China launches new Go West development drive to counter post-coronavirus geopolitical risks
- China is looking to its western regions to help steady the economy amid friction with the US and potential isolation in the post-coronavirus world
- Beijing’s new Go West plan will build on its Western Development strategy, which had only mixed results in boosting regional growth after it was launched in 1999
This is the first story in a three-part series examining the Chinese government’s new Go West plan to develop the central and western regions of the country in response to growing challenges in the international environment.
In July 2013, while at the Port of Qinzhou in southwest China, Premier Li Keqiang summed up the government’s plan for handling an oncoming external economic shock.
With merchandise shipments to the United States and Europe beginning to stagnate at the time, China was looking to use ports like Qinzhou, in the Guangxi autonomous region, to tap emerging markets such as neighbouring Vietnam.
“When it is dark in the east, it is bright in the west,” Li told the gathered port workers, surrounded by stacks of multicoloured containers and towering cranes.
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Seven years later, China is once again looking to the west to help steady the economy in an increasingly unpredictable world.
Faced with threats of economic decoupling from the US and international hostility stemming from its handling of the coronavirus pandemic, China is trying to harness its vast and energy-rich western regions.
Gong Gang, an economics professor at Yunnan University of Finance and Economics, said China could no longer continue as a “peripheral nation in a system centred on the US” after Washington had labelled it a rival.
China needs to embrace the belt and road countries, developing countries, and form a new system centred on itself
“Instead, China needs to embrace the belt and road countries, developing countries, and form a new system centred on itself,” Gong said. “China needs to shift to export yuan, rather than accumulate US dollar reserves with cheap exports.”
Coastal areas, especially the Pearl River Delta and the Yangtze River Delta, became the main beneficiaries, turning into the country’s growth powerhouses and leaving the interior regions behind.
While the government poured huge sums into its first Western Development Strategy to reduce regional inequalities, little has changed since it was launched in 1999.
[We]’ll further integrate western regions into the Belt and Road Initiative and other important regional plans to form a unified national market and build a higher-level export-oriented economy
As part of its new plan, Beijing has announced a series of infrastructure developments, including airports, railways and energy projects, while encouraging industrial relocation. Twelve provinces and regions – covering three quarters of China’s territory, but home to only a quarter of the country’s population – will take part in the scheme.
“[We]’ll further integrate western regions into the Belt and Road Initiative and other important regional plans to form a unified national market and build a higher-level export-oriented economy,” the National Development and Reform Commission said in an explanation of the new development blueprint.
A government source, who is involved in developing strategy for the Go West plan, said it was a direct response to the growing international uncertainties that China faces.
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“Economic planners often think about three strategic questions before planning: is the international situation certain or not? Is it good for China, or not? Will there be peace or war?” said the person, who asked not to be identified given the sensitivity of the matter.
Signs of China’s policy adjustment have already been seen in Beijing’s efforts to counter trade and technology conflicts with the US.
Last summer, city clusters were for the first time held up by the government as major platforms to generate new growth, including the Beijing-Tianjin-Hebei area, the Yangtze River Delta led by Shanghai, and the Pearl River Delta/Greater Bay Area which includes Shenzhen, Guangzhou and Hong Kong. The western cluster of Chengdu and Chongqing was added in January, as well.
During the visit to the western province of Shaanxi in late April, Xi praised Xi’an Jiaotong University’s westward relocation from Shanghai back in the 1950s and called for combining western development with the belt and road plan.
Wang Yiming, former deputy head of the Development Research Centre of the State Council, said China was now being forced to confront a profoundly different domestic and international situation.
“The triangle relations – where East Asia serves as a producing centre, Europe and the US are consumer markets and financial centres, while the Middle East and Latin America are energy bases – saw a systemic adjustment after the global financial crisis,” said Wang at an online symposium in early June.
“How [China can] better embrace emerging markets, developing countries and belt and road economic zones deserves further study,” he added.
There are some encouraging signs for China’s efforts to diversify economic connections via western development. For instance, the western regions have been so far less impacted by the coronavirus pandemic.
The west has also traditionally been the launching off point for trade with Southeast Asia, which surpassed Europe as the top destination for Chinese exports in the first five months of this year.
With location and [government] preferential policies in mind, market institutions will have to assess the commercial value of their investments in these regions
However, scepticism remains about how the government will unleash growth potential in the vast hinterland provinces and find a new way to connect the developing world and the European market.
“The push will largely rely on government resources,” said Raymond Yeung, chief Greater China economist of ANZ Bank.
“With location and [government] preferential policies in mind, market institutions will have to assess the commercial value of their investments in these regions.”
The results of the 1999 development plan have not turned the western regions into the economic powerhouses government planners envisioned. Critics question whether the new plan will be able to produce better results.
Beijing can’t even really afford it. It will all be debt driven and just add to the debt pile and white elephant projects
After seven years of development, Qinzhou port remains a small player compared to busy eastern ports. It handled just 119 million tonnes of cargo in 2019, about a tenth of the Port of Ningbo-Zhoushan, a sixth of the Port of Shanghai and one fifth of the Port of Guangzhou.
“I just don’t see any of this paying off,” said Fraser Howie, a China observer and co-author of Red Capitalism: The Fragile Financial Foundations of China’s Extraordinary Rise.
“Beijing can’t even really afford it. It will all be debt driven and just add to the debt pile and white elephant projects.”
The second story in the series will compare Beijing’s new western development plan with the previous plan in 1999. How did the first plan work and what is different about the new plan?
