Covering: Guangxi, Yunnan, Guizhou, Sichuan

CENTRAL POLICY UNIT

HONG KONG SPECIAL ADMINISTRATIVE REGION

CONSULTANCY STUDY ON

SOCIAL, ECONOMIC AND POLITICAL

DEVELOPMENTS

IN THE PAN-PEARL RIVER DELTA (PRD)

REGION

THE FIFTH MONTHLY REPORT

COVERING GUANGXI, YUNNAN, GUIZHOU, SICHUAN

October 2006

Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

CONTENT

Page

EXECUTIVE SUMMARY ...... 1

1 Railway Construction and Planning in the Four Southwestern Provinces / Region ...... 6 1.1 Sichuan Province ...... 6 1.1.1 Investment in projects worth RMB Tens of Billions...... 6 1.1.2 Key Projects: Construction of a Large-Capacity Transport Passage and a High-Speed Passenger Passage ...... 7 1.1.3 Chengdu is Selected as a Part of High-Speed Railway Circle...... 8 1.2 Guizhou Province...... 11 1.2.1 Visionary Planning...... 11 1.2.2 Ongoing Project: Reconstruction of Guizhou—Guangxi Railway for Expanded Capacity ...... 11 1.3 Guangxi Zhuang Autonomous Region ...... 14 1.3.1 Planned Projects worth RMB 40 Billion Underway...... 14 1.3.2 Specific Projects...... 16 1.3.3 11th Five-Year Plan Goals...... 17 1.3.4 Express Railway as the Focus of Transportation Construction ...... 18 1.4 Yunnan Province...... 20 1.4.1 Ongoing Projects...... 20 1.4.2 Railway Construction Goals within 10—15 Years...... 22 1.4.3 A Conception of Constructing International Railway Passages and Railway Passages into Yunnan ...... 23 1.4.4 The Visionary Qinghai—Tibet Railway: Constructing Yunnan— Tibet Railway...... 27 1.5 Implications for Hong Kong ...... 28 1.5.1 A New Outlook of Railway Construction in the Southwestern Region...... 28

i Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

1.5.2 Implications for Hong Kong ...... 29

2 Trends and Updates on the Four Provinces/Region...... 34 2.1 Economic Performance of the Four Provinces/Region...... 34 2.2 Trends and Updates on Sichuan Province ...... 37 2.2.1 Economic Performance of Sichuan Province ...... 37 2.2.2 The Main Focus of Sichuan Province - Sichuan Experienced the Severest Drought in 60 Years ...... 38 2.3 Trends and Updates on Guangxi Zhuang Autonomous Region ...... 43 2.3.1 Economic Performance of Guangxi...... 43 2.3.2 The Main Focus of Guangxi Zhuang Autonomous Region - The Industrialization and Urbanization Policy Pursued by Guangxi’s New Party Secretary ...... 45 2.4 The Main Focus of Yunnan - The Production of Natural Rubber in Yunnan 48 2.5 The Main Focus of Guizhou – Plan for Medium and Long-Term Scientific and Technological Development in the Guizhou Province ...... 61 3 Regional Cooperation ...... 65

Appendix：...... 81

Appendix I：Statistical Data for the Pan-PRD Provinces/ Region...... 81 Appendix II：English-Chinese Glossary of Terms...... 84

ii Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

EXECUTIVE SUMMARY

1 Railway Construction and Planning in the Four Southwestern Provinces

At the beginning of 2006, the Ministry of Railways and the southwestern provinces/municipality/region finalised a new plan for the development of railways in the region. The southwestern railways will expand by 47% and the railway density will increase from 69.7 km per 10,000 sq. km to 102.5 km per 10,000 sq. km.

1.1 Sichuan Province - The development guideline priorities for Sichuan railways are “to connect the east, the southwest and then expand into northwest China”. At present, the main railway line connects Chengdu (成都), Wuhan (武漢) and Shanghai, and is characterised by heavy passenger use and cargo flows. Another priority is the construction of a double-track line that links Chengdu, Kunming (昆明) and Chongqing; and the construction of an inter-city passenger express railway that links Mianyang ( 綿陽), Chengdu and Emei ( 峨眉). This passenger expressway will link up the seven biggest cities in the province, and will comprehensively expand the transport capacity of the “Chengdu- Deyang (德陽)-Mianyang” economic circle. Chengdu was selected by the Ministry of Railways as one of the six railway centres in China, and is the only southwestern city on the list.

1.2 Guizhou Province - During the period of the 11th Five-Year Plan, Guizhou will begin constructing the Longchang (隆昌)-Huangtong (黃桶) railway, the Guiyang railway convergence hub, and the Guiyang (貴陽)-Zhuhai (珠海) railway. Railway planning in Guizhou is focused on expanding the capacity of the Guizhou-Guangxi line. This will be an important export route for Guizhou resources, and will link the southwestern region to the sea; thus the southwestern resource-based economy will be connected to the export-oriented industries in South China.

1 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

1.3 Guangxi Zhuang Autonomous Region - Guangxi has put forth a “one package” comprehensive railway development plan which includes the construction of two new railway lines, the reconstruction of five old lines and two large convergence hubs. Together the newly constructed and reconstructed lines have a total mileage of 2,800 km which exceeds the existing railway network. This plan will help Guangxi achieve the strategic objectives of building “export routes to the coastal ports from the southwestern region” and “international channels linking ASEAN”.

1.4 Yunnan Province - The objectives of railway construction in Yunnan includes the construction of a Pan-Asian international railway connecting East Asia, Southeast Asia and South Asia (also referred to as the “Three Asia’s”) and the construction of a railway connecting the Pacific Ocean and Indian Ocean (the “Two Oceans”). Further plans include existing line upgrades aimed at providing a higher speed route with larger transport capacity going out of the province, and the construction of a railway between Yunnan and Tibet. This project will finally open up a southwestern route to Tibet that will link the Yunnan- Vietnam railway and the Kunming-Bangkok (曼谷) highway, thereby forming a highway-railway-airway transport network radiating from Yunnan to the entire southwestern region. Kunming will also get an inter-city express railway joining other cities in the province.

