China’s ‘Go West’ policy has mixed results

CHONGQING – If you build it, they will come – except perhaps to China’s vast, untapped western frontier.

Nearly seven years after Beijing launched its “Go West” campaign to lift incomes, ease social tension and bring prosperity to an impoverished region, foreign firms have saddled up mostly only for minor investments, while domestic firms feel left in the dust. Multinationals from Microsoft Corp.to Nokia, Motorola and Siemens have set up research centres in big cities.But the list of players that have invested the big sums that Beijing hoped for remains small and stagnant.BNP Paribas’s chief China economist, Chen Xingdong, summed things up with a Chinese proverb: “The government thought once the phoenix tree was planted, the phoenix would come.But it didn’t.”The much-touted campaign, kicked off at the turn of the century, aimed to revive the fortunes of the country’s 12 poorest provinces or regions, which are home to a quarter of China’s people but account for just 15 per cent of gross domestic product.Beijing had hoped to narrow income disparities with the thriving east, assuaging simmering ethnic tensions.Some manufacturers have answered the call, seeking relief from rising labour and living costs along an increasingly affluent eastern seaboard, while retailers battling for consumers’ dollars have discovered unsated pockets of demand.So the likes of Intel Corp.and Ford Motor Co.have set up plants in the two biggest cities – Chengdu, the capital of Sichuan province, and Chongqing.Carrefour SA and IKEA have set up shop and plan more outlets.Chongqing, a city of 30 million, boasts investment from more than 30 of the top 500 corporations in the world.”Multinationals move westwards, building research and development centres in cities like Chengdu, because of low-cost but well-educated talent,” said William Kusters, chief of the China Mission of the Asian Development Assistance Board.But overall, foreign direct investment in the west, spanning two-thirds of the sprawling country, has amounted to less than US$2 billion a year between 2000 and 2005 – less than half the total that Shanghai alone has attracted.”The main challenge for the west remains infrastructure, and there are not enough items that attract foreign investment,” said Kusters.”The west is like an economic island in the middle of nowhere.There is not much interaction with the rest of China.”For some firms, western China’s isolation is a boon.Lafarge, the world’s top cement firm, runs operations in Chongqing, Chengdu, Guizhou and Yunnan, hoping to cash in on the government’s push to develop new infrastructure.”All these provinces are mountainous areas that are naturally protected from imports,” said Cyrille Ragoucy, chief executive of Lafarge Shui On, a joint venture with Shui On Construction and Materials Ltd.For others, though, remoteness is a bane.Nampa-ReutersMultinationals from Microsoft Corp.to Nokia, Motorola and Siemens have set up research centres in big cities.But the list of players that have invested the big sums that Beijing hoped for remains small and stagnant.BNP Paribas’s chief China economist, Chen Xingdong, summed things up with a Chinese proverb: “The government thought once the phoenix tree was planted, the phoenix would come.But it didn’t.”The much-touted campaign, kicked off at the turn of the century, aimed to revive the fortunes of the country’s 12 poorest provinces or regions, which are home to a quarter of China’s people but account for just 15 per cent of gross domestic product.Beijing had hoped to narrow income disparities with the thriving east, assuaging simmering ethnic tensions.Some manufacturers have answered the call, seeking relief from rising labour and living costs along an increasingly affluent eastern seaboard, while retailers battling for consumers’ dollars have discovered unsated pockets of demand.So the likes of Intel Corp.and Ford Motor Co.have set up plants in the two biggest cities – Chengdu, the capital of Sichuan province, and Chongqing.Carrefour SA and IKEA have set up shop and plan more outlets.Chongqing, a city of 30 million, boasts investment from more than 30 of the top 500 corporations in the world.”Multinationals move westwards, building research and development centres in cities like Chengdu, because of low-cost but well-educated talent,” said William Kusters, chief of the China Mission of the Asian Development Assistance Board.But overall, foreign direct investment in the west, spanning two-thirds of the sprawling country, has amounted to less than US$2 billion a year between 2000 and 2005 – less than half the total that Shanghai alone has attracted.”The main challenge for the west remains infrastructure, and there are not enough items that attract foreign investment,” said Kusters.”The west is like an economic island in the middle of nowhere.There is not much interaction with the rest of China.”For some firms, western China’s isolation is a boon.Lafarge, the world’s top cement firm, runs operations in Chongqing, Chengdu, Guizhou and Yunnan, hoping to cash in on the government’s push to develop new infrastructure.”All these provinces are mountainous areas that are naturally protected from imports,” said Cyrille Ragoucy, chief executive of Lafarge Shui On, a joint venture with Shui On Construction and Materials Ltd.For others, though, remoteness is a bane.Nampa-Reuters