According to Chen, the latest redundant construction differs from previous ones as it is shifting to hi-tech industries represented by IT, new materials and biopharmaceuticals. A tide of construction of hi-tech parks is sweeping the country. There are at least dozens of “Chinese silicon valleys.” In the Yangtze River Delta alone, there are three “silicon valleys” with different names: in Shanghai, Hangzhou and Suzhou.

According to Zhou Yiren, a deputy division chief in the Department of Regional Economy under NDRC, as redundant construction increases, supplies of raw materials become inadequate, leading to mass purchases and an oversupply of raw materials. In the end the products produced by processing industries become superfluous. When the market for related products is saturated, sales stagnate.

In order to relieve competition pressures, companies have to appeal to local governments. To sell local products and prevent economic decline, officials of local governments begin to shut out products from other places, leading to local protectionism. This is inevitable after regional economic conflicts develop.

“This has severely hurt overall national and regional economic development,” Zhou continued.

Because of local protectionism, implementation of the environmental protection law becomes a big challenge, said an official of the State Environmental Protection Administration. Local officials often adopt measures that block punishment of companies causing environmental problems, fearing that punishing or closing these companies could drive local GDP down.

“Regional economic conflicts touch off vicious competition, foster the spread of local protectionism, destroy harmonious relations among different regions, lead to fluctuations in the macroeconomy and convergence of inter-regional industrial structures and, at the same time, restrict improvement of corporate efficiency,” said Zhang.

Facing the challenge

NDRC said on April 10 that the National Office for Promoting the Rise of Central China had been established. Besides formulating preferential policies for development in six central provinces, the office will also promote coordinated development in central China in order to avoid “redundant construction with horrible results.”

Zhang agrees with the establishment of the office. “I think there should be such an institution responsible for coordinating regional cooperation and conflicts,” he said.

But he also contends that the institution should be under direct leadership of the State Council rather than NDRC. In Zhang’s opinion, the Central Government does attach importance to regional economic conflicts, but has not had workable management measures in place to deal with them.

Others hold the same opinion as Zhang. On almost every occasion when discussing regional economic development, there are appeals calling on the State Council to establish an institution for coordinating internal economic development within various regions.

Gao Huiqing, a division chief of the State Information Center, said that at present, setting up an effective coordination mechanism is the best way to resolve regional economic conflicts.

According to Gao, it is unrealistic to expect that no redundant construction would occur in different regions. Since all localities are at the stage of accumulating resources and considering their own benefits, it is inevitable that there are conflicts in regional economic development.

In his opinion, regional economic conflicts can be effectively alleviated through breaking down regional and departmental barriers. He said that different regions should unite, giving priority to mutually beneficial, supplementary and optimized industrial structures. With effective coordination mechanisms, chain reactions in the planning of industries, markets, transportation and other policies among different cities and regions can be promoted. The joint development of regional economies can be promoted by integrating regional resources and readjusting regional industrial structures, he concluded.