1.5 The Four Southwestern Provinces/Region will have a high-density railway network. This will strengthen interregional communication and connections with Central China, making it possible to reduce the transport time and costs for accessing ports in the Beibu Gulf (Gulf of Tonkin) or neighbouring countries across land. Chengdu, Nanning (南寧) and Kunming will become railway convergence hubs and central cities in the region. This will reduce the need to connect to the Pearl River Delta (PRD) railway network.

2 Trends and Updates on the Four Provinces

2.1 Sichuan Province

2 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

This summer, Sichuan suffered from a serious drought which resulted in economic losses of RMB10 billion. Difficulties caused by the drought included a shortage of drinking water and an interruption to electricity and water supplies. It affected the daily operations of the intensive energy consuming industries and impacted on the livelihoods of the citizens.

2.2 Guangxi Zhuang Autonomous Region

Since the new party chief, Mr Liu Qibao ( 劉奇葆), became the Secretary of the region three months ago, he has repeatedly expressed his thoughts on the development of Guangxi. His focus has been on the ‘M’ strategy, industrialisation and urbanisation. It emphasises the cultivation of superior industries and competitive corporations, together with the development of large and medium-sized cities, in order to create a virtuous circle of industrialisation and urbanisation.

2.3 Yunnan Province

Natural rubber is a profitable and renewable natural resource of Yunnan. The rubber industry features in the National Plan to Develop the Western Region and the National Action Plan on Agricultural Cultivation. Yunnan Province has listed it as a superior industry and an innovative bio-tech industry. Natural rubber also has an important role to play in turning Yunnan into a province of green economy.

China is the biggest importer and consumer of natural rubber in the world, with its resources not sufficient to cater to domestic needs. In recent years, shortages have risen and the self-sufficiency rate is far below the safety level of 30%. Strong domestic demand has transformed China into a net importer and led to a continuous price rise.

The two main rubber production areas in China are Yunnan and Hainan, and they have benefited enormously from high rubber prices. The Central Government wishes to found foreign production bases, such as Laos, Myanmar and Cambodia because rubber production in China is restricted by environmental conditions. Some local governments and

3 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

enterprises have signed up lease agreements and rubber plantation cooperation agreements with these countries.

In 2006, the price of natural rubber soared sky high, and this has caused concern. The Shanghai Futures Exchange has witnessed a big increase in the trading of rubber futures contracts. The accumulated trading in the first half of the year reached record levels on the list of Mainland commodities, and rubber and copper jointly shared the crown for the top place.

2.4 Guizhou Province

The Guizhou Provincial Government has issued the Plan for Medium and Long-Term Scientific and Technological Development in the Guizhou Province, 2006-2020, which is based on the national policy for the development of science and technology. It emphasises increasing capital input and the establishment of a regional scientific-technological innovation system. In future, the province would develop local competence, instead of seeking foreign assistance or relying on the export-oriented economy. The direction of scientific-technological development on the Mainland, and the export-oriented commercial city of Hong Kong, are taking separate paths.

3 Regional Cooperation

3.1 Beibu Gulf Rim Economic Cooperation

The Beibu Gulf Economic Rim includes the coastal provinces of Guangdong, Guangxi and Hainan, and some northern provinces of Vietnam. It is an important region for economic cooperation between China and ASEAN.

3.2 Construction of the Beibu Gulf (Guangxi) Economic Zone

4 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

Since the Prime Ministers of China and Vietnam jointly announced the plans to build ‘Two Corridors and One Ring’, the Beibu Gulf (Guangxi) Economic Zone has gone from strength to strength. In March 2006, the Guangxi Regional Government set up a Beibu Gulf (Guangxi) Economic Zone construction management committee to integrate resources in the area.

3.3 Economic Cooperation between Guangxi and Vietnam

Following the construction of the Beibu Gulf Economic Rim, cross- border trading and economic cooperation have rapidly increased between Guangxi and Vietnam, thus benefiting the economic needs of both regions. Vietnam will soon enter the World Trade Organisation (WTO) and subsequent tariff reductions will benefit Guangxi’s exports to Vietnam. Vietnam is the first choice for Japanese and Taiwan enterprises that adopt the ‘China (Mainland) plus one’ strategy. Guangxi complements Vietnam in resources and has achieved relative superiority in the mechanical and electrical industries. Guangxi could produce accessories for multinational corporations investing in Vietnam, and play an important role in the production value chain of globalised industries.

3.4 Pan-Beibu Gulf Economic Cooperation

On 20-21 July, the ‘Pan-Beibu Gulf Economic Cooperation Forum’ was held in Nanning, Guangxi. The Forum expanded the concept of Pan- Beibu Gulf cooperation to include Singapore, Malaysia, the Philippines, Brunei and Indonesia. Pan-Beibu Gulf cooperation is beneficial to the development of the China-ASEAN Free Trade Area. It will also assist China’s resource and energy strategy, the development of the Western Region and the economic development of Guangxi.

5 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

1 Railway Construction and Planning in the Four Southwestern Provinces / Region

In the three provinces and one municipal (Sichuan, Guizhou and Yunnan provinces plus the municipal of Chongqing) of Southwest China, the mileage of railway roads for every ten thousand people stands only at 0.32 kilometres, far below the national average of 0.57 kilometres1. Even if Guangxi is taken into account, the figures change little. The Southwestern railways are not only below par in coverage, as a network, they do not operate well as hubs and gateways. They also do not meet stringent technical standards: there is not a single large-capacity passage; the majority of the main lines are single track, with short curve radius and steep slope; the annual transport capacity of Guizhou—Guangxi railway hardly reaches 10 million tonnes2. Starting at the end of August in 2004, the Central Government strengthened its cooperation with local governments to accelerate the construction of Southwestern railways. In early April 2006, Liu Zhijun (劉志軍), Minister of Railways, made a special trip to Chongqing, Sichuan and Guizhou to discuss with local leaders the development of Southwestern railways, thereby finalizing a new plan. According to the blueprint, a total mileage of 3,700 kilometres of new railway lines will be newly constructed, and a total of 2,400 kilometres (including double-track lines) will be reconstructed; the entire Southwestern railways will expand by 47% and railway density will increase from 69.7 km per 10,000 sq. km to 102.5 km per 10,000 sq. km3.

