ìChinese Provinces Form Regional Economic Bloc: Beijing Backs Move to Lower Barriers,î by Keith Bradsher, New York Times, 2 June, p. W1.
The leaders of nine provinces and two special administrative regions in booming SE China announce theyíre setting up a regional trade bloc within China. Itís population will rival the EU all by itself!
Why necessary? For the longest time, the provinces in China have acted almost like mini-states in terms of trade, with lots of barriers. In many ways, China is closer to a confederation economically than a unitary state (something it comes far closer to being in terms of politics).
This is China synching its internal rule sets on trade with the emerging global rule set. Huang Zhiquan, one provincial governor, puts it baldly: ìToday, weíve produced regional cooperation to match the global trend . . . Weíll try to eradicate unreasonable interferences and market barriers.î
For centuries, Beijing has discouraged such cooperation, fearing rival centers of power, and since the end of the Cold War, many experts on China were predicting the opposite: that these booming provinces would seek to distance themselves from one another and the rest of China.
Shiu Sin-por, a Chinese economic expert, said that this level of cooperation ìwas unimaginable 10 years ago, both in terms of the politics and economics.î
Why is Beijing letting this happen? A big but little noticed overhaul of the tax codes in China during the 1990s created a host of federal taxes that makes Beijing confident of its ability to draw revenue from the provinces, which, up to then, were the main tax collectors in the system.
Rules baby! Connectivity! Integration!
And another sign that the worst-case scenario of China melting into civil war following an economic meltdown is fading away with each year.