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    China Business
     Sep 15, 2005
Asphalt net covers China's west
By Rui Xia

Five years after starting its "go west" campaign to develop its western region, China's road construction in these strategic areas has reached a gigantic scale. Last month, the Yunnan (ATol map of Yunnan) provincial government announced the completion of a central section of the Kunming-Laos highway, a road that will eventually link Yunnan, in southwest China, to Thailand. Earlier this year, also in Yunnan, the new Kunming-Xiaguan highway was opened; this was the first section of the improved Yunnan-Tibet highway (ATol map of Tibet). China intends to complete paving and upgrading the road all the way to Lhasa. The Sichuan-Tibet highway is also underway (ATol map of Sichuan), creating great engineering challenges as workers upgrade a road on some of the world's highest and most difficult terrain.

Meantime, on the other side of the plateau, a new Tibet-Nepal highway is being built to connect China with the Indian subcontinent. North of this, new roads stretch from Xinjiang province (ATol map of Xinjiang) to Kazakhstan and Pakistan. Still

more roads connect the west to the booming coastal cities in the east. As a whole, this network of roads, stretching from Singapore to Uzbekistan, is the cornerstone in China's relentless attempts to gain leadership of the continent through commercial ties.

Road construction has become ubiquitous throughout the west, from steamy tropics to snow-capped mountains to arid deserts. It seems as if everywhere one goes, there is a bypass, a road under construction, and workers in orange waistcoats pitching their tents by the roadside. Some of the results are impressive. The Erlanshan tunnel, on the Chengdu-Tibet road, is celebrated as a Chinese engineering achievement almost as great as the Three Gorges Dam. The asphalt snakes zigzagging through Xinjiang today seem to belong to a different era than earlier highway projects, those former premier Zhu Rongyi once famously dubbed "tofu constructions" for their scandalously poor quality.

The justifications for the western development policy are economic, political and social. Beijing is increasingly concerned by the growing economic gap between east and west, which led to social unrest and riots in different areas during the 1990s. The "go west" campaign, it is declared repeatedly, aims to make the west an "incubator for skilled manpower" and a "hot spot for foreign investments". Five years after announcing these large-scale projects, it seems the western regions have made some progress, but still face many obstacles.

Focusing on building roads into the Tibet Autonomous Region has predictably drawn much criticism from advocates for the Tibetan cause. Together with the highly controversial Golmud-Lhasa railroad, argue some pro-Tibetan groups, these roads will encourage a further influx of Han Chinese into Tibet, making the Tibetans a minority inside their own territory and risking their traditional culture. The Chinese respond by pointing out the many benefits to the region and its people that will come through an improved road system. A network of superhighways between Thailand and Tibet via Yunnan will allow easy access for tourists from southeast Asia to southwest China and Tibet, both of which have immense tourism potential.

Yet, the statements about roads making life better for the Tibetans are debatable. Most reports by foreign researchers and journalists show that, whereas investments are pouring into Tibet in bigger sums than ever before, the main beneficiaries are Han Chinese immigrants, whilst Tibetan farmers and herdsmen still count amongst China's poorest people, often losing their land for the sake of construction, and are frequently denied access to information or the right to participate in decisionmaking regarding the future of their "autonomous region". Significantly, the Asia Development Bank, despite providing US$2.6 billion in loans for roads in other parts of western China, has announced its loans will not be used for road construction in Tibet.

The Tibetan road network, beside the nominal objective of bringing prosperity and modernization to the plateau, is highly important strategically, giving China easy access to the Himalayas and links into the Indian subcontinent. This development should, and indeed has, stirred some disquiet in India, whose side of the Himalayas has very few roads.

The main beneficiary: The east
Some residents in the west say the improved roads will merely allow easier, more convenient shipment of natural resources to factories in the east, and that the west will not be the main beneficiary. That western China is rich in natural resources is not in dispute: Sichuan and Tibet have minerals, Qinhai and Xinjiang have oil, and Xinjiang has natural gas. Until recently, these resources could not be exploited due to access problems. Providing easier access for mining projects is definitely one of the western road network's main goals. As for goods manufactured inside the region, there is still great reliance on traditional agriculture, in which the west has an advantage over the east, but other investments have been slow to come, despite government incentives that sometimes extend to complete tax exemption.

