Long Shaobo: Why the Rapid Growth of Capital Attraction in China’s Western Region?
Originally published in Chinese on March 23, 2021 by International Business Daily. Translated by ACCEPT.
Source: https://k.sina.cn/article_1916733321_723f078902000xdkp.html?from=news&subch=onews
From January to February 2021, China absorbed foreign investment to kick off the year. In terms of regional distribution, the absorption of foreign capital in China’s eastern, central, and western regions grew by 32.3%, 11.1%, and 50.9%, respectively. The foreign investment absorption in China’s western region grew significantly faster than in the eastern and central regions.
Industrial Advantages Continue to Emerge
This shows that in the process of promoting the formation of a new development pattern, the advantages and potential of the western region in attracting foreign investment are constantly being tapped, said Long Shaobo, Deputy Director of the Department of Public Economics at Chongqing University. He told the International Business Daily that industrial development is always a matter of geopolitical environment. The advantages of industrial development in the western region are mainly based on geographical location, resource endowment, and locally advantageous industries, including agriculture and forestry, tourism, and other emerging global industries such as big data, smart devices, and new infrastructure. In the context of Belt and Road Initiative (BRI) construction and the continuous improvement of infrastructure in the western region, western China’s disadvantages compared to eastern China in terms of circulation costs and foreign exchanges will see a gradual reduction. Coupled with the policy dividends from the implementation of the Western Development Strategy in the new era, the optimization and upgrading of the industrial structure in western China will accelerate.
In recent years, China has continuously introduced policies to support its western region. The fully open development pattern has attracted foreign investment to the western region directly, while the spillover effects of foreign direct investment have also driven the region’s industrial structural upgrading and economic development.
Sichuan Province, which ranked first in western and central China in terms of foreign direct investment in 2020, has always simultaneously enacted multiple measures and precise policies. The province has made every effort to implement a series of stable foreign investment deployment requirements, actively responded to the impact of the pandemic and its impact on the external environment, and achieved remarkable results in attracting foreign investment.
The eight economic and technological development zones in Sichuan province make up only one ten-thousandth of the province’s total land area, but account for 12% of Sichuan’s actual utilization of foreign capital. Most of these zones account for around half of their respective cities’ high-tech manufacturing output, actual utilization of foreign capital, and imports and exports. The economic development zones have gradually become an important engine for regional economic development, an incubation base for industrial cultivation, a window of demonstration for deepening reform, and a critical avenue for expanding openness.
A relevant authority at the Sichuan Economic Cooperation Bureau communicated that as the opening year of the 14th Five-Year Plan, 2021 is also a key year for Sichuan Province to improve the quality and efficiency of its foreign capital utilization. The significant increase in the scale of foreign investment absorption cannot be separated from relevant policy support. The Guidelines for Foreign Investment in Sichuan, released in January this year, are the first special support policy for foreign investment in the name of the provincial government and the first investment guidelines edited specifically for foreign investors in Sichuan Province. The document closely follows the Sichuan Provincial Committee's strategic deployment of “one stem, multiple branches, five-region collaboration” and “four-way expansion, all-area opening,” highlights Sichuan's comparative advantages in accelerating the construction of the twin-city economic circle in the Chengdu-Chongqing region, and presents the advantages and investment opportunities of Sichuan's investment environment in an all-round and comprehensive manner.
Seizing New Opportunities and Promising Prospects
According to Ding Meng, a researcher at the Bank of China Hong Kong Institute of Finance, in addition to the existing policy of actively utilizing foreign investment, the western region should focus on grasping the dividends created and released by the Belt and Road Initiative when further undertaking the industrial transfer of foreign investment. “As the open frontier of the BRI, the western region bears the daunting task of large logistics distribution for the new round of industrial transfer. However, compared to eastern China, western China has a large disparity in its infrastructure and logistics network configuration, which directly increases the transportation and logistics costs of foreign investment transfers. Coupled with the fact that industrial support is not yet complete, this will affect the confidence of foreign capital transfers to the west, said Ding Meng. He added that the western region should make full use of its geopolitical advantages, rapidly reduce the logistics costs of overland trade by creating an intelligent Internet of Things, accelerate the establishment of a talent pool platform, strengthen its upgrading cooperation with eastern China, and enhance the attractiveness of the western region to foreign capital through the overall relocation of relevant industries.
In terms of sound and optimized industrial support in the western region, Long Shaobo believes that in addition to existing industrial and fiscal policies, local governments and relevant departments should comprehensively apply and implement financial, income, consumption, investment, and other related policies. He also recommends that they focus on the mutual coordination and cooperation of economic policies to actively guide various resources and factors to gather in the western region. At the same time, local governments and relevant departments should also create a favorable business, investment, and consumption environment to encourage new enterprise creation, attract more high-quality enterprises to shift to western China and increase R&D and investment in high-tech industries, and encourage consumers to expand consumption of products and services to form a virtuous economic cycle. Generally speaking, technological innovation is the driving force of industrial structure optimization, and the western region should use a combination of original independent innovation and introduced technological innovation to accelerate industrial structure adjustment and optimization and upgrading. This will promote a new pattern of western development in the new era and form a strong magnetic field for foreign investment absorption.
