Asia Times: China: Westward ho!



	February 2, 2000	atimes.com

Editorials

China: Westward ho!

After lavishing most attention and money on the economic development of the eastern coastal regions for the past two decades, China's leaders have decided to give the country's western provinces a chance. In a program to be announced by Prime Minister Zhu Rongji in his annual address to the National People's Congress in March, Beijing will double the investment resources allocated to the 10-province western hinterland and extend to the long-neglected region the same preferential treatment, including tax breaks and low tariffs for imported capital goods, enjoyed by the east in the 1980s and '90s. It's a massive push west in which all government agencies are to be enlisted. If carried out with the same zeal as the development of special economic zones ordered by Deng Xiaoping in the early '80s and supported by the private sector, it has every bit the potential for transforming the country yet again as did America's western-frontier push in the second half of the 19th century.

And God knows those western provinces - from Yunnan and Sichuan in the south to Xinjiang in the northwest - need some attention. They comprise about 56 percent of China's land mass and are home to 23 percent of its population, but account for only 15 percent of the country's GDP and have received less than 15 percent of central government investment funds. Per capita annual income on avergage is just one-tenth of Shanghai's. Only three percent of foreign direct investment (or US$1.4 billion) flowed there in 1998 compared to 87 percent for the eastern and 10 percent for the central provinces. But the development potential is huge: much like the American west and southwest, China's western regions are rich in natural resources such as coal, oil, and natural gas as well as strategic minerals. What's lacking are the infrastructure, people and capital to exploit them. Under the coming five-year plan (2001-2005) that is to change drastically as central government direct investment in the west is to be upped to 35 percent of total.

According to the China Business Weekly of January 30, the State Council has given approval to a huge multi-billion dollar liquefied natural gas project to carry 20 billion cubic meters of LNG per year from the Tarim Basin in Xinjiang through a 4,200km pipeline to Shanghai. Pipeline construction alone is expected to cost about US$7.3 billion. If new exploration is included, total project investment cost will be in the US$13.25 billion range. It's the right stuff to kick-start economic development on a broader scale. Much like the railroads opening up the American west, a pipeline is not just an inert object carrying gas. Along its way, as construction proceeds, it will stimulate investment and business development in local areas so far untouched by industry and commerce. The economic multiplier effect of the pipeline project will quickly outdistance the investment total for construction and exploration. And as the pipeline conveys gas east, it will convey people west in large numbers seeking new opportunities. Those famous 3,000-year-old Tarim basin mummies will fast get livelier company.

What strikes us as mistaken emphasis - though perhaps it's just obligatory rhetoric - is that Beijing leaders speak of the push west in terms of poverty alleviation and closing of the income gap between east and west. That's not why the Rockefellers, Vanderbilts, Harrimans and Carnegies went west and financed railroads and oil wells. And that's not why millions of Americans followed along the railroad tracks. They went to seek their fortunes. Of course, China's west today is not America's west then. Sichuan province, for example, is hardly underpopulated. With its 110 million population it would by itself be one of the world's top-10 nations. Nor is the arrid Gansu region exactly an equivalent of California. But then again, much of California's central valley was a desert before the waters from the Colorado River turned it into a garden.

Our point is this: fighting poverty is a noble cause and necessary task. But if the go-west project is to succeed, it will have to succeed because the opportunities beckoning are too good to pass up and because enterprising men and women and companies will want to go there and make it. The government should take care to develop schools and transportation and make provisions for irrigation and energy development. But business will judge whether it's all worthwhile. If the answer is yes, as we expect it to be, poverty will be eradicated over time. But it's the wrong slogan. Call it wealth creation. It has a better ring.