The Yangtze River Delta, -- an economic giant made up of 15 cities including Shanghai, Nanjing and Hangzhou -- has experienced phenomenal growth over the past decade, with Shanghai leading the race. Today, the Yangtze River Delta produces 23.5 per cent of China's industrial production and accounts for 17.2 per cent of the nation's GDP -- not bad for 6.2 per cent of China's population, working on 1 per cent of its land.

The Pearl River Delta (PRD) and the Yangtze River Delta (YRD) are China's strongest economic regions, and their economic prospects also make them the most appealing to investors. This is expected to continue as globalisation pushes down transportation costs, and economic integration magnifies the benefits of industrial clustering and economy of scale.

This is why both deltas are striving toward enhancing their cohesion. However, Hong Kong, Macau, Shenzhen and other cities in the PRD have not given the idea of economic integration much attention until very recently. The "One country two systems" principle has often been used as an excuse for the slow progress of integration within the PRD, but can we learn from how the YRD has gone about integrating the various economies in the delta?

Economic integration of the YRD began in the 1990s in line with the Central Government's plan to develop the area into an international economic hub to drive future growth of the delta. New York, London and Tokyo have successfully implemented such economic strategies in their development. For example, manufacturing activities surrounding Tokyo today account for one-fourth of Japan's total production. Shanghai is following this model and has been positioning itself since the '90s as a financial, services, information and technological development centre of the YRD.

With Shanghai leading the way under the careful co-ordination of the Central Government, massive infrastructure projects in the delta were launched, including Pudong Airport, and Yangshan Deep Water Port -- which is now under construction. Highways linking all the 15 cities in the YRD are also being constructed to shorten travelling times between cities within the delta. Once completed, the expanded highway network will abolish economic bottlenecks and further integrate the individual economic regions within the delta into one powerful trading bloc.

Getting individual municipal governments within the region to cooperate is not always easy, as each have their own views on how integration should move forward. Nanjing and Hangzhou support Shanghai's leading role, but others think a tripod model with Jiangsu, Zhejiang and Shanghai being the powerhouses would be more beneficial.

If the first model is adopted the roles of Nanjing and Hangzhou as municipal centres would most likely be absorbed by Shanghai, which might also improve the economic performance of the delta. The second scenario would most likely lead to equal status of administrative regions, but it could also create overlapping of basic facilities and competition between each other.

One thing is for sure, however, and that is that Shanghai is the main driver of the Yangtze River Delta, though this does not mean economic integration within the region is without its flaws. Mistakes have been made, but as long as the cities within the delta admit to those mistakes and learn from them, then the YRD will continue to grow. For example, Wang Yongming, Zhejiang vice governor told the Chamber delegation in September last year that he feels Zhejiang should have first built the Shanghai-Ningbo Highway, instead of the Hangzhou-Ningbo Highway, a move which has impeded the province's development.

All of the other 14 cities in the YRD view Shanghai as their regional economic heart, and are aware of the advantages they can gain from shortening the travelling time between the city. Ye Rongbao, Zhejiang deputy party secretary, told a Chamber delegation last month that Zhejiang has benefited a lot from having Shanghai as its leader. As a financial, logistics and information hub of the delta, Shanghai has provided tremendous opportunities for Zhejiang. Every year, the three cities organise a seminar on "Development of the Yangtze River" to help plan and co-ordinate their growth.

In addition to jointly devising macro economic policies, cities in the delta are also looking to integrate their industries. Planners are studying how the various municipal governments within the delta can facilitate such integration, though no concrete plan has yet been put forward. Developments in this regard are expected to be slow because each city is jockeying for funds from the Central Government and require enterprises from the other cities to pay double tax, which is aimed at protecting their local industries. Authorities in the delta are being urged to formulate policies to improve their co-ordination and to take advantage of each other's benefits.

Competing against each other will waste each city's resources, while too much intervention by the Central Government means going back to a planned economy. Market competition within the delta is beneficial in the sense that only the best can survive, which raises the overall competitiveness of the entire area. But to integrate their industries, municipal governments should open up their markets and provide macro guidelines for enterprises. Now that a market economy has been in place in the delta for some years, all regions within the Yangtze River Delta have firmly established their own industries.

Cities within the delta are also coming to realise that closer cooperation on environmental protection issues, and full utilisation of their travel resources will ensures a win-win situation for all. Jiangsu, Zhejiang and Shanghai have reached a consensus on protecting the environment with regard to repair and maintenance projects of Taihu, Yangtze River and Qiangtong River. Similarly, co-ordinated development of their rich tourism resources translates into a prosperous future.

The robust growth of the cities in the YRD over the past few years is proving that economic integration drives regional growth. Perhaps, Hong Kong can learn from the YRD and co-ordinate its efforts to enhance the PRD's infrastructure, free market economy, environmental protection efforts and tourism industry.