Economic Implications of China's "Go-West" Policy: A View from Thailand

By Phanishsarn, Aksornsri | Journal of Southeast Asian Economies, August 2006 | Go to article overview

Economic Implications of China's "Go-West" Policy: A View from Thailand


Phanishsarn, Aksornsri, Journal of Southeast Asian Economies


I. Introduction

The People's Republic of China embarked on economic reform and has gradually opened the country to the outside world since 1979. As a result, the Chinese economy grew at an extremely rapid pace over the last two decades. However, the rapid growth, which took place mainly in the eastern coastal region, caused a large disparity in economic development between the east and the rest of the country. Recognizing this, the Chinese Government decided to revise the direction and policy of its regional economic development. The result of this revision is the China's Great Western Development Strategy, or the so-called "Go-West" policy, which puts greater emphasis on the development of the relatively backward and mostly inland western region. The purpose of this research note is to examine how this policy came about, and to assess the implication of this "Go-West" policy for Thailand.

The remainder of this research note is divided into four sections. Section II examines the situation leading up to China's policy for regional economic development. Section II analyses the necessity of the "Go-West" policy, how it came about, and the essential ingredients of the strategy. Section IV covers the economic potential of the important western provinces, with emphasis on the four provinces located closest to Thailand, namely: Sichuan Province, Chongqing Municipality, Yunnan Province, and the Guangxi Zhuang Autonomous Region. Section V ends with an analysis of the implications of China's "Go-West" policy for Thailand, with an emphasis on the opportunities for economic linkages with the four aforementioned provinces.

II. Background to the Policy on Regional Economic Development in China

II.1 China under Mao Zedong (1949-78)

The first stage of economic development in China, under the leadership of Mao Zedong, emphasized the development of a self-sufficient economy, and the government considered the inner rural region of China to be a "strategically significant area". This regional development policy stressed the importance of the inner region, and actively supported more investment in the landlocked regions. The national economic policy of China, based on the Third Five-Year Economic Development Plan (1966-70), was to develop its own industries. The State Council poured subsidies, raw materials, and labour into rural areas in the interior region. Accordingly, each area promoted its own industrial production, especially heavy and military-related industries. However, as the inner region of China was both backward and unproductive, this policy incurred a very high economic cost, resulting in production inefficiency, and did not generate sufficient economic return. This policy also contributed to a slow-down in the development of the eastern coastal region, with its greater economic potential. Therefore, industrial policy under Mao led to an imbalance in the geographic distribution of the industrial sector.

II.2 China in the Economic Reform Period (1978-present)

In late 1978, under the helm of Deng Xiaoping, China adopted an economic reform and opening-up policy, which led to major changes in the country. The Chinese leadership switched their attention from the inland region to more systemic development of the eastern coastal area, and placed greater importance on light and labour-intensive industries. In July 1979, Special Economic Zones (SEZs) were implemented in four cities: Shenzhen, Shantou, Zhuhai in Guangdong Province, and Xiamen in Fujian Province. These cities possessed high economic potential. The Chinese leadership wanted to use these SEZs to attract foreign investment, technology, technical know-how, and managerial expertise from overseas enterprises, and to use these foreign assets to help develop China as a whole. Production of goods for export was also promoted in these areas as a means to generate more income for the country. Foreign direct investment (FDI) played a vital role. …

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