Chengdu-Chongqing Economic Circle: Objectives and Planning Rationales

The Master Plan for the Construction of the Chengdu-Chongqing Economic Circle (Master Plan) issued by the CPC Central Committee and State Council in October 2021, identifies Chengdu, 27 districts (and counties) in Chongqing, and 14 other Sichuan cities as the “Chengdu-Chongqing Economic Circle”. Covering an area of 185,000 sq km, the Economic Circle has a population of over 96 million and a GDP of over RMB7 trillion. As a huge market in the hinterland of China’s western region, it has great significance in promoting the country’s dual circulation development paradigm.

This article is the first of a four-part series on the Chengdu-Chongqing Economic Circle compiled by the HKTDC Research’s Greater China team to give the business community a better idea of this new plan. The series examines the development direction and recent progress in the Economic Circle in four respects, namely (1) objectives and planning rationale, (2) manufacturing industries and scientific research, (3) service industries and logistics and (4) consumer market and social development. It also features industry expert and academic institution interviews. This article introduces the Master Plan and analyses its guiding principles and planning rationale from a macro perspective.

Guiding principles

Construction began after a decision by the Central Committee for Financial and Economic Affairs at its 3 January 2020 meeting to build the Chengdu-Chongqing Economic Circle into an important growth pole for high-quality development. Five principles of “high-quality development” are stated in the Master Plan as follows:

These principles clearly show that the central government emphasises balance and connectivity in developing the Chengdu-Chongqing Economic Circle. While allowing all cities within the Economic Circle to give full play to their own advantages, the central government is also trying to strengthen the channels of mutual co-operation and smooth communication. Chongqing is intended to become a national advanced manufacturing centre, western China financial centre, western China international transport hub and international gateway hub. Downtown Chongqing is also going to embark on urban-rural integration with districts in western Chongqing, such as Bishan, Jiangjin, Changshou and Nanchuan.

Designated as a garden city demonstration area¹, Chengdu will capitalise on its advantages of high-quality living and upgrade its capability in the planning and management of international and domestic high-end factors to build a regional economic centre, science and technology centre, world cultural city and international gateway hub. It will also join hands with the neighbouring cities of Deyang, Meishan and Ziyang to build the Chengdu-Deyang-Meishan-Ziyang integrated development pilot zone. Northeastern Chongqing and northeastern Sichuan will also promote integrated development, while southern Sichuan and western Chongqing will step up integrated urban-rural development. The city clusters of Chongqing and Chengdu will be closely linked by a transport network formed by the Chengdu-Chongqing north line, central line and south line.

Positioning, goals and government’s role

The Master Plan envisages the Economic Circle becoming an important economic centre with national influence, as well as a technology and innovation centre, a new centre of excellence for reform and opening-up, and a high-quality liveable place with national influence. This positioning is very important for Economic Circle development. Chengdu and Chongqing are said to have lagged behind in the past in terms of economic development due to accessibility and other issues. The positioning promoted in the Master Plan suggests that the Chengdu-Chongqing region will have a decisive role to play in China’s economic, technological, livelihood and opening-up development in future.

In terms of development objectives, the Chengdu-Chongqing Economic Circle aims to build itself into a strong twin-city economic circle with distinctive characteristics by 2035. Besides joining the ranks of cosmopolitan cities and fully developing their leading position as world-class advanced manufacturing clusters, the urban system of co-ordinated development in large, medium and small cities within the Economic Circle will also be further improved. Infrastructure connectivity is expected to greatly enhance the livelihood of local people. In order to achieve these objectives on schedule, the Chengdu-Chongqing Economic Circle plans to achieve major progress in the following areas by 2025:

The central, Chongqing municipal and Sichuan provincial governments will work closely together to implement the planning principles and development objectives. The Master Plan points out that the Chongqing municipal and Sichuan provincial governments bear primary responsibility for constructing the Chengdu-Chongqing Economic Circle. The two governments will discuss plans and carry out various tasks through mechanisms such as the Chongqing-Sichuan joint party and government meeting. They will also map out their own plans for city clusters development. The central government will strengthen communication with the Chongqing and Sichuan governments, and will take responsibility for formulating Economic Circle land and spatial planning, as well as implementation plans for the multi-level rail transit system, comprehensive transport development, construction of the western China financial centre and technology and innovation centre, ecological and environment protection, the Bashu Cultural Tourism Corridor, and so on.

Up to April 2022, the central government has released a comprehensive transportation development plan, a multi-level rail transit plan, a western China financial centre plan, ecological and environmental protection plan (Chinese only) and other directives. The Chongqing-Sichuan Party and Government Joint Meeting has also met four times, with the participation of party committee secretaries, the Sichuan governor and mayors of Chongqing and other cities.

Planning rationales

Chongqing was a key city in Sichuan province prior to becoming a municipality directly under the central government in 1997. Over the years it has maintained a steady working relationship with the Sichuan provincial authorities. Why did the central government decide to build the Chengdu-Chongqing Economic Circle? How can the deepening of co-operation between Chongqing and Sichuan through the Economic Circle promote development in these two places, and in the country as a whole? What is the connection between the Master Plan and the country’s 14th Five-Year Plan? Answers to these questions can probably be found through an analysis of China’s plans for city clusters, dual-circulation development, and integration of industries and resources.

