China’s economy has been experiencing double-digit growth for over a dozen years. This miraculous increase, however, hasn’t spread wealth equally throughout China. The comparatively sluggish economy in western parts of China could easily disrupt the nation’s rapid development as a whole, while environment, ethnic minority issues, and allocations of natural and human resources only complicates matters.
China has been growing economically with great speed, but the benefit of this growth is not shared evenly within the country. Some eastern areas of China, such as Guangdong, Zhejiang, and Shanghai, are doing well, whereas the western regions of the country such as Guizhou, Tibet, and Gansu are having trouble modernizing, and this gap is growing.
Rather than ignore these disparities, in 1999 China’s then-Communist Party chairman Jiang Zemin introduced the Great West Development Plan and stressed the importance of a balanced economic development between the west and east of China. In 2000 the Great West Development Plan was divided into several projects addressing natural conservation, human resource improvement, and industrial development.
The “Great West” refers to the provinces and cities of Chongqing, Sichuan, Guizhou, Yunnan, Shanxi, Gansu, and Qinghai and the autonomous regions of Tibet (Xizang, Ningxia Hui, Xinjiang Uygur, Inner Mongolia, and Guangxi Zhuang. This area covers 71.4 percent of China’s territory (6.85 million square kilometers) and holds 28.8 percent of China’s population (about 367 million people); it is a resource reserve with great market potential for the entire country’s economic growth. Therefore, the Great West Development Plan focuses on more than reducing the income gap between east and west.
Gross domestic product (GDP), the total market value of goods and services produced in an area in a given period, usually a year, is a useful indicator of that area’s development. The GDP of western China accounts for only about 16.8 percent of the national total. Moreover, the per capita GDP of the west is only two-thirds of the national average and less than 40 percent of the per capita GDP of eastern China.
Goals of the Plan
The Great West Development Plan is a difficult but necessary project. According to the plan, within the first ten years of the twenty-first century the infrastructure of the west will be largely enhanced and the ecological environment preserved (the “catch-up steps”), while advantageous industries should be promoted and people’s living standard should be improved (the “developing steps”). If the plan is carried out, by 2050 there will be a new west with a sustainable natural environment, prosperous economy, and stable society.
To quicken development in the west, the plan specifies a need for policies that will support the growth of investments, taxes, education, and human and natural resources. Therefore, not only an environmentally friendly course of action based on scientific and technological advances, but also a lucrative market for investing through secure and smooth capital channels will be necessary for the plan’s success.
Key Points of the Plan
Infrastructure is the starting point of the plan. To prepare for economic development, efficient infrastructure, such as transportation networks including roads, railways, and airports, is needed. Also needed are a natural gas pipeline, a communication network, an electrical grid, broadcasting networks, and water projects.
Ecological conservation is a “catch-up procedure” for the sacrifices made for previous unplanned growth-oriented development on one hand and a future sustainable growth environment on the other. Large areas of land in the west, once fertile forests or grasslands, were of vital importance for the fragile ecology. These regions were altered for economic benefit, and now the gray, barren soils needs to be cultivated and coaxed back into green forest and grassland reserve, even though it means a short-term economic loss.
Industrial structure adjustment and adaptability will help the west create a niche in future development. The east has capital and technology, but the west has other advantages. Agriculture should be upgraded with support from science, technology, and information to benefit not only local farmers but also the whole country. Natural resources need to be utilized efficiently to promote the transition from a dependency on these resources to a broader economic base. In addition, tertiary industry that is resource efficient and labor intensive, such as tourism, should be encouraged.
Education creates talent, which is the engine for social progress. However, in China’s five minority autonomous regions of the west (Guangxi Zhuang, Inner Mongolia, Ningxia Hui, Xinjiang Uygur, and Tibet (Xizang) education is not well developed.
Reform and open-door policies brought successes to the east of China, and such successes can be taken as a reference point for the west. The west needs to adopt preferential policies to stimulate economic activity. State-owned enterprises still need to be adapted to market-oriented economy mechanisms.
The foregoing points have been supported by policies of the central government. For example, in the period 2001–2010, enterprises in encouraged industries enjoy a 15 percent income tax waiver; new enterprises in transportation, electricity, water projects, and broadcasting enjoy two years of income tax waivers and three years of half income tax after being established; farmers’ income from planting trees and grass is tax free for ten years.
What the Plan Means
As a regional development plan, the Great West Development Plan is regarded as a national strategy because the plan may not only reduce the gap between the west and the east but also stimulate development in China as a whole. For the five minority autonomous regions stability will be one of the top priorities. Less-developed minority areas can be a weak link in the chain of stability, and the plan seeks to achieve overall prosperity by focusing on economic development and social progress in these remote areas, and by tapping into both the west’s vast resource reservoir and its large market, the potential of which is far from being fully explored. After a decade of double-digit economic growth, China has the capacity to fully implement the Great West Development Plan to everyone’s benefit.
Barriers to Investment in Western China
Many companies continue to hesitate when it comes making large investments in western China. Infrastructure, business support systems, and government practices are all are reasons why companies hold back.
Unskilled labor in western China is still very low paid (manufacturing wages are a dramatic 40–50 percent less than they are in the main coastal provinces), but this advantage for foreign companies is counterbalanced by difficulties in locating skilled labor and a decrease in productivity. Although facilities in western China do not require migrant labor and therefore have significantly lower turnover rates than their counterparts in the east, the pool of available high-quality mid-level managers and engineers is smaller, and companies may have to pay a premium to have senior-level managers move from the east.
While the central government is investing heavily in infrastructure projects in western China, the region still lags behind the east. To ship a “standard” truckload from the nearest major port to most major cities within the “Go West”
regions costs between $500 and $1,000 and requires one to three days. River transport is only a third of the price of trucking, but it is slow and has limited capacity. Rail links also suffer from limited capacity due to a focus on passenger transport; they can only meet 30–40 percent of demand in the key Yangzi corridor. Air links are still developing and are relatively expensive. Power is generally less expensive than in the east, but reliability can be an issue.
When it comes to business support, foreign companies find that most local suppliers are not developed or sophisticated. Much more time and effort is required to find, qualify, and develop them to meet customer requirements. In addition, western China cannot easily accommodate foreign companies’ need for such sophisticated support services as accounting, consulting, architecture, design, and so forth.
Government policies and regulations are more inconsistent in western China. Intellectual property and environmental regulations exist, but are less stringently enforced than in coastal China.
Source: Morin, C.. (2006, December). Is western China ready for business? Guanxi: The China Letter, 1(8), 1, 8.
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