State Triggers Economic Engine in Western Regions

Fat deals await global investors as the central government ploughs money and preferential incentives into the western development programme, hoping to turn the poverty-ridden interior into a driving economic engine.

They will be eligible for a piece of the huge pie in projects worth billions of dollars, ranging from roads and railways to property and environmental protection.

Leading the way are 12 major infrastructure projects worth a total investment of up to 300 billion yuan (US$36 billion), many of which involve environmental protection. The figure is a huge jump from the more than 10 billion yuan (US$1.2 billion) on offer last year, when the go-west campaign was launched. That money was invested in 10 massive projects including the Qinghai-Tibet Railway, the natural gas pipeline, major superhighways, education and agricultural projects.

Li Zibin, vice-director of the Western Region Development Office under the State Council, told reporters that foreign investors can get more scope for their investment and operation in the region.

Analysts said the central government will be expected to roll out bolder incentives to get foreign business interested in the west rather than concentrate on the booming eastern region centred around Shanghai's Pudong. Only 20 per cent of overseas investment now rests in the western regions.

But the untapped region does have its own edge. Compared with the developed coastal region, it has an ample pool of cheap labour, huge natural resources and a potential market that few can really turn away - a population of more than 300 million.

The campaign will also foment market forces as more investment means more consumption. With purchasing power increasing, the region will serve a dynamic market for products ranging from Nokia's mobile phones, Sony's electronic products and even to General Motors' Buick sedans.

The western regions, grouping 11 provinces and autonomous regions and one municipality, covers 71 per cent of China's territory.

But the per capita Gross Domestic Product (GDP) only stands at US$500, far lower that of the national average of US$840, and minuscule compared with Shanghai at more than US$4,000 and Beijing's figure of US$3,000, official statistics said.

A comprehensive investment package has been devised which stipulates measures and policies with regards to the programme. These regulations are expected to be effective later this year after being given the stamp of approval by the State Council.

Though few details have been made public, State officials have said the package is committed to upgrading the "software" of the western regions, meaning an overhaul of education, law and administrative reform to ensure overseas firms meet the minimum of problems.

It came on the heels of a steep income tax cut for foreign business in the region, from 33 per cent to 15 per cent later this year. The income tax in special economic zones is 15 per cent, 24 per cent in the coastal region and 33 per cent in other regions.

However, it is not an easy nut to crack.

Poor infrastructure access, a worsening environment, debt-burdened State-owned businesses, as well as rudimentary education and technology still loom large. Meanwhile, red-tape and closed-mind attitudes of the local administration offices still make foreigners reticent about investing in the west, analysts said.

And to solve these problems will take more than just a couple of years.

( 09/04/2001)

In This Series

Forum to Promote Western Economy

Farmland-to-Forest Plan Improves Western Ecology

Environment Crucial to West

West China, a Huge Potential Market for Foodstuff Industry

10-year Plan in Place for 'New Western China'

New Railroad to Spur Western Development

Communication: Herald of the Western Development

More Eastern Township Enterprises Dive in Western Development



Western China

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