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East, West and Central Areas Go Hand in Hand

With growth slowing in the crowded and costly coastal centres, Beijing is urging investors to look to China's hinterlands.

China's development as a world-recognized economic force often gives rise to comparisons between it and the developed economies of the Western world. This may be especially important in future considerations of the way China handles its rapid economic development and the perceived economic disparities between the country's various regions.

These disparities are precisely targeted by the country's 11th Five-Year Programme (2006-10) for Economic and Social Development. The Programme reflects President Hu Jintao and Premier Wen Jiabao's concerns about and the urgent priority they assign to developing China's hinterlands. Five years after the "Develop the West" policy was launched by their predecessors, China's officials have unleashed a charm offensive to persuade more companies to move.

After years of expansion, coastal China and particularly the Pearl River and Yangtze River deltas are facing increasingly severe growing pains. Labour and land costs are rising rapidly in Shanghai, with commercial rents up nearly 40 percent over those of the past three years, while industrial space is simply not available. Labour costs are also increasing in Guangdong, but the bigger problem is finding any workers at all to serve this titan of manufacturing.

Moving westward is now more easily accomplished than ever because of the massive expansion and improvement of the country's interior infrastructure. Almost US$9 billion has been spent on new airports in the last five years, with twice as much allocated for the next five. In the coming years, a recently approved national highway plan will double the 34,000-kilometre highway network–already the world's second most extensive after the US Interstate Highway system.

One Shanghai-based Western logistics expert said, "When the Chinese Government talks about building infrastructure, they will do it on time and on a scale that defies belief."

The central and local governments' support of infrastructural investment has contributed greatly to the development of the country's western areas.

Li Zibin, deputy director of the Office of the Leading Group for Western Region Development at the State Council, said, "We need an additional five years to turn western China into an ideal zone for investors from home and abroad."

Li made these remarks in an interview with China Daily on the eve of the fifth anniversary of the country's launch of its "Go-West" strategy, which is built upon western China's rich natural resources and inexpensive labour supply.

According to Li, China will continue to pour huge investments into the western regions over the next five years to develop it into magnet for domestic and overseas investors. The money will be used to build up local infrastructure and improve the environment.

The central government is giving top billing to narrowing the yawning income gap between rich coastal cities and the rest of the country. Billions of yuan have been spent on bridges, expressways, and power plants to boost the economies of inland China. As a result, provincial delegations are increasingly trekking to Beijing, Shanghai, and Guangzhou to trumpet their advantages over the coast.

The five-day Tenth Investment and Trade Fair for Cooperation between East and West China ended in Xi'an on April 4 with more contracted investment for West China.

The fair saw the signing of 1,155 investment contracts worth about 125.74 billion yuan (US$15.8 billion) between domestic companies, according to the fair's organizing committee.

Investment from domestic firms was 65 percent higher than in 2005, according to the committee.

Another 142 contracts were signed by Chinese and foreign companies with a total contracted investment of US$2.43 billion, up 30.4 percent for the year.

More than 2,000 companies found investment partners during the fair.

Shaanxi Provincial Vice-Governor Zhao Zhengyong said facts have proven that the fair has become a key platform of cooperation among provinces and autonomous regions.

"The Investment and Trade Fair for Cooperation between East and West China has been playing a crucial role in the development of China's West," said Zhao.

With sponsorship by the Ministry of Commerce and other departments, the Eighth China Hi-Tech Fair will be held from October 12 to 17 this year in Shenzhen, to promote development of high-tech industries and transfer of international high-tech results. It has been held annually for seven years since it first opened in 1999. The Hi-Tech Fair has become the biggest transit place for high and new technological results in China and has played an important role in enlarging China's cooperation and exchanges in the high and new technological field with other countries.

Since China launched the western development programme in 1999 to narrow the economic gap between the region and the country's East, the outcome has been fruitful.

Preferential policies, abundant energy supplies, and cheap land and labour in the region have been recognized by overseas investors, but transnational corporations have taken a wait-and-see attitude towards the development drive.

Statistics from the Ministry of Commerce show that in the first two months of this year, the western region approved the establishment of more than 200 overseas-funded enterprises, and actually used US$276 million of overseas capital, up 51 percent year-on-year.

What about coastal China? Foreign investment there still dwarfs what is going on in western China. Infrastructure in many parts of the interior is still primitive and unreliable. And regardless of any cost savings, multinationals want their regional headquarters near the political, regulatory, and financial centres of Beijing and Shanghai.

Nevertheless, it is clear that vast new regions of China are now open for business, or soon will be. The next round of meetings sponsored by officials from areas such as Shaanxi is sure to be well-attended.

Here is the sidebar for the article, because the three movements are mentioned but without specific introduction and explanation.

Regional Development Flash Back

China initiated its western development strategy in 1999 to help the relatively backward area–which includes 12 provinces, autonomous regions and Chongqing Municipality-catch up with East China.

The vast western regions cover half of the nation's territory and are home to one-fourth of its population, producing about 65 percent of the nation's total average gross domestic product (GDP).

A series of preferential policies, including more governmental investment, preferential tax rates and flexible policies, are included in the strategy. All efforts have gradually paid off and the average annual GDP rate in the area was as high as 10 percent during 2000–04, although the figure for 1999 was just 7.2 percent.

Chengdu was an early beneficiary of the Go West movement: It nabbed a Motorola research and development lab in 2001 by promoting lower costs as well as access to engineers from its strong universities. When Motorola decided to expand outside its original downtown location in 2003, the municipal government agreed to pay for the new research centre. (Neither the company nor Chengdu officials will say how much.) Inside, some 330 Chinese engineers and technicians are developing software for Motorola phones.

Northeastern Industrial Region

In 2003, the central government launched a campaign to rejuvenate the northeastern traditional industrial belt, mainly including Heilongjiang, Jilin and Liaoning provinces.

The plans included regrouping existing industrial enterprises, bringing in advanced technologies, boosting research and development of new products, and opening the doors of State-owned industrial enterprises to private investment from home and abroad.

The move followed a speech made by Premier Wen Jiabao during his inspection tour in the region in 2003.Wen said that the central government would support the three provinces in their efforts to readjust their economic structures and to upgrade technologies.

By doing so, China aims to build the northeast region into a national and even a world-class industrial base for equipment manufacturing and important raw materials, Wen said.

Analysts have called the move another major strategy the Chinese Government has adopted to boost its economy following its massive late last-century programmes to develop the eastern coastal regions and the massive programme to develop the vast under-developed western region three years ago.

Central Area

The Communist Party of China's high-profile accent on the rise of the central areas of the country illustrates and re-enforces its new development philosophy that no area be left behind.

As the leadership finally sets eyes on the central provinces, virtually all parts of the country have been brought into focus.

The latest focus on central areas, which differs slightly from the traditional concept of "Central China" and includes Anhui, Henan, Jiangxi, Hubei, Hunan and Shanxi provinces, is a belated response to complaints about a "forgotten central part."

If the idea to develop the West was an intrinsic reaction of a national leadership anxious to curb the rapid polarization between two extremes, the new weight placed on central areas is more in line with economic common sense.

Home to 600 million of Chinese, they are major contributors of the country's grain and energy supply.

The CPC's proposal to build bases for commercial grain supplies, energy and raw materials, modern equipment manufacturing and high-tech industries there, along with the development of comprehensive communication hubs, is based solidly on their comparative advantages.

About 75 percent of the locals still live in rural communities. Inadequate urbanization and industrialization have resulted in a mammoth army of surplus labour. Anhui, Hunan, Jiangxi, Henan and Hubei provinces are the second to sixth largest labour exporters in the country.