Coping with new challenges in regional development | "Finance" editorial

Following the central government's initiation of a new round of real estate policy adjustments, various regions are actively implementing these measures, leading to a general trend of stabilization and improvement in the real estate market. Given time, real estate is expected to shift from being a drag on investment to once again becoming a driver of investment. However, considering the vastness of China and the differences in development status across regions, the real estate market will not experience uniform conditions nationwide. For the present and the foreseeable future, it is essential to pay attention to the divergence in the trends of real estate markets in different areas and at different levels, as well as the potential impact of these trends on the coordinated development of regional economies, in order to prepare contingency plans and respond more securely.

In the new round of policies aimed at supporting the real estate market, the proactive involvement of bank and fiscal funds in the collection of housing resources and the facilitation of the smooth completion of real estate projects have attracted attention. When market confidence is lacking, it is necessary for the government's visible hand to play an active role in lifting the market.

In this process, the differentiation of real estate markets across regions may accelerate. First-tier and new first-tier cities, which have relatively smaller real estate bubbles and are financially stronger, making them easier to manage, will likely see an increase in their attractiveness. The relaxation of restrictions and the provision of preferential measures in these markets will also divert housing funds, exacerbating the relative oversupply in third- and fourth-tier cities.

In terms of cooperating with the government's collection of market housing, bank funds also clearly favor first-tier and new first-tier cities due to the corresponding demand for housing, shorter cost recovery cycles, and lower required risk provisions. The increased introduction of public rental housing and talent apartments, as well as the further advancement of policies that promote equal rights for renters, along with the relatively sufficient employment opportunities and ample entrepreneurial prospects in these cities, will undoubtedly create new attractions for mid-to-high-end talent and young people. This, in turn, will lead to a more optimistic outlook on the development potential and prospects of first-tier and new first-tier cities, thereby enhancing the quality of their real estate markets.

On the other hand, some third- and fourth-tier cities, and even some second-tier cities, are currently in a state of having relatively more real estate bubbles, a tendency towards overcapacity, and a relatively larger aging population. The current round of relaxation and support for the real estate market may intensify the differentiation, potentially making it more difficult for these cities to absorb existing real estate inventory. This could have certain impacts on the flow of talent, the cultivation of subsequent economic growth drivers, and the internal momentum of these cities. Moving forward, these cities may face new challenges and pressures in the development of new industrial tracks, the resolution of local debt, and the prevention of systemic risks in the financial sector.

In light of these challenges and pressures, relevant departments should increase the transfer of central fiscal funds to third- and fourth-tier cities to ensure the protection of basic needs, helping them better cope with various contraction effects, achieve a soft landing in real estate, and digest the overcapacity in related industries, thereby maintaining the momentum and potential for local economic growth and social development.

Furthermore, after the boom of the last real estate cycle and the transfer of industries, new ideas are needed for the development and enhancement of the blood-making functions of third- and fourth-tier cities in the coming period. On one hand, they cannot passively wait for the spillover effects of the new round of development centered around new quality productive forces in coastal areas, as this could lead to falling into the old trap of accepting mature industries and then experiencing internal competition. On the other hand, they must avoid blindly developing new tracks without sufficient financial resources and patient capital to prevent the accumulation of new debt and risks.In the process of building a unified national market, it is essential for Chinese-style modernization to prevent the widening of regional development disparities. Therefore, expanding the scope and intensity of transactions for some production factors, such as land use quotas, can to some extent increase the support from developed areas to developing regions, which is a viable solution.

Cities and regions in the third and fourth tiers can also leverage their own industrial advantages and resource endowments to engage in new forms of industrial chain cooperation with coastal areas. Instead of striving for a complete industry, they can focus on excelling and strengthening a particular link. For instance, it is not necessary for all to develop the entire new energy vehicle industry; excelling in a specific segment may be easier to achieve a comparative competitive advantage.

Furthermore, the role of market capital should be better utilized to develop characteristic industrial counties and cities. Practice has proven that market capital is more sensitive and precise in capturing demand, seizing business opportunities, and allocating resources. The vigorous development of characteristic industrial counties and cities with their own internet celebrity effect, such as Cao County in Shandong, fully demonstrates this point.

In the service industry, third and fourth-tier cities and regions can also expand small and beautiful characteristic tracks based on different cultural and tourism resource endowments. Currently, due to the large infrastructure and urbanization of previous years, the accessibility and service availability of third and fourth-tier cities are not a significant issue. What is needed now is the refinement and upgrading of services, which requires local governments to introduce more favorable policies to guide the return of talent in the service industry.

Recently, there have been news reports of elderly people selling their homes in big cities to retire in smaller cities. This two-way flow of resources is very valuable. However, the implementation of projects like health and wellness towns requires financial support, policy inclination, and a tilt of various soft resources in science, education, culture, and health at the central level. For example, the national networking and convenience of medical reimbursement, and the allocation of medical resources not based on the administrative level of the city but more on market demand. For social capital in healthcare, while emphasizing public welfare, how to compensate in an appropriate manner, etc.