1.1 Sichuan Province

1.1.1 Investment in projects worth RMB Tens of Billions

In early April 2005, the Ministry of Railways and the Sichuan Provincial Government signed a document in Chengdu entitled Summary of the

1 “A Blueprint for Southwestern Railways—Report on the Upcoming High Point of Railway Construction in Yunnan, Guizhou, Sichuan, and Chongqing (西南鐵路新藍圖──寫在雲貴川渝鐵路建設高潮到來之際)”, Xinhua Net Qinghai Channel, 29th April 2005, http://www.qh.xinhuanet.com/qztlw/2005- 04/29/content_4155178.htm. 2 Ibid. 3 Ibid.

6 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

Conference on the Railway Construction of Sichuan Province. According the planning of the Ministry of Railways, the development guideline priorities for Sichuan railways are “to connect the east, the southwest and then expand into northwest China”. The future main railway lines will connect Chengdu (成都), Wuhan (武漢) and Shanghai with large capacity, including a passenger line and a freight line. The line connecting Chengdu, Suining (遂寧), Dazhou (達州), Wuhan, Hefei (合肥) and Shanghai will be mainly used for cargo carriage, with a billion- ton capacity; while the passenger line will connect Chengdu, Chongqing, Wuhan and Shanghai.

The reconstruction of Dazhou-Chengdu line for expanded capacity and the construction of double track for the section of Xiangfan (襄樊), Hubei- Chongqing line in Sichuan are the two projects already underway since 2005, the investments in which are estimated at about RMB 18.4 billion. In addition, Sichuan also plans to reconstruct the part of the Lanzhou—Chongqing line which falls into the purview of Sichuan, and construct a new double-track line of Chengdu—Emei (峨眉) for the Chengdu—Kunming (昆明) line, and a new double-track line of Suining—Chongqing. The three projects mentioned above will be started during the period of the 11th Five-Year Plan. They require a total investment of more than RMB 15.8 billion.

Another major project to be undertaken during the period of 11th Five- Year Plan is the construction of the Chengdu convergence hub, which will cost about RMB 1.6 billion. It will include the reconstruction of Chengdu South Railway Station for larger capacity, the construction of Chengdu East Container Centre and the establishment of a Locomotive Application and Maintenance Station, and other related projects. These projects make it possible for Chengdu to become one of the most modernized international logistics hubs in the Southwestern region4.

1.1.2 Key Projects: Construction of a Large-Capacity Transport Passage and a High-Speed Passenger Passage

The completion of Wuhan—Chongqing—Chengdu passenger railway will mean the completion of the Shanghai—Wuhan—Chengdu passenger and

4 “China plans to invest billions in Sichuan’s railway construction (中國投資數百億元在四川建設鐵路)”, Xinhua Net, 3rd April 2005, http://news3.xinhuanet.com/fortune/2005-04/03/content_2781657.htm.

7 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) freight passage. By then, the travel time from Chengdu to Chongqing will be reduced from nearly 11 hours to only 2 hours; it will possibly take only 12 hours or so, instead of the current length of time of 35 hours travelling from Chengdu to Shanghai. Thus, one can depart at sunset in Chongqing and arrive at sunrise in Shanghai. The travel time is less than 10 hours5.

1.1.3 Chengdu is Selected as a Part of High-Speed Railway Circle

1.1.3.1 Inter-Provincial High-Speed Railway

On January 6th, 2006, the Ministry of Railways announced at The National Railways Working Conference that the sixth train speed acceleration programme for a broad area would be fully in place by 1st October 2006. By then, a national railway transportation network centring around Beijing, Shanghai, Zhengzhou (鄭州), Wuhan, Guangzhou (廣州), Xi’an (西安) and Chongqing will be formed. Travels between these cities and the capital cities of the neighbouring provinces will take one to two hours, and travels between these cities and the neighbouring cities will take half an hour to one hour. By that time, the average train speed will reach more than 200 kilometres per hour6. Chengdu is the only city in the Four Southwestern Provinces/Region that is listed in the national network.

1.1.3.2 Intra-Province High-Speed Railway

The preliminary work for the construction of the inter-city passenger express railway connecting Mianyang, Chengdu and Emei, jointly conducted by the Ministry of Railways and Sichuan Provincial Government, has been put into operation since late 2005, and it is expected that formal construction of the section connecting Mianyang and Chengdu will be completed in 2006, earlier than

5 “Chengdu benefiting from express railway, departure at sunset while arrival at sunrise between Chengdu and Shanghai is soon to be realized (1) (成都到上海夕發朝至，成都搭上鐵運高速（1）)”, Chengdu Net, 18th December 2005, http://news.chengtu.com/news/382.shtml. 6 Xu Li (徐利), “Ministry of Railways announced the selection of Chengdu as one of the railway centers in China (鐵道部宣佈成都入席高速鐵路交通圈)”, Chengdu Net, 1st July 2006, http://news.chengtu.com/news/385.htm.

