Rebooting Western Progress

By staff reporter LU RUCAI

Over the last decade, Wei Houkai has tried to identify the problems that impair the development of West China, and find some solutions. The West China research project began 10 years ago, under his directorship at the Western Development Research Center at the Chinese Academy of Social Sciences. Casting a cold eye on a plan partly executed, he and his team presented strategic options to central policy-makers for responding to the diversity of the western regions. The following is a China Today (CT) interview with Mr. Wei.

CT: What's your assessment of the Western Development strategy's decade of achievements?

Mr. Wei: Assisted by the state's policy support, the Western Development Drive has been proceeding steadily, as evidenced by a sizable increase in investment, distinct progress in establishing infrastructure, ecological construction, and accelerated economic growth. Since the implementation of the strategy, the GDP growth of West China has climbed up steadily, from 7.3 percent in 1999 to 14.5 percent in 2007. Though affected by the global financial crisis, its GDP growth in 2008 still reached 12.4 percent. Meanwhile, the economic and social development of the west has shown marked improvement. The local per capita GDP in 2008 reached RMB 15,900, or 3.7 times that of 1999. Both urban and rural incomes are going up and going up quickly. Between 2000 and 2008, the fixed asset investment of West China increased at an annual average of 23.4 percent, higher than the national average. That's the good news.

CT: How much has the decade accomplished in view of the entire program?

Mr. Wei: The strategy is designed to be implemented in three stages over a period of 50 years. The first decade (2000-2010) was meant to concentrate on infrastructure and ecological construction, with the objective of basically reining in ecological deterioration, improving the investment environment, setting up a benign economic development cycle, and escalating the availability of social and public goods to approach the national average. The following two decades (2011-2030) are to construct competitive and characteristic local economies, complete industrialization in certain areas, urbanize at least half of the western population, and raise the living standards of the majority of local residents to the national level. Meanwhile, ecological deterioration should be brought entirely under control within this planning window, marked by a gradual recovery of the ecological environment and the establishment of a benign ecological cycle. The last two decades (2031-2049) will be devoted to the realization of overall modernization, economic prosperity, social progress and general affluence in a new, beautiful West China.

So the first decade covers only the foundation of the Western Development Drive. Despite improvement in its infrastructure, ecological construction and self-development capability, West China is still vulnerable; its infrastructure is still backward, and a self-development mechanism absent. Compared with the eastern costal areas, the west still has a long way to go. That's the more sobering news.

CT: Does the Western Development Drive boil down to "poverty relief"?

Mr. Wei: No. They are totally different. You cannot draw a parallel between West China and poverty, though it may have a denser concentration of poverty than other parts of the country. The west also has many big cities. I should reiterate that the goal of the Western Development Drive is to enhance the internal capabilities of West China to drive its own economic prosperity and social progress and achieve environmentally friendly modernity on its own.

CT: What are the major obstacles to western development?

Mr. Wei: For the time being, industrial structure is a problem. The shrinking proportion of processing industries and the increasing size of mining and raw materials exports are detrimental to the optimization of the local industrial structure.

Secondly, the urbanization gap between the west and the eastern coast is widening. According to our study, the gap in terms of per capita GDP between the west and the east coast started to close in 2003, and in 2007 the gulf between their urban residents’ incomes and industrialization levels began to narrow. But their urbanization gap has started to broaden, which is harmful to the development of the west.

Thirdly, the increase in job opportunities in the west is too slow to meet demand. Investments are concentrated in energy and heavy chemical industries, which are capital-intensive, but not labor-intensive. Sichuan, for example, is a populous province, and local industry cannot generate enough job opportunities for its surplus labor force.

Fourthly, poverty has always been a problem for the west. In 2008 the local poor were enumerated at 26.488 million, and the poverty occurrence rate was 9.3 percent. The majority of China's rural poor live in the west.

Finally, industrial development in the west is sustained by high carbon dependency. In 2008 its energy consumption for every RMB 10,000 of GDP was 2.02 tons of standard coal and every RMB 10,000 obtained in industrial added value burned 3.43 tons of standard coal; they were respectively 83.6 percent and 56.6 percent higher than the national average, and 117 percent and 126 percent higher than the eastern level.

CT: What are the challenges to the Western Development Drive?

Mr. Wei: The state has issued a series of supportive and preferential policies, but they have not effectively reflected the "differentiation and classified guidance" principles. Geographical, economic and social conditions vary a great deal among the western regions. There are big cities with strong scientific and economic foundations, such as Xi’an, Chongqing, Chengdu and Lanzhou; but there are also out-of-way and extremely backward areas, as well as indomitable deserts and frozen alpine zones. Since the policies do not adjust to such disparities, their effectiveness is uneven.

Following the implementation of the Western Development strategy, the state launched some other initiattives, such as the "Rejuvenation of the Northeast" and the "Thrusting of Central China." The state has also put forth many new plans, proposals and policy measures designed specifically for designated areas. Their emergence has eclipsed the original Western Development strategy, depreciating its overall value.

In addition, China's commitment to developing a low-carbon economy to mitigate the effects of climate change also thwarts progress in West China. It burdens them with stringent ecological and environmental requirements that other developed zones did not have to contend with, plus a higher development threshold and a bigger bill for achieving the same ends.

CT: What are the biggest hindrances in the development of West China?

Mr. Wei: I think the most important are old ideas and concepts. Based on our study, economic approaches in the west are at least 10-15 years behind the east coast conceptually. The makeup of a bulky state-owned economy and a weak private sector is also disadvantageous to its development.

Lack of human resources is another hindrance. There is both a general and structural shortage. Most human resources in the west work for government departments, state-owned enterprises, or for concerns in the few big cities. Most of these specialize in the humanities, while high-tech experts and managerial talent are few and far between.

CT: What do you think are the key points that follow-up policies should address?

Mr. Wei: The State Council is currently drafting a statute to push forward the Western Development Drive. In my opinion, it should address the following areas:

First, there's a need to enhance policy effectiveness. A differentiated and classified policy would shape a system that distinguishes different areas for the ways each must uniquely flourish. Core cities, natural resource deltas, old industrial bases, poverty-stricken areas and frontier areas should all be demarcated.

Second, a national demonstration park for industrial transfer – free of pollution violations – should be set up, and supportive policies regarding investment, finance, credit and land use should be promulgated.

Third, an equal level of basic public services should be promoted for western areas in the fields of science and education, sports, culture, medicine and public health, greening and gardening, environmental protection, and social security.

Fourth, the tax policy for the west should be updated. Upon its expiration in 2010, the current preferential tax policy should be extended for another 10 to 20 years. An even lower tax rate should be applied, and tax-free zones should be concentrated in relatively poverty-stricken areas to stimulate the local economy.

Fifth, a resource and ecology compensation mechanism should be set up to protect western ecological zones and the general environment.

In addition, we should strengthen poverty relief to enhance West China's self-development capability. The development of its border areas should be enabled first, then channels can be opened between West China and Central/ East China, Northeast China and neighboring countries, to accelerate its economic development.