Global slowdown may hit China's hinterland hard

Special Report:Global Financial Crisis

BEIJING, Nov. 27 -- China's less-developed central

and western parts are likely to suffer more than coastal regions in the

unfolding global economic slowdown in the long term, warned a senior official

from the National Development and Reform Commission (NDRC).

Fledging industrial structures, sharply declining

resource prices and a weaker capability to handle risk and social conflict make

the western and middle regions more vulnerable to global financial woes, said

NDRC's vice-minister Du Ying.

This is the government's first public regional risk

assessment since the outbreak of the financial crisis. Du made the remarks at a

recent national meeting. They were posted on the NDRC's website yesterday.

Du eschews conventional thinking that the global

financial storm will hit coastal regions in East China hardest, even though it

has already forced some export-oriented manufacturers there to close.

An NDRC official present at Du's speech, told China

Daily on condition of anonymity that Du gave three reasons to backup his

judgment:

First, economies in central and western China are

largely small-scale and resource-intensive and will be slow to adapt to the

changes brought by the crisis.

Second, many businesses in these regions are based on

raw material export and will be badly hurt if the price of raw materials keeps

dropping in international markets.

Finally, Du believes the weaker economy in China's

hinterland won't provide enough job opportunities for migrant workers returning

from bankrupt factories in East China, potentially giving rise to social

conflicts. The central and the western regions are China's major labor

exporters.

Others agree; Zhang Yongjun, senior researcher with

the State Information Center, said he believes the economic woes suffered by the

lower-stream economy (manufacturers) will be passed on to the upper-stream

economy (raw material suppliers).

"So far, the eastern part of China is more hurt by

the financial crisis than the central and western regions, because its economy

depends on export and manufacturing. But the impacts will soon pass on to the

upper-stream economy, which is located mostly in central and western China,"

said Zhang.

In addition price fluctuations of raw materials are

usually more violent than those of lower-stream products, he said.

However, local entrepreneurs in central and western

China have not yet felt the growing pains of the financial crisis.

"I think manufacturers in East China will get hit

more than us," said Yang Xinmin, head of the planning department of Shaanxi Coal

and Chemical Industry Group based in Northwestern China's Shaanxi Province.

"Their economy depends largely on export, but here only a few industries could

feel the pinch. Coal and crude oil producers are not affected by the price

fluctuations in the global market since we have a government-controlled pricing

system," he said.

"The central and western regions should shake up

their economy with an industry transfer from East China, making them less

vulnerable to the global financial turmoil" said the unnamed NDRC official. "In

addition, I think the central and western regions should get a bigger share in

the government's 4-trillion-yuan stimulus plan."

(Source: China Daily)