LexisNexis(TM) Academic - Document
LexisNexis(TM) Academic - DocumentCopyright 2005 The Financial Times Limited
Financial Times (London, England)
June 24, 2005 Friday
London Edition 1
SECTION: ASIA-PACIFIC; Pg. 10
LENGTH: 792 words
HEADLINE: China's 'go west' investment policies to limit wealth disparities show limitations: Even Beijing's communist leaders admit a regional economic balancing act is impossible, writes Mure Dickie
BYLINE: By MURE DICKIE
BODY:
South Korea's SKTeletech raised eyebrows last year when it announced plans to build a mobile phone factory in Urumqi, capital of China's far western region of Xinjiang.
Xinjiang, a sparsely populated and economically backward region with an economy based heavily on desert oil drilling and cotton cultivation, is not an obvious place to try to establish an electronics business.
But SK Teletech, an affiliate of the SK Telecom group, did not have much choice.
Asked why the Koreans would choose a remote region with limited skilled labour, Cha Xinming, a senior official of the Urumqi economic and technological development zone, points out that only companies approved by the government can make mobile phones in China.
Allowing SK Teletech to set up in China's more developed east could have resulted in a "major loss of social resources", Mr Cha says. "(They had to) fit in with the Great Western Development policy," he says. Such determination to direct high-technology investment towards Xinjiang reflects the importance put by China's government on boosting the economy of the country's western regions.
The five-year-old western development policy is aimed at limiting regional wealth disparities that have yawned ever wider as the economies of China's eastern provinces boom.
It is also intended to ease ethnic tensions and cement Beijing's rule in frontier areas such as Xinjiang, where many among the mostly Uighur local population see Chinese officials and settlers as foreign occupiers.
In Xinjiang, the impact of the policy is easy to see. Urumqi boasts a gleaming new airport terminal and upmarket department stores in its Chinese-dominated centre. A local executive talks with pleasure about the speeds he can reach in his Mazda sports car on a new road built into the desert. "Practice has proved that the central authorities' policy decisions, guiding principles, policies, and key tasks for implementing the strategy of the great development of western regions are absolutely correct," a meeting of Chinese leaders concluded last month.
Even Beijing's self-congratulatory communist cadres recognised that "myriad difficulties and problems" still plagued the western regions, however.
Indeed, some senior officials publicly acknowledge the limitations of the western development policy. Lou Jiwei, vice-finance minister, says fiscal transfers to western regions totalled Rmb600bn (Dollars 72.5bn, Euros 60bn, Pounds 40bn) last year, but that this was only enough to ensure public spending there matched eastern levels.
"I think it is impossible for development of the west to rely on fiscal spending. It has to rely on the strength of the market," Mr Lou says in an interview.
In Xinjiang, officials see pulling in investors such as SK Teletech as a way of putting market forces to work for the region's benefit.
The new SK Mobile, a joint venture with Chinese telecommunications equipment manufacturer Datang and a Xinjiang property group, is expected to prompt a number of related investments from parts producers that will lay the foundations of a new electronics sector in the region. "By helping Xinjiang to attract some relatively high-tech companies . . . the state is driving Xinjiang's economic development," says Mr Cha.
SK Mobile is also keen to look on the bright side of its Xinjiang base. Ma Chaoying, company vice-president, says the venture sees a potential market in central Asian states that border the region, although he admits it is still "not clear" how big a source of demand they might be.
But the reliance on administrative influence to push investment westward highlights regional authorities' inability to offer the kind of generous tax breaks and other special treatment that might make private companies eager to come.
SK Mobile will get cheap land, but even that is often available much further east. "The government's attitude is 100 per cent supportive, but the scope of its incentive policies are limited by state regulations," admits Mr Ma.
Even if SK Mobile confounds its doubters and thrives in China's hugely competitive handset market, Xinjiang is likely to be forced to seek new ways to attract investors.
General liberalisation of the Chinese economy is gradually reducing officials' leverage over investment decisions. Since SK decided to set up in Xinjiang, new regulations have allowed a number of new mobile handset manufacturers based in eastern areas to enter the market.
Even if Xinjiang is able to drag in other electronics investors, it is unlikely to ever become a centre of Chinese high-tech manufacturing - and it might be wiser to focus on other opportunities.
