The world today is experiencing unprecedented changes in the past century. The resurgence of anti-globalization waves, significant escalation of geopolitical friction, and outbreaks of several wars and military conflicts have all greatly impacted the peaceful and cooperative world that has long been established under the process of globalization. The fragmentation of market space, severe obstruction of free trade, and the forced restructuring of the global supply chain have brought considerable uncertainty to the world economy and the Chinese economy.
Uncertainty implies potential risks, and this signifies that established development models are being overturned. As a result, the familiar globalization systems are being deconstructed, and the rules that were once collectively followed are being abandoned. When certainty decreases and uncertainty increases considerably, old rules are disrupted, new rules are yet to be established, and markets inevitably feel disoriented to varying degrees, sometimes even losing their sense of direction.
In the case of China, faced with the uncertain major changes in the world, rationality will be a necessity in its determination, particularly in its reform and innovation, and strive for development under constrained conditions.
For local economic development, the role of leaders as pacemakers is crucial. Especially when the overall development situation for China is unfavorable, local leaders need to maintain clear understanding, firm determination, and clear direction. The role of leaders is to lead the team, rally consensus, break through obstacles, and achieve development goals. A local official in the Yangtze River Delta region aptly concluded that it is necessary to "reform and open up new paths, innovate and seek truth, be practical and diligent, and strive for progress".
The courage for development and the choice of direction cannot be separated from scientific judgment and rational analysis. It is essential to have a timely perception of the changing situation to gain profound insights into the direction of future development.
During the tracking research of the development of the G60 Science and Innovation Corridor in the Yangtze River Delta, the local officials' clear understanding of the changes in the development environment and rational judgment left a deep impression on the researchers of ANBOUND. In 2020, when the anti-globalization trend was rising and the COVID-19 pandemic began to impact China and the rest of the world, Cheng Xiangmin, the CCP secretary of Shanghai's Songjiang district, clearly realized the systemic changes in the situation. Faced with the rapidly increasing uncertainty of the overall environment, Cheng proposed the "three hedges" approach as the mainstay of the development of the G60 Science and Innovation Corridor. The so-called "three hedges" refer to the uses of "domestic development certainty to hedge against the international environment uncertainty, industrial and innovation chain’s integrity against the uncertainty of global industrial changes, and the precision of institutional supply against market uncertainties".
In our view, this approach has very practical guiding significance and valuable references for many local governments in China.
Firstly, in the concept of "domestic development certainty to hedge against the international environment uncertainty”, from the perspective of the development reality of politics and economics, the changes in the external environment and the increase in uncertainty are external factors that China cannot control. What the Chinese individual, regional, national, or institutional entities can do is enhance their understanding of external uncertainties and strengthen the certainty of their development that is more controllable or manageable. This can help to weaken the impact of uncertainty brought about by the external environment.
The second concept is utilizing "industrial and innovation chain’s integrity against the uncertainty of global industrial changes " The current wave of deglobalization and geopolitical turmoil has led to systematic disruptions in the economy, particularly impacting industrial and supply chains. Trade barriers and geopolitical tensions constructed by the U.S. and its allies have exacerbated the "decoupling and disruption" to some extent, leading to a major adjustment in the global industrial landscape and hindering the flow of innovative elements such as technology and talent. At the core of this industrial restructuring is the forced reconstruction of global industrial and supply chains. In the face of such systemic adjustments, maintaining the integrity of the industrial and innovation chains has become a key lever for ensuring the stability of economic and industrial development. Looking back on the development of recent years, it is evident that preserving the integrity of the industrial and innovation chains is crucial to addressing the issues at hand. This is consistent with the central leadership's repeated emphasis on "enhancing the collaborative level of the industrial chain and innovation chain"
Finally, there is the use of “the precision of institutional supply against market uncertainties”. The development of technology and economy is not just the aggregation of hard elements; institutional factors play a crucial role. As a matter of fact, the success of China's reform and opening up over the past forty years has largely benefited from institutional changes, which have provided institutional space, mechanism space, and improved incentives. From the perspective of public policy, the so-called "reform and opening up" targets institutional change and optimizes institutional supply. Facing market fluctuations brought about by deglobalization and geopoliticization, and uncertainties in industrial and supply chains, improving institutional supply through reform and innovation is one of the best safeguards for China in reducing uncertainties for the development practices like the Yangtze River Delta G60 Science and Innovation Corridor.
ANBOUND has been advocating field research for the past 30 years, attaching great importance to the best practices from grassroots development. From our observations, in Shanghai's Songjiang, the origin place of the Yangtze River Delta G60 Science and Innovation Corridor, its development process since 2016 has coincided with two major shifts in the broader context: China gradually shifting its development focus towards high-quality development, and the global shift towards deglobalization and geopolitical friction reshaping the world. In this process, the G60 Science and Innovation Corridor has evolved from a specific local practice to attracting participation from nine cities in the Yangtze River Delta region, ultimately becoming a national development strategy and plan—incorporated into the integrated development strategy of the Yangtze River Delta and China’s 14th Five-Year Plan. This cannot be separated from the local foresight in development philosophy and timely adjustments to respond to environmental changes.
Final analysis conclusion:
From a public policy perspective, the "three hedges" strategy not only represents a proactive attitude in the face of adverse environmental changes but also serves as a development strategy to address uncertainties. It is also a method for overcoming difficulties, seeking change against the trend, and coping with challenges. The initial proposal of this strategy in Songjiang was motivated by the desire to cultivate an industrial chain ecosystem to create a magnetic effect, while simultaneously effectively handling COVID-19 measures and maintaining economic-social operations. However, in light of the development of the situation, such a strategy holds strong guiding significance for both current and future local or even national economic development in China.