8 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) previously planned. After its completion, travel time from Chengdu to Emei takes about one hour, and only half an hour to Mianyang, and merely ten minutes to Guanghan (廣漢). According to the planning, the Mianyang—Chengdu—Emei inter-city passenger express railway will span a total of 386 kilometres, link up altogether seven cities, namely, Mianyang, Deyang, Chengdu, Meishan (眉山), Guanghan, Emei and Leshan (樂山), and provide transportation facilities to a population of more than 25 million along its line. Its construction will be co- funded by the Ministry of Railways and Sichuan (including cities involved along the line), with the total investment estimated at about RMB 23 billion. Moreover, it will also constitute an effective link with the Chengdu Shuangliu International Airport as well as some of Chengdu’s subway lines.

Map 1-1: Railway Network of Sichuan and the Neighbouring Cities and Counties

Source: People’s Daily Online, http://unn.people.com.cn/GB/4585240.html

It is estimated that annual passenger flows will reach 30 million and the train speed will reach as high as 250 kilometres per hour along some sections of the line, when the Mianyang—Chengdu—Emei inter-city passenger express railway is in full operation. According to the planning, this inter-city passenger express railway will form the backbone upon which new lines will be constructed to link Meishan and, ultimately, Leshan. By then, it will take only two hours from 9 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

Mianyang to Leshan and the transport capacity of the Chengdu-Deyang-Mianyang economic circle will also be comprehensively expanded7.

7 “Chengdu benefiting from express railway, departure at sunset while arrival at sunrise between Chengdu and Shanghai is soon to be realized (2) (成都到上海夕發朝至，成都搭上鐵運高速（2）)”, Chengdu Net, 18th December 2005, http://news.chengtu.com/news/382.shtml.

10 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

1.2 Guizhou Province

1.2.1 Visionary Planning

Starting from 2005 and during the period of the 11th Five-Year Plan and under the auspices of the Ministry of Railways, Guizhou will start the construction of the Longchang ( 隆昌)-Huangtong ( 黃桶) railway, the Guiyang railway convergence hub, and the Guiyang (貴陽)-Zhuhai (珠海) railway. It will also begin constructing, at an appropriate time, double track for the Nanning (南寧)— Kunming (昆明) railway and Chongqing—Huaihua (懷化) railway, which have already been incorporated into the National Medium and Long-Term Railway Network Planning. The reconstruction of Sichuan—Guizhou railway for expanded capacity and the construction of Huangtong—Baise ( 百色) section of the Longchang—Baise railway will be incorporated into the Planning in due time as well. With additional funding, formal construction work of Hangtong—Zhijin (織金) section of the Longchang-Huangtong railway, from Longchang of Sichuan to Huangtong of Guizhou, has already begun before May 2005, and the Guiyang railway convergence hub construction project is also under way8.

1.2.2 Ongoing Project: Reconstruction of Guizhou—Guangxi Railway for Expanded Capacity

The average speeds of passenger and freight trains operating along the Guizhou—Guangxi railway are only 41 kilometres per hour and 21 kilometres per hour respectively, due to the line’s low technical standards, outdated facilities and the complex geological conditions. Currently, this railway can only accommodate the carrying capacity of 9 pairs of passenger trains and freight volume of 3.6 million tonnes. In fact, it is rated as a second class national railway. Largely due to the limited carrying capacity of Guizhou—Guangxi railway, an annual volume of

8 “Ministry of Railways discusses with Guizhou on how to speed up railway construction (鐵道部與貴州共謀加快鐵路建設)”, All China Data, 3rd April 2005, http://www.allchinadata.com/news/Detail.asp?LiterID=5936209&ColumnName=&Column=01%25.

11 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

10 million tonnes of cargo flows need to find alternative ways to enter the Western region in recent years9.

Map 1-2: Neighbouring Areas around the Existing Railways in Guizhou and the Longchang—Huangtong Railway being under construction

Source: People’s Daily Online, http://unn.people.com.cn/GB/4585240.html

It follows, therefore, that the reconstruction project of Guizhou— Guangxi railway is the major concern of Guizhou railway planning. On 28th August, 2006, a special ceremony, celebrating the first rail laid in the Guizhou section, was held in Dujun City (都勻市) to mark the preliminary achievement of the project since it began a year ago10. The Guizhou—Guangxi railway starts at

9 “The first track is to be laid in the reconstruction project of Guizhou—Guangxi railway for expanded capacity (黔桂鐵路擴能改造工程進入全線鋪架階段)”, Xinhua Net, 29th August 2006, http://www3.xinhuanet.com/chinanews/2006-08/29/content_7895844.htm. 10 “The first rail is to be laid along Guizhou section of Guizhou—Guangxi railway (黔桂鐵路貴州段進入鋪軌階段)”, Webpage of Guizhou People’s Government Portal, http://www.gzgov.gov.cn/2005shouye_tc/showzwxx.asp?id=27025.

12 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

Liuzhou (柳州), the largest industrial city in Guangxi, in its southern end, and reaches Guiyang, the capital city of Guizhou, in its northern end. As an important link connecting Guizhou and Guangxi, it also encompasses another nine counties and cities, including Liujiang (柳江), Yizhou (宜州), Jingchengjiang (金城江), Dushan (獨山) and Dujun etc., under the administration of Liuzhou, Hechi (河池), Qiannan (黔南) and Guiyang. In the country’s railway networks, characterized by the so-called “Eight Horizontals and Eight Verticals” railway passages, the Guizhou—Guangxi railway is actually one of the “Eight Verticals”. It is the south section of the Baotou (包頭)—Liuzhou (Nanning) railway passage, connecting Sichuan—Guizhou railway of the Baotou—Liuzhou Passage and Hunan— Guizhou railway and Guiyang—Kunming railway of the Shanghai—Kunming (Chengdu) Passage to the north, and the Hunan—Guangxi railway to the south. It borders Nanning—Kunming railway of the “Sea-Going Passage of the Southwest” to the west, and lies next to Huaihua—Liuzhou section of the Jiaozuo (焦作)— Liuzhou railway in the east. As a major link between Southwest, Northwest and South China Economic Zones, as an indispensable passage for Guizhou to transport its coal and phosphorus outwards, and as an important sea-going passage for the Southwest region, the Guizhou—Guangxi railway has become the foremost link between the resource-based economy of the Southwest and the export- oriented economy of South China.

