EDITOR'S note:

This is part of the author's series on the yin (software) and yang (hardware) of a city that began to appear in Shanghai Daily last October.

PRECEDENTS in history should invite people to tread a novel course. With "chartering" as witnessed in the cases of Philadelphia, Hong Kong, Lübeck and Shenzhen, the process of urbanization would become shortened and less painful.

Though many would see it as a flight of fancy, let's imagine that Raul Castro outsources a big chunk of land (the less occupied the better) to a foreign institution of high credibility (the Canadian government could be a good candidate) as a guarantor to coordinate the development of a new charter town.

The cornerstone of desirable governance lies in the set of rules of yin: how to share contributions and consequences according to the rules and mechanism laid out in advance.

Cuba and neighboring regions would provide labor for enterprises funded by international investors. The consortium thus formed will enable a jump start to the modernization which Cuba is seeking after so many years of stagnation.

This unconventional line of thought in urbanization was rediscovered by Paul Romer, a scholar of economics widely known for searching for technological innovations to raise productivity. Romer initiated the idea of contemporary charter cities and integrated the approach. So enthusiastic is he that he gave up his position as a chair professor at Stanford University and an offer from the IMF to be its chief economist to devote himself to the pursuance of the charter city.

Romer believes the charter city could serve as a booster in lifting developing countries out of poverty and alleviating the gap in distributive injustice facing the world.

Models

In Romer's design, the charter cities need three key roles: host, guarantor, and resource, wherein the host provides open land; the guarantor designs and enforces a charter: a set of rules governing the implementation; and the resource on the other hand brings labor, funds, and various capacities.

The charter is the cornerstone to the whole construction. It generates proactive expectations and facilitates transaction expansions in the long run. On the foundation of charter the detailed implementations will be specified and carried out in a context-dependent manner.

In the moot case of a charter city in Cuba as described above, the guarantor could be performed by Canada, probably with the aid of Germany or France. In addition to the role of host, Cubans (and neighboring Hondurans, Dominicans and Jamaicans) will be the sources of labor. Investors from all over the world might participate with capital, techniques, management, and markets.

While the Romer model is conceptually innovative and practically implementable, it has a drawback reminiscent of the bad omen of neo-colonialism, which is deeply despised by the world at large and the people in underdeveloped nations in particular.

Romer's model of a charter city, nonetheless in my view, can function well within a sovereign country, eg China.

When the three key roles are performed by regions of different growth stages, the resistances of politics and criticisms of ideologues will then be neutralized.

Under the coordination of the central government, a consortium for a charter city can be formed. In China's case, Guizhou and Qinghai provinces, the Inner Mongolia Autonomous Region, among other underdeveloped inland regions, would be the land host, and provide labor and natural resources; Shanghai, Beijing, Zhejiang and Shandong provinces and other coastal regions that are getting rich ahead of the nation would serve as the guarantor for rules and provide funds and expertise.

Facing the quandary of regional inequality exacerbated by overall growth, Chinese are urged to explore non-conventional solutions.

Market forces

Building up charter cities in the inland provinces is a path worth experimenting with. The mentor-disciple relationship forged between coastal and inland regions as an attempt to help upgrade inland economies has been put into trials since the 1960s but has failed to bear any fruit.

The traditional method is futile because the rules of yin, which have been proven critical to market transactions, are simply not in place and hard to develop from within. Sidestepping a knotty problem, in Romer's words, is frequently a better option leading to an innovative solution. The outsourcing of a charter will give the guarantor free reign to design the rules and effective leverage to enforce them.

The better practices aiming to mobilize market forces, enabled by the agreed upon rules - from resources and funds allocation, administrative agencies and procedures, staffing and hiring, to performance and accountability - will not only facilitate healthy development in the charter city, but also set a role model for stakeholders beyond. The spill-over impact will be a driver for changes of local culture, management, working ethics, and so on. In short, the rules of yin will take root in the minds of people of regions yet to develop.

It becomes clear that China has to tap its internal potentials to sustain the growth. It can no longer look outside for support like 20 years ago when Shenzhen was taking off. The central government may consider the charter city as an optional policy tool for urbanization of the yin type.

As such, the central government should focus its special attention on how to provide market incentives to appropriately mobilize coastal and inland regions. The synergy of yin and yang will be therefore entailed in the mission to create an effective jump start to nationwide balanced growth.

The author is professor of business at California State University at Long Beach. He was a Fulbright Scholar. He has undertaken many projects, receiving many awards in China and publishing 14 books in Chinese. He lives in Los Angeles. (brucesunchina@gmail.com)