually started in the rural areas with the "baogan daohu" system - a system of contractual responsibility between farming households and the collectives. In other words, it was the success in the catchment area of the cities in the Zhujiang Delta that created the material foundations for the development of the urban system. The liberalization of the price control system for basic staples relieved more people from tilling the soil. They could now either participate in the offshoots of transnationals run by Hong Kong subcontractors, or own private businesses or even private enterprises (often under the name of collectives). From here they began extending the "brogan" system to the urban area.

The less clear-cut property rights system in the urban state-owned enterprises made it difficult to implement urban economic reforms. Urban economic reforms encountered many problems in the Zhujiang Delta. This was especially the case for those enterprises having no potential for conversion into joint foreign partnerships. The distorted price system, the overburdened welfare system, low wages, "overstaffing," obsolete machinery, poor management, too many superior organizations that could intervene in operational management decision-making, and a relatively low rate of profit retention are features common to all Chinese state-owned enterprises. The enterprises of the PRC Zhujiang Delta are no exceptions, especially the large enterprises owned and run by the central ministries and provincial departments. Only the medium to small enterprises are actually run by the municipal and township bureaux. In general, Chinese domestic enterprises are still predominantly the largest employer, producing a significant share of industrial output.

The four cardinal principles that China must uphold (socialism, the dictatorship of the proletariat, communist leadership, and the thoughts of Marx, Lenin, and Mao) explicitly or implicitly affect decision makers in the PRC Zhujiang Delta at all levels and are part and parcel of the so-called "Chinese way of socialism." The upholding of the four cardinal principles means that China will not participate wholeheartedly in the new international division of labour, and the functional power of transnationals will be taken as a constant threat to the territorial sovereignty of China. It may not be the wish of the Chinese government to find itself integrated with the world system only in a peripheral position, with its cities in the Zhujiang Delta only in the lowest stratum of the world city hierarchy. It would, however, be a dilemma for China if the position of its cities in the world city hierarchy were able to rise only with a fuller integration of its economy with the world system. Integration in this sense means that China would have to offer more concessions in functional terms to transnationals, for example as regards their trademarks, patents, and other kinds of measures to protect intellectual property, which can be used in China only with permission.

The open policy has commanded great attention since 1978. The present form of the open policy - accepting foreign investment in setting up equity joint ventures in production as well as in the tertiary business sector - was absent in the period 1949-1978. However, if one goes back further in history one discovers that in many dynastic periods the Chinese government practiced open policies in the frontier zones but rarely in the ecumene (Chu and Zheng, 1992). Wholly owned subsidiaries and joint ventures with foreign and domestic partners were found in many coastal provinces and cities prior to 1949. The open policies since 1978 have not just been the response of the Chinese government to the emergence of transnationals, but are a continuation of a disrupted long-held tradition in frontier provinces. Inherent in the openness, Chinese central governments have traditionally sheltered their ecumene by territorial means. The first is distance decay, which weakens the impact of alien influences over distance. The second is territorial containment: alien elements are allowed only in well-defined and guarded plots of territory under Chinese jurisdiction. Apart from these defined plots of territory, there are some less well-defined areas where alien elements would be tolerated but not explicitly welcomed. This model of territorial containment could be observed in Guangzhou, Quanzhou, and Fuzhou during the Ming dynasty and even earlier.

