THE 21st century is being called ‘the Chinese century’. Just as the US was emerging as the most powerful state in the world at the dawn of 20th century, China is emerging now as a pre-eminent power.
It has the largest population and the fourth largest territorial area in the world. It has a wealth of valuable natural resources and most important of all is its economy which has been growing at an astonishing rate of around 10 per cent for the last 30 years.
In purchasing power parity terms, China has become the second largest economy in the world after US and experts predict that it will be the biggest after two more decades. This is an amazing feat for a country that was classified as poor not many years ago. It’s future also appears bright as China leads the world in attracting foreign direct investment.
All these figures, however, camouflage the vast regional disparities that exist in China. It is the eastern region of China that is steaming ahead while central and western regions are lagging behind.
As the map shows, most of the less developed areas, with GDP per capita around 4000 yuan, are in the West while most of the developed areas, with GDP per capita five to 10 times higher (20,000—40,000 yuan), are in the East.
According to one estimate, the GDP per capita of western region is only one-third of GDP per capita of eastern coastal region and despite having 30 per cent of population, its share in China’s economic output is less than seventeen per cent (2003).
Other figures show the same disproportion. Ninety per cent of foreign direct investment( FDI) coming to China goes to eastern region while only four per cent goes to western provinces. Industrial performance, exports and R&D also point to the same discrepancy.
The western region of China is not a small area. Its area consists of more than 70 per cent of Chinese territory. Chinese leadership has realised that status quo needs to be changed. In 2000, the State Council created a leadership group for Western China Development headed by the prime minister. The strategy was to invest in education and infrastructure and give other incentives to attract foreign investment in the region. Starting from 2001, Chinese government launched major infrastructure projects and capital construction investment became higher in western than eastern China.
Moreover, preferential policies were offered in terms of development of science and education, capital input, investment environment etc. In April 2002, President Jiang Zemin reiterated the importance of western region by saying “ ‘Develop the West’ strategy is of great and far-reaching significance for accelerating the development of China’s central and western regions, China’s modernisation and the resurgence of the Chinese nation”.
But why will the foreign investors go to the remote regions of western China when they can easily invest in the developed eastern regions? Why will the multinationals risk by investing in relatively uneducated and unskilled populace, when they can invest in the regions, which are politically stable and technologically at the cutting edge? And why should investors increase their costs by setting their factories thousands of miles away from the export handling seaports?
Just take a look at the distances of Urumqi (capital of Xinjiang) from various ports of China. All of them are about or more than 4,000 km. With the condition of roads and railways in China, it will take millions of yuans of manufacturers to transfer their goods to ports and even after this expenditure the time of travel is not guaranteed.
It appears that the incentives given were not enough. The latest Economic Development Report on Western China released in Beijing in April, 2006 shows that despite six year of concerted efforts the gap between western and eastern China is actually increasing.
In 2005, per capita disposable income of urban dwellers in western China was 66.7 percent of the disposable income of urban dwellers of eastern China, which was three percentage points lower than the 69.7 per cent, the figure recorded in 2004.
For the rural residents of western China, the drop was even bigger. Their disposable income was 44.2 per cent of rural residents of western regions, which was 3.8 percentage points lower from 48 per cent, the figure recorded in 2004.
Perhaps Chinese government has to offer a bigger incentive and here Pakistan can help China and also help itself. China trade with the Middle Eastern and North African (MENA) countries is increasing rapidly. It is already the largest trading partner of UAE and Sudan and second largest trading partner of Iran and Jordan. Some people will think that this boost in trade is due to China’s increasing appetite for MENA oil but it is not.
China’s exports are expanding. For example, its share of Saudi Arabian market doubled from 3.6 in 2000 to 7.2 per cent in 2005. Similarly, China’s trade with EU is growing; EU is its largest trading partner and has become the second biggest trading partner of EU countries, with two-way trade around 180 billion euros.
All these traded goods and commodities, worth billion of dollars, have to take a trip of thousands of miles to reach their destination. The distance between Middle Eastern ports and Shanghai is around five thousand nautical miles while for European ports it increases to ten thousand nautical miles. Compare it with the distances of these markets from Pakistani port Gwadar. For Middle Eastern markets it is less than thousand miles and for European markets, it is less than 6,000 nautical miles.
As western China is only around 2,000 miles from Gwadar, it makes business sense to make goods for Middle East and EU in western China and then export it through Gwadar. Only in this way can the goods made in western region will be competitive with those made in east and only then investors will be ready to put their money in these remote regions.
Moreover, western China and Pakistan can also serve as energy corridor for the booming provinces of eastern China. It will not only provide eastern China with cheap and secure sources of energy for its rapid development but also provide a boost to the economy of western China and Pakistan.
President Musharraf in his recent visit to Shanghai said that his government would do all to turn Pakistan into an energy corridor for China. There are several proposals floated in this regard. The first one and most likely to be implemented is a pipeline from Iran to China.
The feasibility study of this project is already underway. Another one is to initially establish a rail link and transfer LPG from Middle East to China by using railway carriages, as billions of dollar investment will be required for the pipeline. Railway link will also provide a cheap way to transfer other goods to and from western China, changing it from a remote region to a station that will transfer goods and commodities worth billion of dollars every month..
Western China can develop and come at par with eastern China soon. The problem is the difficult terrain and thinking outside the box, but as Chinese and Pakistani engineers have shown before while making Karakorum Highway, where there is a will, there is a way.