BIWEEKLY BRIEFING              Wednesday/August 16, 2000

CHINA’S "GO WEST" PIPELINE PROJECTS: A "GREAT LEAP WESTWARD"?
Dr. Robert M. Cutler

                Under the "Go West" program announced last June, China intends to build up nine provinces including Gansu, Guizhou, Ningxia, Qinghai Shaanxi, Sichuan, Tibet, Xinjiang, and Yunnan, as well as the city of Chongqing, into the next motors of the country's economic development over the course of several decades. In this context, the chairman of the West-East Pipeline Project has announced that foreign investors would be welcome in all upstream and downstream phases of the project without limits. The reason, as he said, is that China lacks the skills, capital and technology to build the project on its own.

BACKGROUND: The Chinese National Petroleum Corporation (CNPC) asserts that Xinjiang has 17.4 trillion cubic feet of proven gas reserves. However, it is not clear that they are all recoverable. The geology is frequently difficult and the depths are often extreme. It is more likely that this figure is for potential or estimated reserves. Indeed, several years ago western energy companies, encouraged by Beijing's touting of Xinjiang's natural energy resources, paid high fees to test-drill for oil, and they came up dry. Now, the 2,600-mile-long "West-East" pipeline is projected to carry gas from Xinjiang to Shanghai at a construction cost of $5 billion and to open in 2003.

Such a projection for the construction of the "West-East" pipeline is unlikely and highly optimistic for the following reason. CNPC has decided that gas from Chongqing should be delivered first. The Jingbian-Shanghai section of the "West-East Pipeline" is planned to be its first segment, bringing gas from Chongqing to Shanghai. Its construction is projected to occur in tandem with gas development in North Shaanxi, which itself requires a three-to-five year time horizon. The head of the Shaanxi regional planning commission has stated that projects considered as undesirable for environmental reasons in the coastal provinces may nevertheless be undertaken in the west instead. This would appear to confirm definite difficulties in attracting investment.

The confirmed preference to undertake gas development in the the West of China in regions like Xinjiang rather than in China’s coastal provinces bodes ill for the environment of China’s western regions. Shaanxi already has great problems with desertification and soil erosion in the region, and deposits huge quantities of sand into the Yellow and Yangtze Rivers. The Xinjiang-Shanghai pipeline is only one of six that China has announced its intention to build in the next decade. The others are Sebei-Xining-Lanzhou, Chongqing-Wuhan, a second Shaanxi-Beijing line, a line from Russia into Northeast China and thence to North and East China, and a pipeline for imported LNG and offshore gas resources. Some skepticism concerning the realization of all these projects within the stated time frame would seem justified.

IMPLICATIONS: Since promises for strong central financial participation in "Go West" have yet to be realized, and the central authorities have back-pedaled ever since announcing it, the initiative has engendered competition among the political prefects in the regions. Indeed, the "Go West" program is less an actual program than an initiative launched by Beijing that provides incentives for the regional elites to demonstrate loyalty to the political center and compete for its attention. Thus, the Chinese media have been filled with unrealistic plans launched as publicity tactics by individual government departments, and especially by regional elites and sub-elites who are intent on grabbing the carrot offered.

For example, the proposed regional specializations, including petroleum for Xinjiang, high-tech and financial centers for Chongqing and Xian, even herbal medicine for Yunnan, have come from the bottom up and are integrated neither with each other nor on a national scale. One of the only things that the political center in Beijing has done is to declare that large sums of money have been set aside for transport and communications links, such as improvements to regional airports and new highway construction, all the while refusing to make specific commitments to specific projects. The western areas are indeed plagued by poor infrastructure, but ecological degradation and the lack of qualified personnel are problems at least as grave.

From an environmental perspective, the above-mentioned problems in Shaanxi are mild compared with those already existing in western China. In Xinjiang, for example, a huge underground coal fire at Liu Huangou has been burning for over two decades, making the regional capital Urumchi one of the ten worst polluted cities worldwide. Beijing does not have a record of being solicitous of the environment in regions populated by minorities. Such a record is unlikely to improve under conditions of increased foreign investment. But such investment may well be doubtful. The coastal zones remain driving "poles of attraction" for investment, with sunk costs having already established a bedrock of infrastructure. Beijing's incentives for investment in the west have been unexceptional. Investments by corporations from eastern China in the "Go West" region have concentrated in developed cities and regions of the nine-province area.

CONCLUSION: Beijing has already reduced "Go West" to a slogan in search of foreign capital, a standard variable in the armory of international, but also domestic, propaganda campaigns. While the political center uses it increasingly within China to distract attention from current economic problems, regional and functional sub-elites use it to target their messages at various differentiated audiences. For example, regional officials enthuse over possibilities such as decreased central interference in local economic affairs or free land for those with fresh ideas about agricultural development. So doing, they conveniently ignore President Jiang Zemin's unambiguous declaration that all development must take place under "conditions of a socialist market economy."

The leadership's hesitation over "Go West" is based on the recognition of pervasive loss-making in infrastructure in the east, together with an inability—which may camouflage a fundamental unwillingness—to design specific measures that could really promote economic development in the western regions. On balance, this is a rather benign outcome. The "Go West" initiative (it does not deserve to be called a "program") might still turn out to be a "Great Leap Westward." Like the Great Leap Forward of the 1950s that encouraged local initiatives in ill-conceived and poorly planned projects, the "Great Leap Westward" could from the outset be nothing but a collection of overlapping, non-integrated projects that are technically impossible to complete and so wasteful that years will be required to recover from the effects.

AUTHOR BIO: Dr. Robert M. Cutler is Research Fellow, Institute of European and Russian Studies, Carleton University, Canada. He has specialized in interdisciplinary Eurasian affairs for twenty years, at present focusing mainly on energy issues and ethnic conflict in Central Asia and the Caucasus. http://www.robertcutler.org