The Special Economic Zones, the open coastal cities, and the deltaic Open Economic Regions are all territorial containment devices (Chu, 1986) to control the alien phenomena associated with the international circulation and accumulation of capital (of both transnationals and overseas Chinese families). Hong Kong and Macau have been part of the world city system since well before 1978. In the early 1980s, Shenzhen and Zhuhai were designated to contain the circulation of international circulated capital. These Special Economic Zones were the first to allow wholly foreign-owned subsidiaries offshoots of the transnationals. Joint ventures were permitted and tolerated in other Zhujiang cities and countryside between 1980 and 1984. The forceful penetration of overseas Chinese family capital in the Zhujiang Delta in the early 1980s and the successful integration of the area in the world economy by means of compensation trade and contractual joint ventures brought to the attention of the Beijing central government that the initial barriers of the Special Economic Zones had been breached and that other restraints were necessary. In 1984, 14 "open coastal cities" were designated to accept foreign and overseas Chinese family capital. A year later, the Zhujiang Delta Open Economic Region was created. The failure to contain the rapid growth of activities of alien capital in the inner Zhujiang Delta led to the retreat of the boundary of the Zhujiang Open Economic Region to the outer Zhujiang Delta in 1987. In the course of time, it is possible that China will have to enlarge this Open Economic Region again, or modify its containment strategy by creating new containers for the diversion and control of alien capital and to accommodate new investment.

Regionalism has always existed in the South China frontier zone (Solinger, 1977). With a strong central government, the centrifugal tendencies of the South are suppressed as much by military presence as by an effective centralized resource allocation system on which all outlying regional economies are dependent. When the core degenerates, as during the period 1966-1978, the fringe areas, as subsystems of the whole, are able to exploit their relative autonomy and transform themselves into "upward transitional peripheries" and break away from the control of the central government. The autonomy of Guangdong and Fujian in economic affairs was legitimized in 1978 and they have been granted the power to experiment with ideologically unconventional means of economic development. Innovative concepts of the acceptance of foreign capital, technology, and Western management in Guangdong and Fujian have been implemented, leading to the partial, if not total, integration of the economies of these two provinces with the world economic system and of their cities with the world city system. The Zhujiang Delta, being next to Hong Kong, which is already a member of the world city system, is therefore close to the network of world capital circulation and information flows.

The regionalist tendencies of Guangdong were reinforced and it subsequently succeeded in moving away from the system in mainland China towards the outside capitalist world. The account of the development of the PRC Zhujiang Delta above illustrated this without touching on the subtlety of the working mechanism. In brief, PRC Zhujiang Delta officials were bold enough to interpret the various measures of the open policy set by the central government, the autonomy in economic affairs, the four cardinal principles, etc. with the greatest flexibility. One official summarizes this situation well as follows: "Central government expects the regions to follow what is allowed; but the Guangdong officials do everything as long as the central government does not explicitly disapprove" (fieldwork, 1991).

Without the centrifugal tendencies, the regional officials' bold attempts to interpret central government directives flexibly would not have been supported by the public. In most cases they were rewarded with a high rate of economic growth in the region or monetary returns to their enterprises. However, some unlucky ones encountered sanctions from the central government. In Hainan Island, car imports and their resale to inland areas is a notorious example. Others are less publicized; for example, the appointment of Mr. Li Hao from Beijing to take over as mayor and first municipal party secretary of the Shenzhen Special Economic Zone, two key positions formerly held by the deputy governor of Guangdong.

Guangdong's emergence as an economic power among the provinces also enables it to have a bigger say in national policy. On the governorship of Guangdong, for example, the former governor's declared preference to retain his position rather than take a higher position in Beijing also indicated that Guangdong regionalism had never been stronger since 1949. This tendency will likely become accentuated when Hong Kong and Macau become part of China in 1997 and 1999 respectively. Being functionally integrated, Hong Kong, Macau, Guangzhou, and other prosperous Zhujiang Delta cities and towns exert a very strong economic, if not political, power over future national policy formulation in China. From the perspective of the central government, would a strong, united, and powerful Zhujiang Delta urban system in the southern frontier region of China be to its benefit?

Conclusion

To conclude, the Zhujiang Delta urban system has now become part of the world city system and, of course, part of the Asia-Pacific urban system. As the world city system itself can be regarded as a spatial outcome of the new international division of labour, the predominant process of the internationalization of capital and its inherent logic of accumulation and reproduction will push the Zhujiang Delta urban system to extend its influence northward and assume a bigger role as an intermediary for transnationals to extend their market and production facilities.

