"The region's labor-intensive manufacturing boom has proved to be more than the local environment and resource reserves could withstand," said Chen Min'er, Executive Deputy Governor of Zhejiang Province, at the press conference.

Some of the province's polluting enterprises engaged in manufacturing low value-added products are being shut down or moved out of the region, while hi-tech and energy-efficient ones are favored with tax breaks, he said.

"At the same time, we have extended a helping hand to the private enterprises buckling under pressure in terms of financing, land use and power supplies," Chen said. "Since this year, the total number of the province's enterprises has been definitely on a rise."

"The government has subtly left open the possibility of further tax relief for enterprises in the service sector, such as the reform of the value-added tax system and the cancellation of business tax," said Guo Tianyong. The advanced manufacturing sector would provide a solid base for tertiary industries, which in turn could serve the next round of national industrialization, he added.

Integrated city cluster

Analysts said gearing up the region for a ballooning tertiary sector has other rewards. Shanghai and the two provinces could join their tertiary forces and benefit from the interplay between each other. Besides this, the three areas within the region would each have their own sets of priorities. According to the government circular, Shanghai would make efforts to maintain its advantage in logistics and finance, while Jiangsu and Zhejiang would explore the productive service sector focused on software, logistics, tourism and real estate.

But Zuo Xiaolei stressed that it was unnecessary for the government to rush ahead with dividing up industries. Instead, its most pressing job would be to optimize the market environment for enterprises to find their best roles, she said.

Basking in the region's dramatic tertiary endeavors would also be a flurry of small and medium-sized cities that would play host to some labor-intensive industries forced out of the big cities. Guo said this would make the task of building the delta into an international urban agglomeration as part of the country's urbanization efforts achievable.

The formation of a city cluster could maximize the scale effect of industrial production and precipitate a consumption-driven economy, Zuo said. Shanghai obviously would play a vanguard role in leading the development of surrounding areas, just like Wuhan has become the beating heart for the economic circle of central China, she added.

With an unprecedented integration of the region on the way, policymakers have pledged to remove administrative barriers hindering the free movement of the workforce and production materials within the region. In another move, a regional high-speed rail network is taking shape with a plan to build three intercity lines, namely, the Shanghai-Nanjing Railway, Nanjing-Hangzhou Railway and Shanghai-Hangzhou Railway. Nanjing and Hangzhou are the capital cities of Jiangsu Province and Zhejiang Province, respectively.

Yang Xiong, Executive Vice Mayor of Shanghai, said the 2010 Shanghai World Expo would be a long-awaited catalyst for the delta region to power ahead.

"Since the U.S. economy is expected to bottom out in 2009, the expo is expected to further provide us with more recuperative power to regain lost ground," he said.