Looking for a New Model

By LIU XINLIAN

Looking for a New Model

By LIU XINLIAN

Avoiding the mistakes of the east creates challenges and opportunities for the west

An automobile factory near Yinchuan in northwest China’s Ningxia Hui Autonomous Region stands vacant among a number of busy newly built plants. After producing only four prototype cars in the three years since opening, the plant, owned by southwestern Chengdu Newland Automobile Co. Ltd.which sunk 1.8 billion yuan ($279 million)into the 20-hectare facility, was forced to close in September 2010, said a report on the Beijing-basedChina Business Times.The closure came after Chengdu Newland failed to apply for approval procedures and produced cars without a manufacturing license, said the Ministry of Industry and Information Technology (MIIT).

Now, weeds and various shrubs have started to reclaim the factory. No plans have been laid out to reopen the facility, said the report.

The failed project illustrates the problems facing west China’s development as it looks to attract investors, said Mao Zhenhua,Director of the Institute of Economic Research at the Renmin University of China.

“Many problems existed when the east was developing. The western region, at this early stage in its development, should look for a new path by learning from the lessons of the east,” said Zhang Shuguang, a researcher at the Institute of Economics with the Chinese Academy of Social Sciences.

If west China follows east China’s development path and doesn’t adjust itself to western conditions, it will pay a high economic and ecological price, said Wang Zaiwen, Deputy Director of the Training Center of the National Development and Reform Commission.

Too much of the same

The west holds vast amounts of land and natural resources. It also has a vulnerable environment, low productivity and a high poverty rate. But the 6.95-million-square-km territory’s main feature is its diversity.

But many of the regions are not embracing their unique assets and advantageous industries, instead sticking to a largely homogenous economic development path.

“There exists high homogeneity of industrial structure in central and west China,” said the 2010 Report on Regional Financial Operations in China released by the People’s Bank of China, the central bank, in June.

The non-ferrous metal industry, especially electrolytic aluminum, has been migrating from east to west but in a seriously disordered fashion due to a lack of planning and administration, said an MIIT report released on August 1.

The ill-planned transfer has exacerbated problems in the already bloated domestic electrolytic aluminum industry.

Li Defeng, Director of Aluminum Department of China Nonferrous Metals Industry Association, said more than half of the country’s electrolytic aluminum capacity will be located in fi ve provinces or autonomous regions in west China in the next five years,including Xinjiang Uygur, Inner Mongolia and Ningxia Hui autonomous regions, and Qinghai and Yunnan provinces.

Rising costs, a result of rising power prices, are also hindering production. Some producers in central and west China have meager profits or are suffering losses, said the MIIT report.

The same blind investment has struck other industries, such as polysilicon, cement and copper.

The MIIT on May 27, 2010 required the elimination of outdated industrial production capacity. The target is to reduce the electrolytic aluminum production capacity by 339,000 tons,iron by 30 million tons, steel by 8.3 million tons,cement by 91.6 million tons, and glass by 6.5 million weight cases.

For western provinces or autonomous regions with almost the same investment plan, it is urgent to develop advantageous industries on a case-by-case basis.

“Currently, many local governments are rushing to draft copycat industrial plans, and their plans are not based on their own natural resources and other conditions,” said Liu Qihong, Director of the Regional Economy Research Center of Nanjing-based Hohai University.

The State Council issued guidelines on industrial transfers from the east to the west in September 2010. The central and western regions should develop their own advantageous industries individually, said the guideline.

In a bid to shake up investment in west China, the guideline set a basic principle for the western region to follow, namely,adjusting measures to local situations and enhancing guidance and administration.

To improve the investing environment in central and west regions the government will provide policy support through tax incentives, land use and financing, said the guideline.

Experts and scholars say, fostering new growth points is the most important key to solving blind construction and investment.

The 11 years following the launch of the western development strategy have shown optimized inter-regional economic planning is the most vital part of promoting balanced economic development among regions and bridging regional gaps, said Chen Zongxing,Vice Chairman of the 11th National Committee of the Chinese People’s Political Consultative Conference.

The Chengdu-Chongqing Economic Zone, Guanzhong-Tianshui Economic Zone and Guangxi Beibu Bay Economic Zone became the strategic pillars propelling the development of China’s west, said Chen.

“In the future, we should create more economic growth belts and areas according to the natural conditions and resources.For example, the Lanzhou-Xining-Golmud Economic Zone, Shaanxi-Gansu-Ningxia Economic Zone will become the new growth belt,” said Chen.

Chen also suggested launching green economy pilot projects in some cities with rich resources, like Qaidam Basin in Qinghai Province, Erdos in Inner Mongolia and Liupanshui in Guizhou.

LIU QUANLONG

EMERGING WEST: An employee works on the production line of the world’s second largest electronics connector maker Molex Inc.’s plant in Chengdu,capital of Sichuan Province

Environmental priority

West China, characterized by its highly vulnerable ecosystem, is faced with the dilemma of driving economic growth but not at the cost of environmental damage, a problem the east was not able to solve.

West China should not follow the east’s path of “pollution fi rst, treatment later,” said Wang.

Most of the industries transferred from east to west were labor-intensive, high energy-consuming and high-emission producing, a report in the Beijing-basedChina Environment Newssaid.

Jiangxi Province has warmly welcomed the textile, plastic and shoe industries, reported theChina Environment Newsciting the Jiangxi Provincial Commission of Industry and Information Technology. Western cities even invited backward and outdated industries from the east. While eastern Zhejiang Province was regulating its highly polluting lead-acid battery industry, central and western provinces offered favorable policies to invite the poisonous producer.

The phenomenon of the west gobbling up the east’s unwanted leftover industries is becoming a hazardous trend, said Zhu Hongren,chief engineers and spokesman for the MIIT.

The Ministry of Environmental Protection reported in 2005 the serious pollution in Shaanxi, Shanxi and Inner Mongolia was a result of heavy industries that manufactured coking coal, cement and carbide.

A World Bank report issued in 2007 showed China’s pollution cost about 5.8 percent of GDP each year.

The west pays much higher environmental costs from pollution because of its vulnerable ecology, said Shi Minjun, a researcher with the Management School of the Chinese Academy of Sciences. Once the west is polluted, its severity will exceed pollution in other parts of the country because of its upstream location along important water systems, said theChina Environment Newsreport.

The country issued the Catalog of the Advantage Industries of Foreign Investment in Central and Western Regions in 2004 and its amended version in 2008.

Foreign investors will be encouraged to invest in labor-intensive industries that meet the requirements of environment protection in central and western regions.

The catalogue was compiled to prevent highly polluting and energy-consuming industries and backward production technology from moving from the east to the west,said the report.

The guideline issued in September 2010 also said the government at various levels should screen potential investors in the region.

Attracting investment is not mandatory for local business-promoting departments and vicious competition among regions is strictly prohibited, said the guideline.Industrial investment in central and western regions must be in line with ecological factors and backward industries are banned from setting up operations in central and western regions.

The environmental impact assessment should be implemented when receiving industrial transfers and environmental monitoring should be enhanced during the process, said the guideline.

Although the country issued the guideline to curb high-polluting industries,containing the momentum of pollutionheavy industrial transfers is unlikely, said theChina Environment News. What the country really needs is a separate law to prohibit polluting industries in west China.