1. City clusters

For many years China has sought to achieve economic growth through increasing the concentration of industries and population in cities, in particular large cities. Data from the seventh national population census in 2020 shows that Chengdu, Shenzhen and Guangzhou are the three fastest-growing cities. In 2020, Chengdu had a permanent population of 20.94 million. The city’s permanent population rose by 5.82 million during the 10 years between 2010 and 2020. The proportion of Chengdu’s population in the province also increased to 25.02% from 18.80% in 2010.² A similar situation is found in the central districts of Chongqing. In 2020, Chongqing’s permanent population increased to 32.05 million from 28.85 million in 2010, with 32.3% of its permanent population living in the central districts.³ Compared with 2010, the share of permanent population living in Chongqing’s central districts increased by 6.42 percentage points by 2020.⁴

Although the demographic dividend helps fuel growth in big cities' industries and consumer markets, it also leads to many problems. While an influx of people brings heavy pressure to bear on housing supply and livelihood facilities in big cities, industries in the surrounding cities and regions also lose competitiveness due to population loss. In view of this, the central government has been actively promoting new urbanisation in recent years. According to the 14th Five-Year Plan, new urbanisation is a principle that aims to promote the co-ordinated development of large, medium and small cities and small towns that make up city clusters and urban agglomerations, while helping local characteristics thrive. Large cities are able to sustain vitality in the surrounding small and medium-sized cities by using their own leading position to assist development in the latter. Large cities also have more room to nurture high-tech industries and resolve the problems of population surplus and insufficient room for industrial development.

As the Master Plan points out, the Chengdu-Chongqing region has problems, including “having obvious bottlenecks in infrastructure, not-so-desirable urban scale and structure, industrial chains that do not have a high degree of division of labour and co-ordination, weak supporting power for technology and innovation, big gaps in urban-rural development, arduous tasks of ecological and environmental protection, and deficiencies in livelihood supplies”. The new urbanisation development principle is key to solving these issues.

In order to implement this principle in the Economic Circle, the Master Plan points out that Chongqing and Chengdu will strengthen the leading role of central cities through the development of modern services and advanced manufacturing industries to spearhead the overall planning and co-ordinated development in the region. Other cities will upgrade their industrial level in order to host trades relocated from Chongqing and Chengdu, as well as take over some of the twin cities’ functions, so forming a foundation to develop their own real economy. Moreover, the Chengdu-Chongqing region will encourage enterprises to tap the unique business opportunities of all cities within the Economic Circle by actively developing the private economy and harmonising the standards and procedures of government services.

2. Dual-circulation development

According to the dual-circulation development paradigm put forward in the 14th Five-Year Plan, China will strengthen the domestic market and continue to open up (For a detailed analysis of the dual circulation development strategy, see China’s 14th Five-Year Plan: Key Policies). The Chengdu-Chongqing region is well qualified to be a dual circulation hub. First, the area is fairly strong economically. The per-capita GDP reached RMB86,879 in Chengdu and RMB94,622 in Chongqing during 2021 (the per-capita GDP of Sichuan province as a whole was RMB64,326). The economic scale and potential of the Chengdu-Chongqing region will contribute to building a strong domestic market. As the Master Plan points out, the Chengdu-Chongqing region has “become an important engine for economic and social development, promotion of ecological civilisation, reform and innovation, and opening-up in China’s western region.”

Meanwhile, the Chengdu-Chongqing region is one of the hubs linking domestic and international markets. In 2021, the freight trains of China-Europe Railway Express (Chengdu-Chongqing) made more than 4,800 trips, accounting for over 30% of the national total.⁵ Goods can reach the Chengdu-Chongqing region via roads, domestic rail and Yangtze waterways for export to Asia and Europe via international railways. Goods produced here can also be exported by sea through Guangxi’s Beibu Gulf, Hainan’s Yangpu port and other places. Through a much-improved network of rail, roads and waterways, the advantages of the region in connecting with Southeast Asia, South Asia, Central Asia and Europe are gradually emerging.

These conditions make the Chengdu-Chongqing region an ideal place for strengthening domestic and international circulation on the mainland. Besides becoming an important outpost for China’s goods and services trade with foreign countries, the region can also attract more technologies and investment to the country. This is of vital importance, not just for the region’s own industrial upgrade. By opening the region to the outside world, China can build a huge western market, thereby narrowing the gap between the western and coastal regions. Thus, the Master Plan points out that the Chengdu-Chongqing region will optimise the Chongqing Liangjiang New Area, Tianfu New Area in Chengdu and other major industrial platforms and fully implement the pre-establishment national treatment, plus negative list management system for foreign investment. The region will also speed up the construction of bilateral co-operation parks with Germany, France, Switzerland, Italy and other countries in various parts of Chongqing and Sichuan, as well as promoting the China-Singapore (Chongqing) Demonstration Initiative on Strategic Connectivity and the China-Japan (Chengdu) Regional Development Co-operation Demonstration Zone. These measures will greatly improve the region’s opening-up.

