China Market Guide

Western Region Development

Brief Introduction on China's Western Region

China's western region includes 10 provinces, municipalities and autonomous regions: Shaanxi, Gansu, Qinghai, Ningxia, Xinjing, Sichuan, Chongqing, Yunnan, Guizhou, and Xizang. The region covers 5.38 million square kilometers, 56% of the country land area, and has a population of 287 million people, 22.99% of the national total.

The territory of the western region is vast, its population sparse, and its undeveloped economic resources need to be strengthened and exploited. Of the China's poor who lack adequate food and clothing, the majority live in this region. It is also the region in which most of China's minority nationalities live.

Natural resources in the western region are very rich. Total water resource account for 82.5% of the nation's total, and utilized water reserves account for 77% of the total, though only 1% of these reserves has been used. The region's mineral reserves are also huge. According to statistics for verified reserves, the region holds 36% of the nation's coal reserves, 12% of its petroleum and 53% of its natural gas reserves. 120 out of 140 categories of verified natural mineral resources are found in the western region, with some rare metal reserves among the richest in the nation if not the world. It's tourist and cultural resources are also rich. In this region we find the clay warriors and horses of the First Emperor's tomb, the Mogao Caves, Jiuzhaigou, etc.

Since the People Republic of China was established over 50 years ago, the industrial systems, transportation, telecommunication, science, technology and education in the region have greatly developed and a sound foundation has been laid for progressive development.

The western region is contiguous to more than 10 countries with borders extending over a distance of 12747 kilometers. With such extensive borders, there is no doubt that the region presents an attractive outlook for international trade with the border countries. The Silk Road that cut across the western region has ever been the first passage of China's exchange with outside world throughout its long history. The present western region will increasingly flourish, representing the glorious process of the region's massive development.

Policy Orientation and Measures for Western Region Development

Western China development needs new ideas, new measures and new mechanism, which can fit into new circumstances. Practical policies especially are needed to be worked out and promulgated in a timely manner so that reform, opening up and economic construction in western China can be carried out speedily. This is an important task of the Western China Development Office.

At present, all related organizations of the State Council are formulating policies and measures, which can help western China development. Referring to suggestions of other parties concerned and taking all factors into consideration, the Western China Development Office is formulating a comprehensive policy program for the purpose of creating positive environment for the implementation of western China strategy and rapid development of the region. Policies of reform, science, technology and education will be given special attention.

Reform and opening-up are key areas in the course of policy-making. To deepen reform of state-owned enterprises, invigorate enterprises and develop urban and rural enterprises of different ownerships including collective enterprises, individual entities, private enterprises and foreign enterprises, so as to gradually make the enterprises as the main entity in western development. Western regions should be more opened to the outside world. People's mind should be changed. We will also improve the investment climate, expand areas that foreign investors can invest, strive for long term and favorable foreign loans, develop export-oriented economy, and expand exchanges with foreign economic technologies. Western areas should be accelerated to the domestic enterprises. Conditions should be created to attract enterprises in eastern areas to invest and bring management skills to western regions. Economic and technological co-operations and joint development in various forms between east and west should be further strengthened.

Policy researches on development of science and technology, effectively employ talented personnel, attract and train talented personnel should be strengthened. Accelerate the application of technologies in western development with focus on the promotion of applicable technologies, pay attention to introduce and digest technologies, and transform these technologies into products. Actively develop technology-intensified enterprises and strengthen technological services.Further measures should be taken to universalize the 9-year compulsory education, promote higher education, secondary education and professional education in various forms. Joint development between east and west on schools should also be conducted. Actions should also be take to well use of the existing personnel by all means, attract talented persons from outside the region, train persons in different fields at different levels that is of urgent need for western development, and exchanges working staff between eastern and western China.

Favorable Policies and Environment to Encourage Foreign

To guide foreign investment in mid and western regions, some favorable policies have been set up in succession. They include: 1) As to the projects under the Category A that restricts foreign investment, as long as they can take the advantages of the western resources and accord with the country's industrial policies, the restrictions can be moderately relaxed. The policy can be referred in "Temporary Regulations on the Guidance of Foreign Investment", which was issued in 1995. 2) In the "Catalogue of Foreign Investment Industry Guidance"(Dec. 1997 Revised Version), conditions for foreign investment projects in western regions were much more favorable. For instance, cement projects that have a daily capacity of 4,000 tons or more can be classified into the encouraged category only when it is set up in mid and western regions. Coal-fired power plants with a capacity of 300 MW per unit are classified into the restricted Category B except for remote areas, which is actually a favorable policy catering to the mid and western regions.

To coordinate with the western development strategy, the country, since last year, has and will continue to adopt some preferential polices to encourage foreign investment in China's mid and western areas. The policies are as follows:

    1) As is decided by the State Council, the foreign investment projects in western regions under the encouraged category and Category B defined by the "Catalogue of Foreign Investment Industry Guidance" can enjoy a reduced 15% income tax rate by permission after 3-year period of existing favorable taxation policies expired. And for the export-oriented enterprises with a yearly export-to-productions rate of more than 70% or up, a reduced 10% income tax rate can be granted that year.

    2) The State Council has decided to upgrade 7 development zones from local level to the national level, namely, Xi'an, Chengdu, Kunming, and Guiyang in western regions and Hefei, Zhengzhou, and Changsha in the middle of China.
After the 50-year construction, especially the 20 years of the reform and opening up, the economic power of the western regions has been improved remarkably. Economic conditions in various aspects in Chongqing, Xi'an, Chengdu and Kunming are no worse than those of some coastal cities. What's more, in light of attracting foreign investment, western regions have their own advantages: abundant natural resources, low labor costs, cheap land rents, and huge potential markets.

However, by the end of 1999, foreign investment projects, the amount of contractual foreign capital and the amount of real utilization of foreign capital in western regions (Sichuan, Chongqing, Guizhou, Yunna, Shaansxi, Gansu, Qinghai, Ningxia, Xinjian, and Tibet) still accounted for a small proportion of the whole country.

To implement the Go West policies, it is vital to accelerate the improvement of both soft and hard investment environment of the regions, including ecological environment, population quality, awareness of the market economy, educational level, density of high-quality human resources, experience for utilizing foreign capital, industrial bases and transportation and telecommunication facilities, so as to vigorously attract foreign investment into the regions.

It should be noted that the proportion of foreign investment in western regions has shown an upward trend in recent years. With the implementation of the Go West strategy, the increasing of state investment and the perfecting of investment environment, foreign investment in the western regions will grow rapidly.