East-west gap widening

08:24, February 25, 2010

China will kick off a new western development strategy for the next decade, following an average annual growth rate of 11.6 percent in the past 10 years in the region's 12 provinces, autonomous regions and municipalities.

Analysts, however, note that an economy mainly driven by central government investment has led to an expanding gap between the western and eastern regions of the country and vicious competition between some key western cities, and urge more efforts to be made toward enabling the west's ability for self-renewal.

The government is set to hold a review meeting on the west's development soon and to launch a package of favorable policies, the February issue of Caijing magazine reported.

"The past 10 years have seen the fastest development of the western regions in history, but the absolute gap between the west and the east in China is not narrowing, but widening," Cao Yushu, former deputy director of the Western Development Office of the State Council, China's cabinet, was quoted by the magazine as saying.

China launched the "Western Development Strategy" in January 2000 to help underdeveloped western regions catch up with the more prosperous eastern regions. The western regions comprise 12 provinces, autonomous regions and municipalities, with a combined population of about 370 million people and accounting for 71.5 percent of the country's total land area.

"It is impossible to solve the deep-seated problems and reverse the lagging situation in such a vast area in a short period of time," Cao said.

Some researchers have attributed the widening regional gap to unbalanced government investment.
Investment in eastern regions stood at 9.64 trillion yuan ($1.4 trillion) in 2008, a 557 percent growth over 1999, while investment in the western areas was 3.59 trillion yuan in 2008, up 663 percent from 1999, a report in Tuesday's Lianhe Zaobao newspaper stated, quoting official statistics from the Sichuan provincial government.

The actual gap in investment between the two regions, however, rose to 6.05 trillion yuan in 2008 from 1.19 trillion in 1999, a 508 percent increase, the report said.

Liu Shiqing, a researcher into western development at the Sichuan Academy of Social Sciences, said western regions didn't get as many big industrial projects in the past decade as the esat.

According to Liu, per capita GDP in 2008 in western regions is less than 45.6 percent of that in the eastern regions. Per capita investment was 60 percent, per capita fiscal revenue 43.6 percent, and per capita savings was 45.1 percent of the corresponding figures in the country's eastern regions.

Jia Wen, an associate professor at the School of Economics at Sichuan University, argued that a lack of private investment is another reason preventing the west, a "sleeping giant," from waking up.

"Government-led investment prioritized infrastructure upgrades, while the overall investment environment in the region hasn't been improved much. Private investors stayed cautious over possible invisible costs, for example, due to corruption and inefficiency," Jia said.

Jia noted that scrambling for limited public resources has led to intense competition between regions in the west of the country.

Many major cities, including Chongqing, as weel as Chengdu and Xi'an – the capitals of Sichuan and Shaanxi provinces respectively – have engaged in a fratricidal fight to become the central city of the west, launching competition in industries such as information technology (IT), finance and transportation, Lianhe Zaobao reported Wednesday.

No cities would like to give up a slice of the cake amid the burgeoning growth of the western region's IT industry, spurred by improvements to infrastructure and the investment environment, and comparative cost advantages, PC World magazine reported.

Software parks and high-tech development zones are being established in the region, and many even issued "free of charge" policies to attract IT enterprises, it said.
Competition for a western transportation hub and financial center also exists between Chongqing and Chengdu, two cities just 300 kilometers apart.

"Government investment, rather than domestic consumption, has been the most significant contributor to local economic development. In the meantime, there has been a general lack of an effecttive mechanism to hold officials accountable in regard to their decisions on investment approvals," Jia said.

According to Cao, limitations on private investment in infrastructure construction will be loosened in the next 10-year strategy, which will insist on favorable fiscal and tax policies and raise funds for environment protection.

"The new Western Development Strategy should be placed in the most outstanding position," said Wang Qin-gyun, from the National Development and Reform Commission, who is involved in the drawing up of the strategy.

Li Yining, an economist at the National Information Center, believes that what the western regions should do in the next ten years is what the eastern regions cannot do.

Source: Global Times