After reconstruction, the total mileage of the Guizhou—Guangxi railway will be 489 kilometres, 119 kilometres fewer than the original 608 kilometres. It will be a first class electrified single track line, with rooms for the possible construction of double track. A second line will be constructed between Liuzhou and Luoman (洛滿). Upon completion in 2008, the entire project will cost RMB 9.4 billion. By that time, travel time from Guiyang of Guizhou to Liuzhou of Guangxi will see a dramatic reduction from the current 14 hours to only 5 hours11. Starting from Longli (龍里) of Guizhou in the north, and ending in Mawei (麻尾) at the intersection of Guizhou and Guangxi in the south, the section within Guizhou is 188 kilometres long. With this development, Guizhou will have finished the construction of its first sea-going express railway passage, with an average speed of 140 to 160 kilometres per hour12.

11 “The first track is to be laid in the RMB 9.4 billion reconstruction project of Guizhou—Guangxi railway for expanded capacity (總投資 94 億元黔桂鐵路擴能改造工程開始全線鋪架)”, China Net, 29th August 2006, http://big5.china.com.cn/economic/txt/2006-08/29/content_7114778.htm. 12 “The first rail is to be laid along Guizhou section of Guizhou—Guangxi railway (黔桂鐵路貴州段進入鋪軌階段)”, Webpage of Guizhou People’s Government Portal, http://www.gzgov.gov.cn/2005shouye_tc/showzwxx.asp?id=27025.

13 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

1.3 Guangxi Zhuang Autonomous Region

Though there are not many lines, Guangxi’s railways are indispensable in linking up the North, the East, the Southwest and the South regions. About 60% of the bulk cargo and 25% of passenger flows are accommodated by these railways. As early as 1992, the Central Government designated Guangxi as the “Sea-Going Passage of the Southwest”, only to see the “Passage” not fully exploited, due to the low technical standards and outdated facilities of the Guangxi railways13.

Map 1-3: Existing Railway Network in Guangxi

Source: People’s Daily Online, http://unn.people.com.cn/GB/4585240.html

1.3.1 Planned Projects worth RMB 40 Billion Underway

On 13th December, 2004, the Ministry of Railways and the Government of Guangxi Zhuang Autonomous Region signed a document entitled Summary of

13 “Construction of the 8.4 billion Luoyang—Zhanjiang railway is soon to start, putting railway construction in Guangxi into full gear (廣西鐵路全盤皆活，洛湛鐵路投資 84 個億即將動工)”, People’s Daily Online, 14th December 2004, http://www.people.com.cn/GB/shizheng/14562/3054398.html.

14 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) the Conference on Accelerating Guangxi Railway Construction, in which a “one package” comprehensive railway development plan for Guangxi was put forth. The main points of the proposal can be summarized as: constructing two new railway lines, reconstructing five old lines and two convergence hubs, and planning to construct another two new lines. The two new railway lines under construction refer to Luoyang (洛陽)—Zhanjiang (湛江) railway and Hepu (合浦)—Hechun (河唇) railway; the five lines under reconstruction are Guizhou— Guangxi railway, Hunan—Guangxi railway, Nanning—Kunming railway, Coastal railway and Jiaozuo—Liuzhou railway; the two convergence hubs refer to Nanning and Liuzhou; and the two new lines under planning are Huangtong— Baise (百色) railway and Tianyang (田陽)—Debao (德保) railway.

Until 2004, the total mileage of Guangxi railways stands only at 2,200 kilometres, while the “one package” comprehensive plan will help it increase to 2,800 kilometres, covering all 14 cities of Guangxi. To achieve this ambitious goal, the Ministry of Railways will put in RMB 40 billion. The projects will be started in late 2005 and will be completed in slightly more than three years. Together the newly constructed and reconstructed railway lines will have a total mileage of 2,800 kilometres, exceeding that of the existing railway network, and amounting to another Guangxi railway network. This plan will help Guangxi railways figure more prominently in the establishment of the China—ASEAN Free Trade Area and Pan-PRD Economic Zone, and will help Guangxi play the dual strategic roles of “Sea—Going Passage of the Southwest” and “International Channel Linking ASEAN”.

According to this “one package” plan, formal construction work for the new railway, Luoyang—Zhanjiang (Luoyang of Henan province to Zhanjiang of Guangdong province) railway, which cut across the southeast of Guangxi, would begin on 15th December 2004. On the subsequent day, 16th December, reconstruction projects of Guizhou—Guangxi railway, Nanning—Kunming railway and Coastal railway for expanded capacity would also be kicked off. Of the above projects, RMB 8.4 billion will be invested in Guangxi section of the Luoyang—Zhangjiang railway, which has a mileage of 380 kilometres; 5.1 billion will be invested in Guangxi section of the Guizhou—Guangxi railway, which has a mileage of 265 kilometres; 210 million will be invested in the reconstruction of the Nanning—Fangcheng railway of the Coastal railway, which started in 2004;

15 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) and 120 million will be invested in the reconstruction of Guangxi section of the Nanning—Kunming railway14.