To date, most transnationals view China as a large market rather than as a production base. Overseas Chinese family capital differs from transnational capital in this perspective, in that for Chinese family capital China is both a market and a production base. This is reflected in the pattern of foreign investment in the Zhujiang Delta. To the Chinese government, the Zhujiang Delta urban system is the means for it to gain a toehold in the international market and to obtain the most advanced technologies, which can be utilized to increase exports and decrease imports so as to improve national trade balances. Economically, these expectations and perceptions of the roles of the Zhujiang Delta urban system are conflicting and difficult to reconcile, particularly to the satisfaction of all.

The undesirability of the Zhujiang Delta urban system in spreading "spiritual pollution" to the ecumene of China has always been a concern of the Chinese central government, and there is evidence that the conventional means of territorial containment have failed. In conjunction with the strong regionalism in the Zhujiang Delta, it will be very unfortunate if the urban system generates too much pressure for the Chinese system as a whole to sustain. To strike a balance between functional integration and territorial integration is thus a lesson that the Zhujiang urban system has to learn and learn well. These two concepts of Friedmann and Weaver are not simply theoretical constructs but suitable policy guidelines for the future leaders of the urban system.

Finally, in territorial terms Hong Kong is undoubtedly part of the Zhujiang Delta urban system, but in functional terms Hong Kong's sphere of influence has spread far beyond the Delta. Despite its small area and with only 5.8 million population, Hong Kong's GDP is as much as a quarter of that of the PRC (in 1990, total GDP for Hong Kong was US$71,263 million and for the PRC US$275,053 million), and in terms of trading volume Hong Kong is even larger (in 1990, Hong Kong's total imports were worth US$84,702 million as against China's US$53,360 million, and total exports were US$82,296 million and US$62,070 million, respectively). In terms of direct foreign investment and corporate control, Hong Kong is as important to other parts of China as to the Zhujiang Delta. One thus has to appreciate the relative importance of Hong Kong within the following framework: top-rank world cities - Hong Kong - various regions of China Guangdong- Zhujiang Delta, instead of simply taking Hong Kong as the highest-ranked city of the regional urban system of the Zhujiang Delta.

Acknowledgements

The research assistance of F. Soulard, who is funded by the UPGC Research Grant No. HKU 5/91, is much appreciated. C. W. Chan, C. K. Lu, and K. J. Peng also provided research assistance in data compilation at various stages in the preparation of this chapter.

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The evolving urban system in North-East Asia

Introduction
Yellow Sea Rim and Japan Sea Rim areas
The transnationalization of urban systems: The BESETO ecumenopolis
Ideal and reality: Needs for further research
References

Sang-Chuel Choe

Introduction

North-East Asia, or the North-Western Pacific Rim, covers the five countries of South and North Korea, China, Japan, and the Commonwealth of Independent States (formerly the USSR). It would be inappropriate to include China and the CIS, which are of continental scale, in the same spatial dimension with Japan and Korea because China has almost ten times the population of Japan and is a hundred times the size of South Korea in area. Therefore, North-East Asia is operationally defined to include South and North Korea, Japan, parts of China (including the provinces of Hebei, Shandong, Liaoning, Jilin, and Heilongjiang and the cities of Beijing and Tianjin), and parts of the Far-East Economic Zone and East Siberia Economic Zone in the CIS. Approximately 400 million people (or 8 per cent of the world population) are concentrated in the region thus delineated and more than one-fifth of the world's gross national product is generated here (table 14.1).

