Fourth, along with the national programs, strengthen inclusive social protection to improve equal access to social services and provide targeted support to vulnerable people.

- Support the integration of migrant workers into host cities with an emphasis on the urbanization of people.

- Provide social services in an equitable manner, including formal and informal workers, the unemployed, and their families.

Global experience and the economic geography literature suggest that the most effective policies for promoting long-term growth are those that facilitate geographic concentration and economic integration, both within and across regions and countries. The path of development counts. To support the development of the economy with the existing economic center and lagging areas, government initiatives should not focus on “reducing the gaps of the productive capacity” across cities, but “moderate differences in economic welfare” between them.

The business environment in Guangdong, in particular the major cities in the Pearl River Delta, is among the best in China. Further improvement can strengthen its attractiveness to investment and spur innovation and fair competition. An enabling business environment can provide a level playing ground for all regions, hub or periphery, the needed institutions and regulations to attract and retain private investment. The sustainable development of the economy in Guangdong depends on how it can deal with the three “Ds”:<sup>9</sup> realizing the benefits of agglomeration economies through a higher _density_ of economic activities in its major urban centers (particularly developing the PRD as global economic centers), overcoming the _distance_ factor by making a concerted effort to improve regional transportation and communications infrastructure (linking the lagging Northern mountainous areas and the East and West Wings with the PRD), and eliminating internal and external _divisions_ to promote intra- and interprovincial market integration and strengthen Guangdong’s participation in the global economy moving up the value chain.<sup>10</sup> Improved connectivity in a proper manner can increase efficiency and facilitate greater industrial specialization through agglomeration economies, and reduce the geographic handicap to encourage the catching-up of the lagging regions. Reduced transport costs between the northern mountainous area and the east and west wings to the PRD — and from there to overseas markets— can improve the attractiveness of the lagging regions and promote development of their firms in two ways: through lower costs of inputs delivered by these factories and through higher net revenue from sales to external markets. Greater access to both national and external markets can create more competition and reduce existing local monopolies. It can also facilitate the movement of labor, skilled and unskilled, to create greater economies of scale and rewards to innovation.

In line with the support to the establishment of Industrial Transfer Parks, facilitating the private sector actors to choose the right locations for investment with the right level of technology and capital/labor intensity can help. Special regional policy can be used in an appropriate manner to support the regions to move towards their latent comparative advantages. Improving market institutions can create and protect effective competition in the market. Measures can include addressing externality and coordination issues – such as provision of infrastructure, logistics, finance, skilled labor. The experiences of the East Asian newly industrialized economies in

> 9 Refer to the terminology developed in the World Development Report 2009 _Reshaping Economic Geography_ , 10 See Huang and Luo (2009) for discussion at the national level.

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