1.3.2 Specific Projects

The 380 kilometres long Guangxi section of the Luoyang—Zhangjiang railway, which involves an investment of RMB 8.4 billion and runs through the eastern areas of Guangxi, will bring great benefits. (Guangxi section of the railway starts at Yongzhou (永州) of Hunan, and ends at Cenxi (岑溪) of Guangxi. In the Guangxi proper, it passes through Hezhou (賀州), Wuzhou (梧州) and Cenxi, where another two lines will be constructed to connect with Yulin (玉林) and Maoming (茂名), hence linking the Guangxi and Guangdong railways). The Luoyang—Zhanjiang railway is an important export route to the coastal ports for China’s central and western regions, linking them with such deep-water ports in South China as Zhanjiang, Beihai (北海), Qinzhou (欽州), Fangcheng (防城) and Maoming. It also signals an end to the embarrassing history of east Guangxi, where not a single rail had been laid before. It cuts short the transportation distance between Hunan and Hainan by 100 kilometres. Together with the Beijing—Guangzhou railway, Beijing—Shanghai railway and Beijing—Kowloon railway, it forms the backbone of China’s vertical railway network, facilitating greatly the implementation of China’s Western Development Strategy. With regards to Guangxi, the Luoyang—Zhanjiang railway will not only help optimize its railway networks, but also bring much relief to the severely strained existing railways by diverting some of the traffic flows from the Hunan—Guangxi railway and Zhicheng (枝城，現名宜都)—Liuzhou railway.

As mentioned above, the total mileage of Guizhou—Guangxi railway will be 489 kilometres (265 kilometres lie in Guangxi, costing RMB 5.1 billion to build), 119 kilometres shorter than the original 608 kilometres after reconstruction. Constructed as a single-staged project, it will be a first class electrified single track line, with a tractive capacity of 3,800 tonnes when put into operation in 2007, while leaving adequate rooms for the possible construction of double track. By that time, it will take only 5 hours to travel from Liuzhou to Guiyang by train,

14 “‘One basket’ railway development plan worth RMB 40 billion helps propel Guangxi’s economic takeoff (400 億元打造廣西新鐵路‘一攬子’計劃助經濟騰飛)”, Guangxi News Net, 14th December 2004, http://news.big5.newgx.com.cn/staticpagesbig5/20041214/newgx41bdd4db-290672.html.

16 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) much shorter than the current 14 hours, with the train speed along the Luoman— Jinchengjiang section reaching 160 kilometres per hour.

After its reconstruction, the major technical standards applied to the Coastal railway (also called Nanning—Fangcheng railway) will be as follows: it will be a first class railway while those sections without reconstruction will be kept as second class; diesel locomotives, for the time being, will serve as engines of traction, with electrification being planned in the future. The tractive capacity will reach 3,500 tonnes. After the completion of the Hepu—Hechun railway, it will form an express passage linking Kunming, Nanning, Qinzhou and Guangzhou together with the Nanning—Kunming railway and Coastal railway.

The electrification of Jiaozuo—Liuzhou railway and the renovation of its traction power system will help Nanning—Kunming railway greatly expand its tractive capabilities, thereby enlarging the export capacity of Guangxi’s coastal ports and relieving transport pressures on the Guizhou—Guangxi railway. In the subsequent 2 to 3 years, the average train speed can reach 200 kilometres per hour as the reconstruction of the Hunan—Guangxi railway is completed. More importantly, the planned construction of the Longchang—Baise railway and Tianyang—Debao railway will enable Guangxi to further develop its aluminium bases in the west15.

1.3.3 11th Five-Year Plan Goals

According to sources from Guangxi Provincial Communications Department and Guangxi Provincial Development and Reform Commission, Guangxi will set its eyes on three comprehensive development goals during the period of the 11th Five-Year Plan, namely, fully exploiting its potential as the key sea-going passage for the Southwest, accelerating the construction of an international channel linking with ASEAN nations, and further promoting cooperation in the Pan-PRD region.

15 “Construction of the 8.4 billion Luoyang—Zhanjiang railway is soon to start, putting railway construction in Guangxi into full gear (廣西鐵路全盤皆活，洛湛鐵路投資 84 個億即將動工)”, People’s Daily Online, 14th December 2004, http://www.people.com.cn/GB/shizheng/14562/3054398.html.

17 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

In the arena of railway construction, Guangxi will focus on constructing new main lines and reconstructing the rest to expand their capacity. Also high on the agenda are expanding existing railway networks and greatly expanding the transport capacities of main railway passages linking Guangxi with Central, Southern and Southwestern China, and with the coastal ports, as well as Vietnam. Guangxi will speed up the construction of the section of the Luoyang—Zhanjiang railway under its purview, the reconstruction of the national main lines such as the Guizhou—Guangxi (Guiyang—Liuzhou) railway, Nanning—Kunming railway, Hunan—Guangxi (Hengyang (衡陽)—Pingxiang (憑祥)) railway, and furnish the Nanning—Fangchenggang railway and Qinzhou—Beihai railway with related facilities as soon as possible. In addition, Guangxi will construct two new lines, one from Tianyang (Tiandong (田東)) to Debao, and the other one from Cenxi to Luoding ( 羅定) of Guangdong. Moreover, it will reconstruct Nanning and Liuzhou convergence hubs, and improve the efficiency of the marshalling yards. It is expected that, by the end of the 11th Five-Year Plan period, Guangxi railways will have a total mileage of 3,360 kilometres, with double-track lines accounting for 36%, electrification rate standing at 35%, and average train speed along the main lines reaching 120 to 200 kilometres per hour16.

1.3.4 Express Railway as the Focus of Transportation Construction

As part of the fifth consecutive nationwide train speed acceleration programme, the Liuzhou Railway Bureau, responsible for over 60% of Guangxi’s passenger and freight transport, accordingly raised the train speed along the Litang (黎塘)—Zhanjiang double-track line and the northern section of the Hunan— Guangxi railway to 110 kilometres per hour; that along Liuzhou—Litang section of the Hunan—Guangxi railway to 120 kilometres per hour; and that along the section of Nanning—Kunming railway under its purview to 100 kilometres per hour. The result is a reduction of over one hour’s travel time along the 2,400 kilometres-long railway lines under the purview of the Liuzhou Railway Bureau. A network of express passages expanding in all directions is thus formed around Nanning: the travel times along the sections under the administration of Liuzhou Railway Bureau of the Nanning—Beijing West railway, Nanning—Wuxi (無錫) railway, Nanning—Chengdu railway, Nanning—Guangzhou railway, and Nanning—Kunming railway were cut by 1 to 2 hours. According to statistics, in

16 Long Geping (龐革平), “Guangxi aims to construct international passages by sea, by river and by land during the 11th Five Year Plan period (‘十一五’廣西將海河陸空並舉建國際大通道)”, PRD Cooperation Information Net, 9th February 2006, http://www.pprd.org.cn/92/guangxi/200602/t20060209_5001.htm.