The détente between the East and the West that started in the 1980s, especially reconciliation between the capitalist and socialist countries, foretells the coming of the Pacific era. Ideological confrontation is now regarded as a remnant of the Cold War. Moreover, changes in the world economic order have been pressuring the North-East Asian countries to work out a new economic regionalism. The countries in North-East Asia have many complementarities and could provide each other with necessary resources and share experiences by being at different stages of economic development. The Russian Far East and China's three north-eastern provinces have abundant natural resources. The Siberian areas, in particular, are endowed with potentially great untapped resources, which Japan and South Korea need in order to gain a competitive edge over other industrialized countries.

Table 14.1 Country profile of North-East Asia, 1989

Sources: Russia, Far East - John Sallnow, "The Soviet Far East," Soviet Geography 30, 1989; China -China Statistical Yearbook, 1991; World Bank, World Development Report 1991.

a. Beijing, Tianjin, Hebei, Shandong, Liaoning, Jilin, and Heilongjiang.

Moreover, the countries in North-East Asia share many historical legacies and cultural commonalities beyond being simply neighbouring states. These countries have followed divergent paths for more than four decades since World War II. China, the CIS, and North Korea have followed an orthodox socialist path of development and its consequent urbanization pattern, whereas Japan and South Korea have kept to a typical capitalist track of economic and urban growth. After half a century of divergent development, new dimensions are emerging in North-East Asia. The idea of a North-East Asian Economic Community patterned after the European Economic Community (EEC) has been widely discussed in political and academic circles, and is nowadays becoming more than wishful thinking. As the world has begun withdrawing from ideological confrontation and is heading for an era of multinational economic cooperation, many concepts such as a North-East Asian Economic Zone, a Yellow Sea Economic Zone, an Organization for Pacific Trade, Aid, and Development, and a Pacific Economic Cooperation Conference have been suggested.

Although the total volume of foreign trade among the countries in North-East Asia was only US$62.4 billion in 1990 (table 14.2), the region is emerging as one of three economic blocs in the world next to the European Union and the North American Free Trade Area (NAFTA). The rate of increase in trade surpasses that of other economic blocs in the world. In addition to the existing trade relationship between Japan and South Korea, which accounts for 98 per cent of the regional total, one of the significant developments is that China became the third-largest trading partner with South Korea in 1991. As shown in table 14.3, between 1985 and 1989 trade volume (exports and imports) increased more than three times between South Korea and China, and more than five times between South Korea and the former USSR. In order to meet increasing trade, the ports of Pusan and Inchon in South Korea recently opened direct cargo routes with Shanghai, Tianjin, and Dalian in China. Moreover, direct passenger services run twice a week between Weihei and Inchon. The coastal trade that once thrived across the Yellow Sea and the Sea of Japan is expected to be revived again. For example, as of September 1990, 26 South Korean joint ventures were operating in China. Although the total amount of South Korea's direct foreign investment in China is meagre at US$25 million compared with Japan's US$2,036 million (Kim, 1991a; Sekiguchi, 1991), it is likely to increase very rapidly, in particular in labour-intensive export manufacturing, as rising wage and other production costs in South Korea provide great incentives to move South Korean capital to locations with cheaper labour costs in order to maintain a competitive edge in international trade.

Table 14.2 Foreign trade among North-East Asian countries, 1990 (US$100 million)

Source: Korea Trade Promotion Corporation Newsletter, 1990.

Table 14.3 Trend of South Korean trade (exports and imports) with China and the USSR, 1985-1989 (US$ million)

Sources: South Korean Ministry of Trade and Industry and Korea Trade Promotion Corporation.

In 1989, the volume of trade among the North-East Asian countries accounted for 14 per cent of total foreign trade in the world. With the relaxation of political tensions and improved multilateral relations, exchanges of science, technology, and culture will surely follow. Diplomatic relations between Soviet Russia and South Korea have been normalized. Since early 1991 China and South Korea have opened trade offices with the function of issuing visas. Full diplomatic ties were established in August 1992. The prime ministers of South and North Korea at their fifth-round meeting on 13 December 1991 in Seoul signed an agreement on reconciliation, non-aggression, exchange, and cooperation between the two Koreas.

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