China goes west

“The coastal areas, which comprise a vast region with a population of 200 million, should accelerate their opening to the outside world, and we should help them develop rapidly first; afterward they can promote the development of the interior,” Deng Xiaoping stated in 1988, laying out a plan by which China’s economy would undergo reform. In the decades since, China’s eastern coastal region, including the cities of Shenzhen, Guangzhou, Shanghai, Suzhou, Beijing and Tianjin have become the central powerhouses of China’s economy.

The vast western interior, however, from Xinjiang in the far west to Yunnan in the south and Inner Mongolia in the north, still lags behind economically. With the announcement of a second plan for western development, the “Go West Plan” or “Go West Strategic Blueprint”, President Xi Jinping intends to finally bring China’s vast western interior up to speed with the rest of the country.

The Western Development Plan

This is not the first time such an initiative has been announced. In 1999, General Secretary Jiang Zemin announced the Western Development Plan that was to promote infrastructure, encourage foreign investment and expand education to the six provinces (from Gansu to Yunnan), five autonomous regions (from Inner Mongolia to Tibet) and one municipality (Chongqing) that make up China’s western region. These twelve regions account for 71.4% of China’s area, but only 28.8% of its population.

The effects of the programme were mixed. Many of the western areas did see economic growth, but the western provinces still account for only around 20% of China’s GDP compared with more than 50% for the eastern coast. The difference in per capita GDP grew from 7,000 RMB in 2000 to 40,000 RMB in 2018 and inequality changed very little. Despite rhetoric promoting environmental preservation, the environmental impact of the highly pollutive industries was disastrous. Loose environmental regulations led to pollution of western sections of the Yangtze River, China’s main source of drinking water.

The liberal allocation of land quotas and high levels of investment through the programme encouraged the local governments to overstretch and overbuild even as they experienced population outflows. As a result, many industrial projects in those provinces were highly inefficient. Fiscal transfers from Beijing encouraged the local governments to borrow irresponsibly. As a result, some western provinces such as Guizhou and Guangxi are among the most indebted in the country. Their overall outstanding debt was more than 1.5 times above their revenues in 2019.

Many commentators at the time saw it less as a genuine attempt to improve livelihoods and more as an effort by the Communist Party of China (CCP) to exert greater control over the country’s more secluded provinces. The plan emphasised large infrastructure, such as roads, railways and bridges, that connected the Tibetan capital, Lhasa, to Beijing or Urumqi, the capital of Xinjiang, to Kashgar in its remote west.  These large-scale projects and others, such as a 4200km gas pipeline from the Tarim basin in Xinjiang to Shanghai, rather than more localised education and health infrastructure, point towards exploitation of these resource-rich areas rather than a genuine attempt to alleviate poverty.

There were also those who saw the large roads and railways stretching for thousands of miles as something even more malevolent – quick transport links for military and security forces. The western regions have the highest proportion of non-Han ethnic minorities. Both Xinjiang and Tibet are regions in which Uighurs and Tibetans are the majority. The infrastructural connections helped the central government control those regions firmly and prevent any uprisings or independence movements that would threaten Chinese “unity”.

The Go West Plan

On May 18th, in advance of the 13th National People’s Congress, the CCP announced a new Go West Plan to be implemented in China’s 14th five-year plan (2021-5). Similarly to its predecessor, the plan will involve a series of infrastructure projects including airports, railways and digital and energy infrastructure. It will also encourage industrial relocation to the western regions and hopes to encourage foreign investment.

Whilst precise details will only be announced in spring of 2021, the Go West Strategic Blueprint indicates Beijing’s priorities going forward. Aside from being an attempt to alleviate poverty in the West and make the country’s economy more equitable, there are a variety of strategic considerations at play.

One key goal of this plan is to strengthen China’s self-sufficiency. In large part, this is strategically important as trade tensions with the US escalate to the point of being a new “Cold War.” In light of those tensions and perception of a hostile international system, building up the economies of the western provinces would serve as security if the east were to suffer under sanctions or increased tariffs. With the added uncertainty of the coronavirus pandemic and its potential effects on global supply chains, China could want to secure itself against future decoupling.

The Go West Plan also ties into another of Xi Jinping’s signature projects – the Belt and Road Initiative. The western provinces form the link between China and Southeast Asia and Central Asia (and beyond towards the Middle East and Africa); two regions that are central to China’s Belt and Road Initiative. Investment in physical and digital infrastructure along those border regions would strengthen connections to these regions.

There are those who consider this an important step towards a new China-centred economic system. A greater degree of self-sufficiency, less reliance on the West and stronger ties to partners in the Belt and Road Initiative all serve to strengthen China’s position independent of the traditional global system. In the words of Gong Gang, a professor at Yunnan University of Finance and Economics, China should no longer be a “peripheral nation in a system centred on the US”.

As with the Western Development Plan of two decades ago, national security concerns may also be at play. In recent years, the central government has cracked down on minorities in Xinjiang in particular, incarcerating millions of Uighurs in “re-education camps”, suppressing their culture and sending thousands of Han Chinese to the special autonomous region. The new Go West Initiative would help Beijing exert greater control over these areas. New infrastructure would also strengthen China’s western and southwestern borders at a time when tensions are high with India in the Himalayas.

The timing of the announcement was unfortunate. China’s Western regions came back into international headlines in late June when reports surfaced of a sterilisation campaign against the Uighur ethnic minority in Xinjiang. There have been calls for investigations into international companies with factories in China’s west after reports emerged of forced Uighur labour.

This has not made foreign investors forthcoming. Furthermore, many international entities are suffering from regional development fatigue in China. To many, the Go West Plan seems to be another debt-fuelled project by Beijing that will result in inefficiency and squandered resources.

If China wants to create a new international economic system centred on itself, the development of its Western provinces will be important. As such, the Go West Plan may represent one step towards that larger goal. However, for it to be successful, the focus will need to be on more long-term development goals or it risks becoming a repeat of its predecessor – highly pollutive, inefficient and debt-ridden.

For now, the US-centred economic system based on the US dollar looks unthreatened. But one benefit of a single-party state with an obsession with economic planning is that it can work gradually towards long-term goals. The question is whether it will be successful in achieving them.

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