18 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) the fifth nationwide train speed acceleration programme, the Liuzhou Railway Bureau was able to raise the train speed along 2,913 kilometres of railway lines, which amount to 55.7% of the total lines under its control17.

In addition, the construction of the Guangxi Express Railway will also start within the year. It spreads from Nanning of Guangxi to Hengyang of Hunan, over 570 kilometres in length, will cost about RMB 30 billion, and take 3 years to be completed. In fact, the project consists of two parts: the construction of new lines and the reconstruction of original lines for expanded capacity, both along the existing Hunan—Guangxi railway. Two new lines will be constructed from Liuzhou to Nanning, an inter-city railway will also be built, co-funded by the Ministry of Railways and Guangxi, with the train speed expected from 200 to 259 kilometres per hour; the section from the north of Liuzhou to the intersection of Guangxi and Hunan will be reconstructed, with train speed expected at 200 kilometres, and will cost about RMB 18 billion. Guangxi Express Railway is an important channel linking China with ASEAN. Upon its completion, travel time from Nanning to Guilin (桂林) will be reduced from 5 hours currently to only 2 hours. They will contribute greatly to the full development of the Tonkin Economic Zone18.

The Hunan—Guangxi railway not only links up the three most viable economies of Guangxi, namely, Guilin, Liuzhou and Nanning, but also shortens the travelling time to neighbouring provinces, while at the same time broadening the base encircled by the cities in Guangxi. It connects with the Litang—Zhanjing railway to the east all the way through to the sea; with the Nanning—Kunming railway to the west entering Yunnan; and joins the Vietnam international railway by going south from Pingxiang port. Through the Hunan—Guangxi railway, transportation distance from Kunming of Yunnan to Guangzhou will be reduced by 522 kilometres, and those from Xichang (西昌) of Sichuan to Guangzhou and from Liupanshui (六盤水) of Guizhou to Litang of Guangxi will be cut short by 844 and 107 kilometres respectively. To the north, this railway is connected by the Sichuan—Guizhou railway of the Baotou—Liuzhou Passage and the Hunan— Guizhou railway and Guiyang—Kunming railway of the Luzhou—Kunming

17 “Express railways became the focus of transportation construction in Guangxi (快速鐵路成爲廣西交通建設重點)”, Xinhua Net Guangxi Channel, 31st July 2006, http://www.gx.xinhuanet.com/misc/2006- 07/31/content_7656093.htm. 18 “Construction of Guangxi Express Railway will kick off within the year, which will last for 3 years and cost about RMB 30 billion (廣西高速鐵路年內將開建，投資約 300 億元工期 3 年)”, People’s Daily Online, 3rd May 2006, http://finance.people.com.cn/BIG5/1037/4347178.html.

19 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

Passage; to the south it is connected with the Hunan—Guangxi railway; it sits next to the Nanning—Kunming railway of the “Sea-Going Passage of Southwest” in the west and to Huaihua—Liuzhou section of the Jiaozuo—Liuzhou railway and the Guizhou—Guangxi railway, one of the “Eight Horizontals and Eight Verticals”, in the east, linking up 18 counties (cities, districts) in Guangxi and 21 in Guizhou. In time, the Hunan—Guangxi railway will become an artery linking Guangxi with Central and Southeast China and with the ASEAN countries. Other than this line, the reconstruction of the Nanning—Kunming railway for expanded capacity has already been completed in July 2005, which saw the tractive capacity raised from 3,500 tonnes to 5,000 tonnes. This was done within a year of implementation of the “one package” plan. In October 2005, Nanning— Fangchenggang railway also saw its reconstruction fully completed, with the line accommodating 55 pairs of trains every day instead of 15 pairs originally, and the annual transport capacity increased from 15 million tonnes to 25.38 million tonnes19.

1.4 Yunnan Province

1.4.1 Ongoing Projects

There are 4 projects currently under the supervision of Kunming Railway Bureau:

1 The second line of Zhanyi (沾益)—Kunming section of the Guiyang—Kunming railway is being built, which is 141 kilometres long, and will cost about RMB 3.77 billion. According to initial planning, this project will be completed in a year’s time. The annual transport capacity of the railway will rise from 1,656 million tonnes to 5,890 million tonnes, and will accommodate 27 pair of passenger trains instead of 11 currently.

2 A new railway from Dali (大理) to Lijiang (麗江) will be constructed. It will be 162.4 kilometres in length, and will cost

19 “Express railways became the focus of transportation construction in Guangxi (快速鐵路成爲廣西交通建設重點)”, Xinhua Net Guangxi Channel, 31st July 2006, http://www.gx.xinhuanet.com/misc/2006- 07/31/content_7656093.htm.

20 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

RMB 4.1 billion. Initial planning calls forth completion in the first half of 2008. It will contribute significantly to the exploration of resources, especially tourism resources, in the northwestern area of Yunnan, and to the expansion of China’s influence with the ASEAN countries.

3 A new railway from Yuxi to Mengzi (蒙自) will be constructed, measuring 162.4 kilometres long and costing RMB 4.1 billion. Initial planning calls for the completion in 2009. Upon completion, the Southwest finally gets a passage beyond the confines of China. Apart from that, it will also play an important role in making sound Yunnan’s railway network, relieving transportation pressures and accelerating the establishment of the Kunming-Haiphong (海防) Economic Corridor.