It is impossible to achieve complete economic balance between China's regions, warns Mr Lou. New Asian invasion, Page 17 Samuel Brittan, Page 19
LOAD-DATE: June 24, 2005
Financial Times (London, England)
June 24, 2005 Friday
London Edition 1
SECTION: ASIA-PACIFIC; Pg. 10
LENGTH: 792 words
HEADLINE: China's 'go west' investment policies to limit wealth disparities show limitations: Even Beijing's communist leaders admit a regional economic balancing act is impossible, writes Mure Dickie
BYLINE: By MURE DICKIE
BODY:
South Korea's SKTeletech raised eyebrows last year when it announced plans to build a mobile phone factory in Urumqi, capital of China's far western region of Xinjiang.
Xinjiang, a sparsely populated and economically backward region with an economy based heavily on desert oil drilling and cotton cultivation, is not an obvious place to try to establish an electronics business.
But SK Teletech, an affiliate of the SK Telecom group, did not have much choice.
Asked why the Koreans would choose a remote region with limited skilled labour, Cha Xinming, a senior official of the Urumqi economic and technological development zone, points out that only companies approved by the government can make mobile phones in China.
Allowing SK Teletech to set up in China's more developed east could have resulted in a "major loss of social resources", Mr Cha says. "(They had to) fit in with the Great Western Development policy," he says. Such determination to direct high-technology investment towards Xinjiang reflects the importance put by China's government on boosting the economy of the country's western regions.
The five-year-old western development policy is aimed at limiting regional wealth disparities that have yawned ever wider as the economies of China's eastern provinces boom.
It is also intended to ease ethnic tensions and cement Beijing's rule in frontier areas such as Xinjiang, where many among the mostly Uighur local population see Chinese officials and settlers as foreign occupiers.
In Xinjiang, the impact of the policy is easy to see. Urumqi boasts a gleaming new airport terminal and upmarket department stores in its Chinese-dominated centre. A local executive talks with pleasure about the speeds he can reach in his Mazda sports car on a new road built into the desert. "Practice has proved that the central authorities' policy decisions, guiding principles, policies, and key tasks for implementing the strategy of the great development of western regions are absolutely correct," a meeting of Chinese leaders concluded last month.
Even Beijing's self-congratulatory communist cadres recognised that "myriad difficulties and problems" still plagued the western regions, however.
Indeed, some senior officials publicly acknowledge the limitations of the western development policy. Lou Jiwei, vice-finance minister, says fiscal transfers to western regions totalled Rmb600bn (Dollars 72.5bn, Euros 60bn, Pounds 40bn) last year, but that this was only enough to ensure public spending there matched eastern levels.
"I think it is impossible for development of the west to rely on fiscal spending. It has to rely on the strength of the market," Mr Lou says in an interview.
In Xinjiang, officials see pulling in investors such as SK Teletech as a way of putting market forces to work for the region's benefit.
The new SK Mobile, a joint venture with Chinese telecommunications equipment manufacturer Datang and a Xinjiang property group, is expected to prompt a number of related investments from parts producers that will lay the foundations of a new electronics sector in the region. "By helping Xinjiang to attract some relatively high-tech companies . . . the state is driving Xinjiang's economic development," says Mr Cha.
SK Mobile is also keen to look on the bright side of its Xinjiang base. Ma Chaoying, company vice-president, says the venture sees a potential market in central Asian states that border the region, although he admits it is still "not clear" how big a source of demand they might be.
But the reliance on administrative influence to push investment westward highlights regional authorities' inability to offer the kind of generous tax breaks and other special treatment that might make private companies eager to come.
SK Mobile will get cheap land, but even that is often available much further east. "The government's attitude is 100 per cent supportive, but the scope of its incentive policies are limited by state regulations," admits Mr Ma.
Even if SK Mobile confounds its doubters and thrives in China's hugely competitive handset market, Xinjiang is likely to be forced to seek new ways to attract investors.
General liberalisation of the Chinese economy is gradually reducing officials' leverage over investment decisions. Since SK decided to set up in Xinjiang, new regulations have allowed a number of new mobile handset manufacturers based in eastern areas to enter the market.
Even if Xinjiang is able to drag in other electronics investors, it is unlikely to ever become a centre of Chinese high-tech manufacturing - and it might be wiser to focus on other opportunities.
It is impossible to achieve complete economic balance between China's regions, warns Mr Lou. New Asian invasion, Page 17 Samuel Brittan, Page 19
LOAD-DATE: June 24, 2005
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