Inter-provincial regional cooperation in China: a case study of Pan-Pearl River Delta cooperation

Abstract

Since the beginning of the 21st century, regional development has become one of the most vital economic issues in China. Both central and local governments in the nation have implemented policies to reduce regional economic disparities and promote regional integration. On the one hand, the central government has exercised policy and political control to promote regional development. On the other hand, local governments have sought opportunities to foster local economic prosperity by forming more competitive economic blocks with neighboring jurisdictions. In particular, growth poles like the Yangtze River Delta (YRD) and Pearl River Delta (PRD) have been very active in promoting regional integration and cooperation as they need the support of other hinterlands for further development.

Literature review indicates that regional cooperation in China is subjected to the influence of both economic and political factors. Although it seems that there is interaction between such economic and political factors. However, there is a general lack of a comprehensive framework to examine regional cooperation in China from a political and economic dynamic perspective.

In order to fill the gap, two game theory models are developed to analyze economic and political incentives for government officials in the context of regional cooperation. The first model attempts to determine the important economic factors that may affect the feasibility of a cooperative project, assuming local government officials are maximizing the absolute economic performance of their jurisdictions. The second model focuses on understanding how the political relationship between provincial leaders may affect regional cooperation between them, assuming local government officials are maximizing the relative economic performance of their jurisdictions. A game theory framework to examine the economic political dynamics of regional in China is developed based on these two models. The game theory analysis reveals that incentives for provincial government leaders to implement cooperation are decided by the consideration of their political career, which is driven by three major forces: central-local government relationship, inter-local government relationship and the potential economic benefit from regional cooperation.

Pan-Pearl River Delta (Pan-PRD) Cooperation, a typical inter-provincial cooperative project established in the 21st century, is used as a case study to theory framework. The empirical study indicates that the emergence of Pan-PRD Cooperation benefited from three perspectives: (1) policy support from the central government, (2) uneven political relationship between provincial leaders in Guangdong and other eight provinces, and (3) strengthened economic interaction between Guangdong and other eight provinces.