Go West Policy Old Chinese Proverb: If you build it, they will come

The Core-Periphery Issue Core-periphery theory is based on the notion that as one region or state expands in economic prosperity, it must engulf regions nearby to ensure ongoing economic and political success. The area of high growth becomes known as the core, and the neighbouring area is the periphery Core – East and South coasts – Beijing, Shanghai, Shenzhen (SEZ), Hong Kong etc. Periphery – North, West (Tibet etc)

Go West With growth slowing in the crowded and costly coastal centres, Beijing is ushering investors to the more remote western parts of China. The Government has implemented a number of policies to encourage firms to mover inland, however the effectiveness is questionable.

Moving Firms – Easy? After years of easy expansion, densely populated regions of coastal China are facing growing difficulties. Labour and land costs are rising fast in Shanghai, with commercial rents up nearly 40% over the past three years, while industrial space is simply not available. Labour costs are inching up in Guangdong too, but the bigger problem is finding any workers at all for its huge manufacturing sector. "The operating environment in coastal areas is getting worse and worse," says Zhai Suoling, general manager of a toy factory in Dongguan. "Lots of manufacturers are moving to inland cities." Indeed, while foreign investment in central and western China was up 7% in 2003 it actually fell by 0.2% in eastern China.

Example Companies such as Honda now run operations in inland provinces. They report no shortage of skilled labour and increasingly vibrant consumer markets. "Companies that don't look at inland China will find themselves disadvantaged," says Emory Williams, chairman of the American Chamber of Commerce in Beijing, which reports that 50% of U.S. member companies have already invested in second-tier cities.

Moving west is now easier due to increased infrastructure. Almost $9 billion has been spent on new airports alone in the last five years, with twice as much allocated for the next five. There are plans in place for a national highway which will double the 34,000-km highway network already the world's second most extensive after the U.S. interstate system. Manufacturers of basic products like toys and shoes, have been the first to migrate. When a new road between the two provinces opens next year, transit time will be cut to nine hours. With land 50% cheaper in Jiangxi than in Guangdong, and energy and water 25% less, the move is an obvious one for companies,

Improved Access – Qingzang Railway Tibet relies upon the core for goods + services. Qingzang Highway before - less than 1 million tonnes of goods transported each year. Cost of transportation of both passengers and goods should be greatly reduced. The cost per tonne- kilometre will be reduced from 0.38 RMB to 0.12 RMB. 75% of all goods transported via railway. The line includes the Tangula Pass, which, at 5,072 m is the world's highest rail track. Over 80% of the Golmud-Lhasa section, is at an altitude of more than 4,000 m. - Hard + Expensive to build.

Chongqing – China’s Chicago Size of Belgium - Population of 32mn. Gov’t led investment - $23bn on 105 major projects, including roads, rail links, a container port and a major environmental cleanup. Once the urban and rural infrastructure improves, private sector investment topping $200bn will follow over the next decade. Mayor, Wang Hongju – ‘Chongqing is becoming a rising, promising land in western China.’ But inward investment of private money is slow to come, having reached just $8bn over the past eight years.

Effectiveness Mixed Results. Chongqing's economy % growth. However this is powered more by constructing fixed assets than by a boom in new manufacturing jobs. If Industry investors remain unconvinced with Go West's potential and fail to invest over the next five years, there will be real concerns over this region's viability, not to mention its social stability.