"It doesn't make sense to transfer industrial capacity to the western regions, as was mistakenly attempted during the Third Front campaign of the 1960s and 1970s," says Dr Tim Oaks, a social geography professor from the University of Colorado who has spent many years doing research in western China. "One cannot deny the fact that the eastern regions stand to benefit a great deal from western development and one shouldn't assume that the "go west" campaign will shift the balance of regional inequality in China that much. I think that as long as the campaign focuses on infrastructure, energy, and the intensification of natural resource extraction in the western regions, the eastern regions will continue to get more of the benefits. The western regions would benefit more if the campaign focused more on direct poverty relief and improvement in access to good education and health care."

Despite this criticism, statistics for the first quarter of 2005 surprisingly put Yunnan, considered a remote backwater just a few years ago, as the fastest-growing provincial economy in China. The northwestern province of Shaanxi (ATol map of Shaanxi) followed close behind, while western cities like Chongqing (ATol map of Chongqing) and Chengdu are opening up to foreign direct investment and east-coast capital. The government sees a modern highway network as a crucial factor in drawing investments to the area. The business community generally agrees. "There must be improvement in road infrastructure in order for the west to draw investors," says Chris Devonshire-Ellis, partner at Dezshira, a consultancy to foreign and joint ventures in China. "It is crucial to have the road network, and indeed there has been some improvement, especially in highways connecting major cities and manufacturing centers to airports, but still much needs be done. There should be, for example, better links between highways and the railway network to make the transportation of goods more efficient."

Yunnan and Shaanxi seem to be the exceptional success stories, however. For the most part, despite huge government investments during the last five years, the west still lags behind - too remote to be attractive to most investors, and lacking qualified personnel. The original plan included improvement of the education system in these regions, alongside investment in infrastructure, but reports from different provinces show this element was severely neglected. Even as a few western cities enjoy unprecedented prosperity, the rural areas sink deeper into poverty. One Mr Liao (not his real name), a school principal from Yunnan, describes the situation: "Tuition fees have gone up again this year, making it even harder for peasant families to send their kids even to primary school. Our school is understaffed and the teachers underqualified. Last year, teachers' salaries were often delayed for weeks, and sometimes we got less than half of the original salary."

Reports from Guizhou province, one of China's poorest, reveal an even graver picture, with high rates of dropout from schools. Professor Oaks thinks that though the gap between east and west is likely to be reduced, the more significant problem now is the urban-rural divide, and that, says Oaks, will continue to widen. "The investment in infrastructure needs to be matched with investment in education and basic healthcare," Oaks stresses. "Also, there is a problem with the scale at which physical infrastructure is being developed. The infrastructure that is being built - large dams, power plants, and highways - primarily benefits urban and wealthy parts of the western regions. Most rural areas see little benefit from these infrastructure developments. Villages still have to rely upon themselves to improve local roads, provide water supplies, and so on. And they have to rely on themselves for providing educational and health care resources. So infrastructure development is good, but it's not reaching down to the most basic levels where it is needed."

An underdeveloped education system, naturally, will result in the west continuing to be burdened with a poor population, and will stand as an obstacle to future economic growth and the resultant higher living standards. Devonshire-Ellis ascribes the problem mainly to a lack of foresight. "There is [a] serious lack of qualified people in the west," he states. "Different regions should find their own niches, and start training people in specific professions, but there isn't enough long-term planning. There should be planning for 20 years ahead, combining infrastructure building and education."

Devonshire-Ellis gives the example of Urumqi, the capital of Xinjiang province, as a city finding its niche. "Urumqi's markets are totally different than those of Shanghai. It has done a very good job establishing ties with central Asian markets and is building itself up as the biggest central Asian city and transportation hub," he says. The recent purchase of PetroKazakhstan, a Canadian-owned oil company operating in the central Asian republic, by the Chinese oil company CNPC will undoubtedly further enhance development in this area, and the new superhighway into Kazakhstan is essential for such economic cooperation.