3. Integration of industries and resources

Chongqing and Sichuan (especially Chengdu) have similar industrial structures. According to Chongqing Statistical Yearbook 2021 and Chengdu Statistical Yearbook 2021, computers, communication and other electronic equipment account for the largest share of gross industrial output in both places. Revenue from these industries accounted for 24.3% and 29.1% of the respective gross industrial revenues in the two cities during 2020. Their services sectors are also similar in size. The financial markets of both cities were worth more than RMB200 billion in 2020, with an output value accounting for 8.9% and 11.9% of their gross output respectively. Processing trade plays a dominant part in their foreign trade, accounting for 64.0% and 65.5% of total exports from Chongqing and Chengdu respectively in 2020.

The above analysis shows that better co-operation between Chongqing and Sichuan can help reduce competition, integrate resources and increase economies of scale. While boosting the position of the Chengdu-Chongqing Economic Circle in the domestic and international markets, this makes it possible to focus resources on tackling weak spots in the industrial chain, such as low levels of division of labour and collaboration, and weak support for technology and innovation. It also enables helping the Chengdu-Chongqing region promoting transformation and upgrade in the processing trade, and the development of scientific research and advanced manufacturing outlined in the 14th Five-Year Plan. The promotion of reforms in key areas across the Chengdu-Chongqing Economic Circle further facilitates administrative procedures to help retain more talent in the region.

The integration of resources is not restricted to industrial sectors, but may be extended to natural resources and energy. Since the Chengdu-Chongqing region lies in the upper reaches of the Yangtze River, the Master Plan specifically points out that the Economic Circle must place the utmost importance on restoring the Yangtze River basin environment and urges Sichuan province and Chongqing municipality to promote joint ecological development and protection and strengthen cross-boundary collaborative pollution control. As for energy, the Chengdu-Chongqing region is a major producer of hydroelectric power. It is also a major natural gas producing area. The Master Plan calls for efforts to steadily promote development of the Jinshajiang, Yalongjiang and Daduhe hydropower bases, optimise electricity resources allocation in Sichuan and Chongqing, retain part of the electricity generated by the Baihetan Hydropower Plant for consumption on the Sichuan-Chongqing power grid, and building 100 billion cubic metre capacity natural gas bases. The above measures will not only protect the ecological environment in the region and ensure energy needs for industrial development, but can also make contributions to China’s green development and energy security.

Takeaways for Hong Kong Businesses

The promulgation of the Master Plan to develop the Chengdu-Chongqing Economic Circle into an important economic centre with national influence, a technology and innovation centre with national influence, as well as a new centre of excellence for reform and opening-up and a high-quality liveable place, shows the central government’s determination to promote the high-quality development of the western region and the balanced development of the whole country. Compared with the western region development strategy in force for many years, the Master Plan has aspects of both breakthrough and continuity. For breakthrough, the Chengdu-Chongqing Economic Circle will boost high-level industrial development and opening-up through the linkage of Chongqing and Chengdu and their surrounding cities, making the region a model for western region development, as well as one of the frontiers of the Belt and Road Initiative. However, the Master Plan is also the continuation of the western region development strategy, in that it seeks to achieve balanced improvement of the whole country through high-quality development in the western region, with efforts to improve its living standards and industrial level.

When trying to understand the content of the Master Plan, Hong Kong businesses should pay attention to the role of the Chengdu-Chongqing region in helping the country reach various economic and social development targets and opening to the outside world, besides focusing on the region’s increasing economic power. They may also study how the unique geographical position, industrial structure and energy mix in the Chengdu-Chongqing region can help their long-term development.

The Hong Kong Special Administrative Region (HKSAR) government has stepped up co-operation with its Chengdu-Chongqing counterparts in recent years. The first plenary session of the Hong Kong-Sichuan Co-operation Conference in May 2018 established a platform for long-term and high-level co-operation between the two sides. In September 2021, the HKSAR Government and the Sichuan Provincial People’s Government signed the Memorandum of the High-Level Meeting cum Second Plenary Session of the Hong Kong-Sichuan Co-operation Conference (Chinese only) and other documents covering 12 areas, including finance, logistics, innovation and technology, culture and education. The HKSAR Chief Executive also visited Chongqing that month. Thanks to the strong support of the Chongqing, Sichuan and Hong Kong governments, the Chengdu-Chongqing Economic Circle should bring increasing opportunities for Hong Kong businesses.

¹ On 16 March 2022, the National Development and Reform Commission, Ministry of Natural Resources and Ministry of Housing and Urban-Rural Development jointly released a notice on issuing the general plan for Chengdu building a garden city demonstration area by adopting new development concepts. (Fa Gai Gui Hua [2022] No. 332)

² Source: Sichuan Provincial Bureau of Statistics

³ Chongqing’s nine central districts are: Yuzhong, Dadukou, Jiangbei, Shapingba, Jiulongpo, Nan’an, Beibei, Yubei and Banan.

⁴ Source: Chongqing Municipal Bureau of Statistics

⁵ Source: Chongqing Municipal People’s Government