Strife-hit Xinjiang set for economic boom

PUBLISHED : Saturday, 22 May, 2010, 12:00am
UPDATED : Saturday, 22 May, 2010, 12:00am

The central government's massive programme to help revive Xinjiang is set to usher in a new round of development - but there is concern that an economic boom may not end ethnic strife if Beijing fails to implement corresponding reforms in social and ethnic minority policies.

At a conference chaired by President Hu Jintao and attended by top Communist Party officials that ended on Wednesday, Beijing pledged to raise per capita gross domestic product in Xinjiang to the national average by 2015, and eliminate poverty in the region by 2020, as the leadership struggles to deal with ethnic tensions there. 'It is the most important meeting on the region since the founding of the People's Republic in 1949, which will usher in a new development era for the region,' said Professor Wei Houkai, director of the Western Development Research Centre at the Chinese Academy of Social Sciences.

Xinjiang is one of China's poorest areas, although its economy has been among the country's fastest growing in recent years thanks to increasing development of its energy resources to meet soaring demand in China's main population centres in the east. The per-capita annual income of rural households in Xinjiang was 3,503 yuan (HK$3,995) in 2008, compared with a national average of 4,140 yuan. The per capita income of its urban residents was 11,432 yuan, compared with a national average of 15,780 yuan.

Investment in the region in the next five years could run to 2 trillion yuan, the Shanghai Securities News reported yesterday.

Stocks of companies based in Xinjiang surged in mainland trading yesterday on expectations that increased investment would boost corporate earnings. Xinjiang Urban Construction, Xinjiang Tianye and Xinjiang Beixin Road & Bridge Construction all rose by the 10 per cent daily limit in morning trading.

Zhuang Jian, senior economist with the Asian Development Bank, said the comprehensive support policy would result in an investment boom in the region.

The day after the meeting, the top executives of giant state monopolies pledged to increase investment.

Wei said a preferential tax policy - which will exempt enterprises investing in impoverished areas in Xinjiang from income tax for two years, with a further 50 per cent reduction for another three years - would also help the region attract outside investment. Similar policies were introduced in the 1980s and '90s in coastal regions, including Shenzhen and Shanghai's Pudong district, to help them attract foreign investment.

Xinjiang will also become the main test bed for a policy that will change the way tax is charged on resources, to a price-based rather than volume-based levy. Industrial insiders said the change would impose 5 per cent ad valorem resource tax, pegged to prices.

Zhuang said the change was expected to significantly increase tax revenue for the vast, energy-rich region, as the tax would be a local levy. 'That means that local revenue would see sustainable and perennial growth in the future as a result of growth in oil and natural gas production,' Zhuang said. Xinjiang is the mainland's second-biggest oil- and gas-producing region.

The landlocked province had the country's deadliest violence in decades in July last year. At least 197 people died and thousands were injured, according to official figures, after Turkic-speaking Uygurs clashed with the dominant Han Chinese.

Zhuang said that while the central government was trying hard to reduce regional development imbalances by promoting rapid economic growth in impoverished western regions, the government would also focus on solving income disparities among different ethnic groups.

Uygurs, like the indigenous inhabitants of Tibet , have complained that Han Chinese, who dominate regional governments and big state firms, benefit most from the development of natural resources.

Zhuang said Beijing would not maintain long-lasting social stability if it failed to reform its ethnic minority policies and distribution system and establish corresponding social policies to help ethnic minorities.