In the southwest, nowhere is the growing income gap more apparent then on the Sichuan-Tibet Highway. A journalist who took the road recently describes the scene: "You pass the long Erlanshan tunnel, feeling you're almost in a science fiction film. Then, a day later, the highway deteriorates into a barely passable dirt road." The vast sums invested in this highway so far are but the beginning. The greatest challenges for China's transportation engineers are still ahead, as the sections of the road passing through the eastern reaches of the Tibetan plateau have yet to be built. These remote areas rise over 5,000 meters above sea level and are often afflicted by floods, landslides and heavy snowfall. Despite years of construction, most villages in the region still aren't connected to any roads. According to state statistics, 90% of China's poorest people inhabit the western regions.

Where is the money going?
The corruption and inefficiency of local governments have caused further unrest in the rural west, and has been a major drawback for foreign investors. When announcing the loans for road construction, the ADB bluntly warned: "many local governments do not have the capacity to manage responsibilities delegated to them by the central government." Some economists describe investing in the west as being "risky" due to a lack of understanding of the free market game, and general ineptitude, on the part of local governments in the area.

Chris Devonshire-Ellis sees a lack of cooperation between the different provinces as a major problem. "Local governments see other provinces as competitors, an attitude which often results in roads between provinces being hindered. The local governments should put aside their differences and work together to develop the area." Prof Oaks also warns against corruption and waste, which, he argues, are inherent to large developing projects in China: "when large-scale campaigns occur in China, they invite many abuses and much corruption because suddenly many resources are made available. Much gets wasted, funds get stolen by corrupt people, and sometimes the results are worse for people than before the campaign." And of course, worsened conditions in the rural areas lead to further social unrest and make western China an even more risky destination for investors.

Economic development, though, is only the overt objective of the "go west" campaign; the unstated and possibly even more important goal is strategic. The western regions as a whole make up more than half of China's landmass, and border 13 countries. Much of the population in these areas is ethnic minorities, sometimes with aspirations for independence. An improved road network will serve the double aim of containing these populations, who have long been one of Beijing's biggest headaches, and improving China's position against its neighbors. Other countries thus view the new stretches of asphalt with mixed feelings of anticipation and fear, as China emerges as an ever-stronger regional power.

Environmental protection is another challenge. When the "go west" campaign was announced in 2000, environmental protection was one of the key targets, at least on paper. Although much is being done in regard to afforestation and water preservation, the rapid development has still put much pressure on the west's fragile ecosystems. Beijing's new environment-friendly policies require all road constructions to be subjected to environmental impact assessments, undertaken by local environment protection bureaus. In reality, explains a local official for one of these bureaus, there is often serious pressure from the local government to hasten the assessment and use lower standards, so construction can start on schedule. In addition, apart from the national and regional highways, there are dozens of smaller roads being built in the west, connecting counties and villages to the main transportation arteries. On many of these smaller county-level roads, the assessments are all but sketchy, and sometimes they do not exist, the official adds, and expresses concern for the future of China's western forests and waterways if development continues at such a wild pace. Environmental problems stand as a serious impediment to greater investment by multinational corporations in the region. The China-Britain Business Council, for example, warns British companies against involvement in many of the major infrastructure projects in western regions because of negative environmental and social impacts.

Some experts argue that focusing on large-scale projects isn't necessarily the answer to the west's problems. "Good infrastructure is crucial to long term sustainable development," says Professor Oaks, "but as a whole, development needs to be carried out at a local scale and made to fit specific local conditions, which are very different throughout the western regions. And instead of focusing on large-scale, costly projects, the focus should be on small-scale inexpensive projects that are less visible, like encouraging small-scale enterprises in rural areas so that locals don't have to migrate far away to cities to find jobs. In many regions throughout China there are people working on projects like these. But a big difference could be made if the kind of money spent on projects like the Three Gorges Dam could be spent on improving access to rural education, and improving the basic technology used in rural households. So, while there is a consensus as to the importance of building infrastructure and developing projects in the west, with highway construction as a major component, the opinions of scholars, investors and government officials are divided as to the best way of doing this. One thing is clear. Though in recent years Beijing's "going west" was somewhat sidetracked because the central government's paying heed to other parts of this vast country, the work is now going on at full scale, with significant future consequences for the whole continent and - for better or worse - forever changing the face of China's west.

Rui Xia is a Western teacher and freelance writer living in China. Rui Xia is her unofficial Chinese name.

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