Rich-Poor Gap Widens in China

Eastern provinces continue to receive favored treatment

LIKE fiscal desperadoes, delegates from China's ``wild west'' came east to the annual parliamentary session two weeks ago gunning for more state funding. Today, as the gathering ends, they may not have more money. But they leave Beijing with the distinction of having ruffled the timid congress with a call for greater state investment.

The delegates come from poor territories dependent on government largess. These regions have suffered under an 18-month policy of austerity more than have economically diversified and dynamic regions.

The westerners bucked the traditional passivity of the National People's Congress with dissonant speeches and jarring gestures.

The west's call for more investment underscores the vast disparity in wealth between China's east coast and hinterland. It highlights how China's socialist leaders have favored the east and repressed the market forces that would enable the west to catch up with the more prosperous coast.

The delegates' appeal for more funding appears as much an expression of humanitarian concern as political interest.

Many of the more than 40 million Chinese with less than $42 annual income - China's poverty line - live in the west. The average rural resident in the west in 1987 had $34 in cash and savings, half the amount of their counterparts in the east, according to official statistics.

``The state has not given Gansu [Province] enough money,'' Jia Zhijie, the governor of the impoverished province, told the Monitor.

``However, we expect the state will increase its investment over time, step-by-step,'' he quickly added.

Delegates from Tibet, Xinjiang, and Inner Mongolia sought to exploit the leadership's obsession over political stability by saying that more money from Beijing would ease tension between the nation's ethnic majority and native minorities.

Tibet suffers from ethnic strife and extreme poverty. About 470,000 people in Tibet, or 30 percent of the region's population, live below the poverty line, Tibetan leader Ngapoi Ngawang Jigme said in an appeal for more state investment. The Himalayan region last year received $212 million from the state but generated just $2.9 million in state revenues, the New China News Agency reported April 1, quoting an official in Lhasa.

Unlike the booming provinces on the east coast, western regions have been hobbled in China's race toward prosperity by state control over investment, pricing, trade, and other economic matters.

Beijing has provided preferential policies for much of the coast in an effort to lure foreign investment and technology and nurture exporting industries that reap precious hard currency.

``The central government can earn much more profit with the same amount of investment in the east than in the west,'' Tong Qingmian, an official at the State Planning Commission, recently told the official China Daily.

Also, both east and west are hampered by a debilitating economic cycle imposed by the socialist leadership, diplomats and economists say.

While rich in resources, the west is monopolized by inefficient state-run firms that must sell much of the region's precious raw materials at low, fixed prices.

On the coast, the growth of many dynamic, market-oriented enterprises has faltered because of a shortage of raw materials from the West's sluggish state sector. The high prices coastal firms must pay for materials on the free market has retarded their growth and revenues to Beijing, which in turn has hampered state investment in the West.

``Managing this regional flow of resources is a no-win situation for Beijing because everybody thinks they're getting the short end of the stick,'' says Nicholas Lardy, a professor of international studies at the University of Washington.

The enervating state-enforced cycle has provoked heated political disagreements between Beijing bureaucrats and provincial leaders. Widespread coverage of the demands by hinterland delegates for more state investment may be part of Beijing's effort to coerce the coastal provinces into agreeing to higher taxes, the diplomats and economists say.

The state could close the widening gulf in riches between east and west by letting market forces rather than its technocrats shape the economy, diplomats and economists say.

China ``ought to move toward a system that allows more decentralized decisions on investment, which implies some of the more prosperous eastern regions undertaking direct investment in western regions,'' Dr. Lardy says.

By allowing supply and demand to set prices and local officials to guide investment, the diplomats and economists add, the state would promote efficiency and direct business tie-ups between the two regions. The west could then hitch its economy to the swifter growth of the east.

However, such drastic market reforms are politically unlikely, particularly under the hidebound central planners who staged a comeback last June. The surge of competition from such changes would throw employees in tens of thousands of moribund state-run industries out of work, the economists and diplomats say.

Consequently, the frontier delegates must be satisfied with scant funding. And the ``widening of the gap in income distribution between the eastern and other areas will continue despite the outcries from local authorities and academics,'' says Mr. Tong, the State Planning Commission official.

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