Eliza Wong
Executive Summary
- Hefei Metropolitan Area (合肥都市圈) is the only pilot zone designated specifically as a metropolitan area in China’s latest factor market reform initiative, highlighting its strategic role in regional economic integration.
- The pilot aims to enhance resource allocation efficiency, foster innovation in artificial intelligence and new energy sectors, and strengthen cross-regional collaboration within the metropolitan area.
- With a GDP of RMB 1.66 trillion in 2024, Hefei Metropolitan Area contributes 33% of Anhui Province’s economic output, despite accounting for only 17.8% of its land area.
- Reforms will focus on removing institutional barriers to factor mobility—capital, talent, data, and technology—to support the development of new quality productive forces.
- The initiative is expected to serve as a model for other metropolitan areas in advancing China’s broader goal of building a nationally unified market.
A Strategic Move in China’s Factor Market Reforms
China’s push to establish a nationally unified market has gained significant momentum with the recent approval of 10 pilot zones for factor market reforms. Among these, the Hefei Metropolitan Area (合肥都市圈) stands out as the only pilot designated explicitly as a metropolitan area. This distinction underscores its growing importance in regional economic strategies and its potential to drive innovation-led growth.
The pilot program, endorsed by the State Council (国务院), targets key urban clusters and metropolitan areas that demonstrate strong economic foundations and the capacity to lead reforms. These regions collectively account for over one-quarter of China’s economic output, positioning them as critical nodes in the country’s efforts to optimize resource allocation and enhance market efficiency.
Why Hefei Metropolitan Area?
According to Li Chunlin (李春临), Vice Chairman of the National Development and Reform Commission (国家发展改革委), the selection criteria emphasized regions with robust growth trajectories and reform readiness. The Hefei Metropolitan Area, though smaller in economic scale compared to counterparts like Nanjing Metropolitan Area (南京都市圈), has distinguished itself through its focus on innovation and strategic emerging industries.
Experts like Xu Shanchang (徐善长), President of the China Macroeconomic Society (中国宏观经济学会), note that the pilot zones are strategically distributed across major regional initiatives, including the Yangtze River Delta (长三角), Beijing-Tianjin-Hebei (京津冀), and Guangdong-Hong Kong-Macao Greater Bay Area (粤港澳大湾区). This geographic diversity ensures that reforms address both intra-regional and cross-regional factor flow challenges.
Hefei’s Unique Position and Challenges
The Hefei Metropolitan Area covers Hefei City (合肥市) and surrounding counties, including Wuhu’s Wuwei City (芜湖市无为市), Huainan’s Shou County (淮南市寿县), and Ma’anshan’s Hanshan County (马鞍山市含山县), among others. Despite its relatively modest economic size—RMB 1.66 trillion in GDP compared to Nanjing’s RMB 5.44 trillion—the area punches above its weight in innovation and industrial clustering.
In February 2024, the Hefei Metropolitan Area received official recognition as a national-level metropolitan area, cementing its role within the Yangtze River Delta’s economic landscape. However, it still faces significant challenges, including internal development disparities and insufficient industrial coordination.
Innovation as a Driving Force
Hefei’s rise as an innovation hub is no accident. The city is home to the Hefei National Laboratory for Physical Sciences at the Microscale (合肥微尺度物质科学国家研究中心), the Comprehensive National Science Center (综合性国家科学中心), and major science and technology infrastructure. These institutions have catalyzed advancements in artificial intelligence, integrated circuits, new energy, and biopharmaceuticals.
In 2024, Hefei’s artificial intelligence sector generated nearly RMB 950 billion in revenue, with intelligent computing power exceeding 7100P, ranking among the highest nationally. The city also leads in new energy, with renewable energy installations accounting for 54% of total power capacity by mid-2024.
Reform Priorities and Implementation
The Hefei Metropolitan Area pilot will prioritize reforms in factor markets related to technology, data, capital, land, and labor. A key objective is to establish a resource allocation system conducive to developing new quality productive forces, particularly in artificial intelligence and new energy.
The pilot’s implementation plan, titled the Hefei Metropolitan Area Factor Marketization Comprehensive Reform Pilot Implementation Plan (《合肥都市圈要素市场化配置综合改革试点实施方案》), outlines measures to promote cross-regional factor mobility, encourage科技成果转化 (technology achievement commercialization), and dismantle institutional barriers.
Leveraging Regional Collaboration
To address existing imbalances, Hefei is strengthening ties with neighboring cities such as Lu’an (六安), Huainan (淮南), and Chuzhou (滁州). Joint industrial parks, shared investment promotion channels, and collaborative projects in new energy vehicles and high-end equipment manufacturing are already underway.
For example, the Hefei-Huainan Cooperation Zone (合淮合作区) has attracted 17 industrial projects focused on new energy vehicles and advanced manufacturing. This model has been recognized by the National Development and Reform Commission as a case study in metropolitan area cultivation.
Implications for Investors and Businesses
The factor market reforms in the Hefei Metropolitan Area present substantial opportunities for investors and businesses. Enhanced resource mobility, combined with policy support for innovation, is likely to attract capital and talent to sectors like artificial intelligence, renewable energy, and advanced manufacturing.
Moreover, reforms such as赋予科技成果所有权 (granting ownership of technological achievements to research personnel) aim to incentivize innovation. Under the pilot, researchers can retain up to 70% ownership rights or secure long-term usage rights for their inventions, fostering a more dynamic innovation ecosystem.
Strategic Advantages in Emerging Sectors
Hefei’s dual focus on artificial intelligence and new energy aligns with national priorities. The National Development and Reform Commission and the National Energy Administration (国家能源局) recently issued guidelines to integrate AI with energy systems, aiming to build a synergistic framework by 2027.
Hefei is well-positioned to lead this integration, leveraging its strengths in virtual power plants, smart grids, and renewable energy management. The city’s use of AI algorithms, 5G, and blockchain technologies to optimize energy distribution has already gained national attention.
Future Outlook and Conclusions
The Hefei Metropolitan Area pilot represents a critical step in China’s broader strategy to enhance factor market efficiency and support high-quality development. By addressing structural bottlenecks and promoting regional coordination, the initiative aims to create a replicable model for other metropolitan areas.
For stakeholders, the reforms signal a commitment to fostering innovation-driven growth and reducing regional disparities. As the pilot progresses, monitoring its impact on resource allocation, industrial upgrading, and cross-regional integration will be essential for assessing its success.
Investors and businesses should closely watch policy developments and explore partnerships within the Hefei Metropolitan Area, particularly in high-potential sectors like artificial intelligence, new energy, and advanced manufacturing. Engaging early could yield significant advantages as the region accelerates its reform agenda.
