The Characteristic Of Regional Market Integration And Regulatory Barriers

Regional economic integration is an important regional development strategy in our country during the stage of the transition and upgrading of the economic system. The third Plenary Session of 18 th CPC Central Committee pointed out, to "build a unified and open, competitive and orderly market system", and to "clean-up and abolish all kinds of regulations and rules that hinder the unified national market and fair competition". At present, China has not yet to eradicate the national market segmentation. In some regions and industries, this problem is still very serious. The economic loss resulted by market segmentation is about 2.5% of GNP(Harberger,1959). Therefore, eliminating the market segmentation and building a unified market, is the new power to release the vitality of the market and to promote economic growth.With rapid development of this new round regional economic integration, Beijing-Tianjin-Hebei Economic Zone, Yangtze River Delta, Pearl River Delta, Zhong Yuan Mega-Region, Cheng-Yu Economic Zone and other Economic Zones have been developing rapidly. Therefore, the regional economic development of Shandong province faces great competitive pressure. In addition, the economic development of Shandong province preaches sealing characteristics. Not only there is market segmentation between Shandong and its surrounding provinces, but also there is a big split between the provincial inside market. Therefore, it is urgent to promote the development of economic integration of Shandong and its surrounding provinces(for convenience, referring to this region as the "Shandong Economic Circle"). The integration of this economic circle not only can improve the overall interests of Shandong and its neighboring provinces, but also can make the region become a new growth pole of China’s regional development strategy and boost China’s connotation development.The protection of the local interests and the excessive intervention to the economic development by the local government is an important cause of market segmentation. For example, some local tax policy and regulations that privilege local enterprises and discriminate against nonlocal enterprises in Shandong and other provinces making the production investment in Shandong have a characteristic of a certain degree of closure, which also contributed to the market segmentation between Shandong and the other provinces. Hence, Only breaking the local protectionism, fighting against monopoly and unfair competition, strengthening the construction of policy mechanism can promote the integrated development of the Shandong Economic Circle. Therefore, the study on the integration issues of Shandong Economic Circle mainly includes the following there aspects, with a view of providing some new ideas and strategies of the development of regional economic integration.Firstly, examining the economic circle integration features. Based on the theory of Optimum Curreney Areas, applying the the “Iceberg Transportation Cost” model and the panel cointegration method, this paper measures the integration degree of good, financial and labor markets and the integration level of production. It is found that, firstly, the degree of integration of various markets(but the level of integration gradually increases) is low, and the degree of integration of factor market is lower than the good market. Secondly, about the degree of integration, there is a big difference between the sub-regions in the economic circles, such as the good market integration level of Shandong province is lower than and Beijing-Tianjin-Hebei and Yangtze River Delta. Thirdly, there is market segmentation between various regions. Such as Shandong province, the level of market integration between Shandong and its surrounding provinces is low, namely, there exists market segmentation among these provinces. And the provincial inside market is also split, especially between the eastern coastal region(Qingdao as the center) and the western inland region(Jinan as the center).Secondly, identifying the regulatory barriers that hinder the development of competition and integration.The main cause of resulting in market segmentation is the regime barrier. Thus, this paper firstly assesses the institutional environment for economic integration. The result shows that, in this economic circle the burden of market regulation is heavy, especially on the non-manufacturing sector, and the business environment and trade facilitation are also need improvement. In addition, as for these three aspects, there is a big gap among the provinces in Shandong Economic Circle. Basically, Jiangsu, Zhejiang, Shandong and other eastern coastal provinces are significantly better than the central and western provinces, which means there are many regulatory barriers among these provinces. Therefore, this paper next identifies various regulatory barriers that hinder the development of competition and integration.Regulatory barriers are mainly in the following three aspects:(1) Administrative division barriers. This is the first regulatory barriers, mainly reflected in some local protectionism policies, in which the inter-regional administrative monopoly policies are the main barriers, such as inter-regional tariffs and local regulations.(2) Administrative institutional obstacles. This kind of barrier mainly exists in the government’s main economic management measures- administrative examination and approval, and the main performance is that the government’s administrative examination and approval system is not efficient, and the approval procedure is cumbersome and complex. This not only wastes more manpower, material and financial resources, but also improves the enterprise compliance costs.(3) Regional coordination disorder. The main performances are inconsistent or duplicate regulations about the same economic activity in different regions. Especially concerning is that, with the deepening economic reform, some regulatory barriers are hided more and more subtler, and exist in the form of favoring of the public interest on the surface. Such kind of barriers are particularly needed to be studied and cleared.Thirdly, building a unified market and efficient market regulation.Based on a comprehensive study of the integrated feature of the main markets, the level of regulation and the institutional environment, this paper puts forward a series of new reform ideas and implementation strategies, and designs regulatory reform areas to build a seamless big market, including coordinating inconsistent regulations, establishing promoting competition regulations and improving capacity-building. In the process of promoting regional economic integration, the core is that all regulatory policies, regulatory mechanisms and regulatory tools are included in the legal framework. The rule of law is the most critical element to ensure the success of the construction of a unified market. In short, promoting regional economic integration is a huge project, all regions need to coordinate their planning and local conditions, play their own advantages, and comprehensively use the ideas and strategies of economic, legal, regulation, management and so on. And this way can effectively coordinate the development of all areas, and ultimately realizes the economic integration.