West China's economic boom

The nation's western provinces are becoming more important for overall economic growth

As the national economy grows at a slower pace, the economic growth of western China is making headlines across the nation. The growth rate of the western provinces has surpassed the national average.

The GDP growth rate for Guizhou province reached 10.8 percent, the Xinjiang Uygur autonomous region 10 percent, Shanxi province 9.7 percent, Gansu province 8.9 percent, the Guangxi Zhuang autonomous region 8.5 percent and finally the Ningxia Hui autonomous region at 8 percent. Western China is obviously an important region to drive the nation's economic growth.

There is tremendous potential in western China's domestic consumption power. When most parts of China have entered the latter developmental stages of industrialization, western China is in the thick of the process. The region also has great potential for more urbanization.

But let's take a look first at urbanization. In 2013, the urbanization rate for East China was 62.8 percent, Central China 48.5 percent and western China at about 46 percent. The region with the lowest rate of urbanization was Tibet, at 23.7 percent. But in recent years, urbanization in western China has sped up and it is expected that the rate in the region will keep growing at a rate of 1.2 percent to 1.5 percent from 2015 to 2020.

Urbanization in western China will boost consumption and rapidly develop the service industry in the region. What is more, because infrastructure in western areas is not as advanced as it is in East China, greater urbanization will attract lots of investment.

Take railway construction for instance. Statistics show that in the first three years of the 12th Five-Year Plan (2011-2015), 1.15 trillion yuan ($184 billion; 163 billion euros) was invested in railway construction in the central and western parts of China and that about 7,000 km of new railway routes were built. In 2014, the fixed asset investment in railways across the nation increased from 700 billion yuan to 720 billion yuan, of which 78 percent went to the construction of railways in central and western provinces. With the acceleration of urbanization in western China, the rail industry will play a greater role in promoting the region's economic development.

Yet western areas are also faced with the pressures of transforming and upgrading their economies and of striking a balance between growth, transformation and reforms.

Over the past two years, the average economic growth rate in western China fell more sharply than that of the national average. The region faces great pressure to maintain sustainable growth. In Gansu province, the GDP growth rate dropped from 10.8 percent in 2013 to 8.9 percent in 2014, still higher than the national figure.

And in terms of economic transformation, there are some severe challenges for western China.

In 2013, the ratio of primary, secondary and tertiary industries in Gansu was completely out of sync with the national ratio. The industrial ratio of Gansu province was just 1.1 percent higher than the nation's, but the industrial mix in the province was not sound.

The province's industries at the time mainly consisted of traditional manufacturing industries or traditional industries hit by overcapacity. This economic mix is fragile and more easily affected by changes in external markets as domestic and international demands for raw materials drop and as prices plummet.

Western China can gain more development momentum in the future if reforms are correctly implemented. As described in the 13th Five-Year Plan (2016-2020), western China will quickly develop if economic transformations and upgrades take hold over the next 10 years and if the region's transformation is driven by innovation.

Western China must first open its service industries to market-oriented reforms. Secondly, western regions should make full use of opportunities brought by the country's "One Belt and One Road" strategy and become a new window for China's opening up to markets around the world. Third, reforms to administrative systems that focus on delegating power to lower levels of government and streamlining government services should be stepped up to break down the barriers for market development and promote regional growth. Fourth, the government development theories should combine growth, transformation and reforms.

The author is president of the China Institute of Reform and Development, a think tank in Hainan province. The views do not necessarily reflect those of China Daily.

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