China Approves 12th Five-Year Plan for Western Regions

February 27, 2012 Posted by China Briefing Reading Time: 5 minutes

By Julia Gu

Feb. 27 – China’s State Council announced last week that it has approved the 12th Five-Year Plan for Further Promoting the Economy of the Western Regions (“the Plan”), a step that is aimed at narrowing the gap between the country’s wealthy coastal provinces and its under-developed western regions.

Specifically, the Plan will target 12 provinces: Xinjiang, Tibet, Inner Mongolia, Guangxi, Ningxia, Gansu, Qinghai, Sichuan, Chongqing, Shaanxi, Guizhou and Yunnan.

The seven major development goals set by China’s central government are as follows:

Increasing economic growth;
Expanding infrastructure construction;
Improving the ecological environment;
Providing better public services;
Developing and strengthening local industries;
Elevating people’s living standards; and
Reforming and opening up the region.

Economic Zones
In an attempt to ensure the efficiency of its “Go West” campaign, the central government has consolidated the 12 aforementioned provinces into the following featured economic zones:

Chengdu-Chongqing Economic Zone
Guanzhong-Tianshui Economic Zone
Beihai Gulf Economic Zone
Hohhot-Baotou-Yinchuan-Yulin Economic Zone
Lanzhou-Xining-Geermu Economic Zone
North Tianshan Economic Zone
Central Yunnan Economic Zone
Central Guizhou Economic Zone
Economic Zone Along the Yellow River in Ningxia
Central and Southern Tibet Economic Zone
Shaanxi-Gansu-Ningxia Economic Zone

The State Council stated that Beijing has planned the rapidly expanding Chengdu-Chongqing Economic Zone to be developed first. The area, which covers over 200,000 square kilometers, is comprised of 31 districts and counties within Chongqing Municipality and 15 cities in Sichuan Province. The Chengdu-Chongqing Economic Zone is regarded as one of the country’s top industrial bases, having already developed strong auto and equipment manufacturing, science, technology and national defense sectors.

The Plan showed that, by 2015, the Chengdu-Chongqing Economic Zone is expected to become a key economic center of West China and, in the longer-term (by 2020), the State Council wants the area to build itself into one of the strongest comprehensive regions in Mainland China. According to experts, the economic zone is looking to become the “fourth pole” to boost China’s economic growth, following the Bohai Bay, the Yangtze River Delta and the Pearl River Delta regions.

Infrastructure Developments
The Plan further asserts that infrastructure development is the undisputed key to the success of the region. The central government wants to more adequately integrate West China into the national transportation network by connecting it directly with the eastern seaboard, including the booming clusters of the Yangtze River Delta, Pearl River Delta and Bohai Bay Zone.

At the same time, international passages that connect Northeast Asia, Central Asia, Southeast Asia, and South Asia are going to be built in the coming years. The Lanzhou-Urumqi Express Railway’s second line project was launched in November 2009 and, after completion, the travel time between the two cities will be reduced to under 10 hours. When the Lanzhou-Chongqing Railway and Guilin-Guangzhou Railway are finished, Xinjiang will be even more connected with the rest of China. By then, the western cities of Chengdu, Xian, Lanzhou, Urumqi and Kunming will serve as major container stations for goods crisscrossing their way across Asia.

Furthermore, highways will be built to bridge Beijing with Kunming and Shanghai with Chengdu by 2015. International transport corridors that lead to Southeast Asia, South Asia and Central Asia are on their way, as well.

Other key development areas, such as resource-rich Inner Mongolia, Xinjiang and Qinghai, will be connected to each other by constructing more highways and railways, the State Council announced. By 2015, it is expected that the region’s railway network will expand by roughly 15,000 kilometers and that urban residents will account for up to 45 percent of the area’s total population.

In order to bring the region’s major cities closer to the rest of Asia and beyond, existing airports will be upgraded and expanded, while new ones will be constructed where they are needed.

Even the oil and gas transport network will be upgraded, according to the Plan. Presently, important projects include Phase II of the China-Kazakhstan crude oil pipeline, the Dushanzi-Urumqi pipeline, the Jiaopiao-Ruili-Kunming section of the China-Myanmar crude oil pipeline, and sub-lines of the Kunming-Chongqing pipeline.

As part of the Plan, West China will also speed up the development of its industrial chain – enabling the region to better take advantage of its abundant natural resources. Xinjiang, for example, can expand its petrochemical industrial chain by improving the existing Urumqi-Dushanzi-Korla network, while Qinghai can use its potassium resources to upgrade its fertilizer industry. Yunnan, Guizhou and Sichuan will work on phosphorus resources to help boost its food processing, food additives manufacturing, and other phosphate products. Meanwhile, Gansu will establish its chemical industrial chain by upgrading its industry centers with more vinyl processing plants, isocyanate plants, as well as improving its synthetic rubber processing and sulfuric acid utilization.

Besides economic development, the Plan outlined goals for West China’s ecological conditions. Forests should cover one-fifth of the land in the whole western area by the end of 2015, and water consumption should be cut by 30 percent per unit of industrial output growth.

Over the past five years, China’s western provincial economies have expanded by an average of 13.6 percent per year and have seen some 365,000 kilometers of highways and 8,000 kilometers of rail built over that time, according to official data. However, the development of inland China has largely been ignored, overshadowed by the performance of the coastal regions during the country’s recent transformation into the world’s second largest economy. Now, after bidding its time and addressing its shortcomings, West China looks ready to soon have its day in the sun.

Dezan Shira & Associates is a specialist foreign direct investment practice and can advise international companies investing in China on the country’s complete legal, tax and operational issues. The firm was established in 1992 and maintains 12 offices throughout China, in addition to practicing in Hong Kong, India, Vietnam and Singapore. For advice on investment opportunities or establishing a business in West China, please E-mail china@dezshira.com or visit our web site at www.dezshira.com.

Related Reading
Doing Business in China
The successor to our “China Business Bible,” this new, completely updated 156-page book covers all aspects of business in China, from the different types of legal structure, the full tax implications, human resources and labor issues, including cost analysis, intellectual property matters, a complete overview of China’s free trade and development zones, and on-going compliance issues such as tax filings and license renewals, audit and closure issues.

Business Guide to West China
172 pages. This book is a detailed overview of West China, including the provinces of Gansu, Guizhou, Ningxia, Shaanxi, Sichuan, Tibet, Xinjiang and Yunnan, and includes detailed introductions to the key cities of Chengu, Chongqing, Kashgar, Kunming, Lanzhou, Lhasa, Guiyang, Urumqi, Xining and Yinchuan.