Transcript Go West Policy

Go West Policy
Old Chinese Proverb: If you build
it, they will come
The Core-Periphery Issue
• Core-periphery theory is based on the
notion that as one region or state expands in
economic prosperity, it must engulf regions
nearby to ensure ongoing economic and
political success. The area of high growth
becomes known as the core, and the
neighbouring area is the periphery
• Core – East and South coasts – Beijing,
Shanghai, Shenzhen (SEZ), Hong Kong etc.
• Periphery – North, West (Tibet etc)
Go West
• With growth slowing in the crowded and
costly coastal centres, Beijing is ushering
investors to the more remote western
parts of China.
• The Government has implemented a
number of policies to encourage firms to
mover inland, however the effectiveness is
questionable.
Moving Firms – Easy?
• After years of easy expansion, densely populated
regions of coastal China are facing growing difficulties.
Labour and land costs are rising fast in Shanghai, with
commercial rents up nearly 40% over the past three
years, while industrial space is simply not available.
Labour costs are inching up in Guangdong too, but the
bigger problem is finding any workers at all for its huge
manufacturing sector.
• "The operating environment in coastal areas is getting
worse and worse," says Zhai Suoling, general
manager of a toy factory in Dongguan. "Lots of
manufacturers are moving to inland cities." Indeed,
while foreign investment in central and western China
was up 7% in 2003 it actually fell by 0.2% in eastern
China.
Example
• Companies such as Honda now run
operations in inland provinces. They report
no shortage of skilled labour and increasingly
vibrant consumer markets. "Companies that
don't look at inland China will find themselves
disadvantaged," says Emory Williams,
chairman of the American Chamber of
Commerce in Beijing, which reports that 50%
of U.S. member companies have already
invested in second-tier cities.
• Moving west is now easier due to increased
infrastructure. Almost $9 billion has been spent on new
airports alone in the last five years, with twice as much
allocated for the next five. There are plans in place for a
national highway which will double the 34,000-km
highway network already the world's second most
extensive after the U.S. interstate system.
• Manufacturers of basic products like toys and shoes,
have been the first to migrate.
When a new road between the two provinces opens
next year, transit time will be cut to nine hours. With
land 50% cheaper in Jiangxi than in Guangdong, and
energy and water 25% less, the move is an obvious
one for companies,
Improved Access – Qingzang
Railway • Tibet relies upon the
•
•
•
•The line includes the Tangula Pass, which, at 5,072 m is the
world's highest rail track.
•Over 80% of the Golmud-Lhasa section, is at an altitude of more
than 4,000 m. - Hard + Expensive to build.
•
core for goods +
services.
Qingzang Highway
before - less than 1
million tonnes of
goods transported
each year.
Cost of transportation
of both passengers
and goods should be
greatly reduced.
The cost per tonnekilometre will be
reduced from 0.38
RMB to 0.12 RMB.
75% of all goods
transported via
railway.
Chongqing – China’s Chicago
• Size of Belgium - Population of 32mn.
• Gov’t led investment - $23bn on 105
major projects, including roads, rail links,
a container port and a major
environmental cleanup.
• Once the urban and rural infrastructure
improves, private sector investment
topping $200bn will follow over the next
decade.
• Mayor, Wang Hongju – ‘Chongqing is
becoming a rising, promising land in
western China.’
• But inward investment of private money is
slow to come, having reached just $8bn
over the past eight years.
Effectiveness
• Mixed Results.
• Chongqing's economy - 12.4% growth.
• However this is powered more by
constructing fixed assets than by a boom in
new manufacturing jobs.
• If Industry investors remain unconvinced with
Go West's potential and fail to invest over the
next five years, there will be real concerns
over this region's viability, not to mention its
social stability.