4 Planned to be completed within the year, the construction of the Kunming South Container Centre will cost RMB 470 million. It will help Kunming become a comprehensive regional logistics hub with an international reach, and will contribute considerably to the establishment of China—ASEAN Free Trade Area and the Pan-PRD regional economic development.

In addition, the construction of three new railway lines in the Yunnan proper will also be started within the year. Measuring 219 kilometres in length, the second line of the Liupanshui—Zhanyi railway will see construction work start in the third quarter of the year. Construction work will take 4 years and cost RMB 8.676 billion. Measuring 99 kilometres in length, the construction of the second line of the Guangtong (廣通)—Kunming railway will see construction work start in the third quarter of the year. Construction will take 4 years and cost RMB 4.8 billion. Measuring 338 kilometres in length, the Dali—Ruili (瑞麗) railway will see construction start at the end of the year. Construction will take 4 years and will cost RMB 11.18 billion20.

20 “Yunnan is poised for a new wave of railway construction (雲南迎來又一輪鐵路建設高潮)”, Xinhua Net Yunnan Channel, 31st July 2006, http://big5.xinhuanet.com/gate/big5/www.yn.xinhuanet.com/newscenter/2006-07/31/content_7652556.htm.

21 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

1.4.2 Railway Construction Goals within 10—15 Years

According to the 2003—2020 National Medium and Long-Term Railway Network Planning, Kunming-Haiphong section of the China—Vietnam international railway passage will be reconstructed; a new section, linking Kunming, Jinghong (景洪), and Mohan (磨憨) of the China—Laos international railway passage will be constructed; a new section, from Dali to Ruili, of the China—Myanmar international railway passage will be constructed; a new section of the Yunnan—Tibet railway, running through Dali, Lijiang and Shangri-La (香格里拉) will be constructed. At the same time, existing railway network will also undergo major renovations, with the second line of the Kunming—Zhanyi railway and Zhanyi—Liupanshui railway being built respectively.

Railway construction goals of Yunnan province in the coming 10—15 years are as follows: construction of an international passage of Pan-Asian railway should be accelerated; train speed along railways leading out of Yunnan to other provinces should be raised, and the capacities of these lines should also be expanded; inter-city passenger expressways which are centred around Kunming and expand into the city blocs of central Yunnan and major tourism cities should be constructed. Recommendations by the Yunnan Provincial Development and Reform Commission are as follows: try to start construction of the south wing of the circular line of Kunming hub in 2006 (time limit for the project is 2 years); start construction of Dali—Ruili section of the west line of the Pan-Asian railway (time limit for the project is 6 years); the construction of the second line of Guangtong—Kunming section of the Chengdu—Kunming railway (time limit for the project is 3 years); try to construct a second line of Guangtong—Dali railway in 2009 (time limit for the project is 3 years); try to start the construction of Yuxi South—Mohan section of the central line of Pan-Asian railway in 2010 (time limit for the project is 6 years); try to construct a second line of Guangtong—Panzhihua (攀枝花) section of the Chengdu—Kunming railway in 2010 (time limit for the project is 3 years); try to construct a second line of Kunming—Weishe (威舍) section of the Nanning—Kunming railway in 2013 (time limit for the project is 4 years); try to start the construction of Mengzi North—Hekou North (河口北) section of the east line of Pan-Asian railway in 2015 (time limit for the project is 3 years); and start the construction of Lijiang—Shangri-La section of the Yunnan— Tibet railway in 2015 (time limit for the project is 5 years).

22 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

A total of RMB 90 billion will be invested into the above projects, which, upon completion, will see 1,900 kilometres of rail lines added to the existing railway network, thereby reaching a total mileage of 4,000 kilometres of railway lines all over Yunnan. By then, the dream of departing at sunrise and arriving at sunset will be fully realized along the Kunming—Guiyang, Kunming— Lijiang, Kunming—Baoshan (保山) and Kunming—Mengzi railways21.

Map 1-4: Existing Railways in Yunnan and Their Surrounding Areas

Source: People’s Daily Online, http://unn.people.com.cn/GB/4585240.html.

1.4.3 A Conception of Constructing International Railway Passages and Railway Passages into Yunnan

In fact, the general idea of constructing a grandiose international grand passage has been conceived by party officials of Yunnan Province quite early, due to historical and geographical factors, plus the gradual realization of China— ASEAN Free Trade Area as well as the rise of China in recent years. International passage refers to the transport passage which, through Yunnan, connects China’s

21 “Yunnan outlined major railway construction goals for the coming 10—15 years (雲南提出未來 10-15 年內鐵路建設目標)”, China University Online, 18th July 2004, http://www.univs.cn/univs/xidian/west/news.php?id=101707.

23 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) inland areas with Southeast Asia, South Asia and more distant regions. The general goal is: connecting “Three Asia’s” (East Asia, Southeast Asia and South Asia), linking up “Two Oceans” (the Pacific Ocean and the Indian Ocean), and gradually forming a fast and convenient transportation system which connects Kunming with Beijing and Chengdu (linking Bohai Rim ( 環渤海)), with Erlianhaote (二連浩特) and Chongqing, with Shanghai and Guiyang (linking Yangtze River Delta), with Guangzhou and Nanning (linking Pan-PRD), and with Vietnam, with Thailand through Laos, with the Indian Ocean through Myanmar, and with South Asia through Myanmar.

Railway passages entering Yunnan and international railway passages mainly refer to six passages entering Yunnan and four international passages. The six passages are the Nanning—Kunming railway, Guizhou—Kunming railway, Neijiang (內江)—Kunming railway, Chengdu—Kunming railway and the planned Yunnan—Guangxi railway and Yunnan—Tibet railway, with the Neijiang— Kunming railway and Guiyang—Kunming railway intersecting at Liupanshui. The four international passages include the China—Vietnam railway, China—Laos— Thailand railway, China—Myanmar railway, and the railway to South Asia by way of Myanmar.

1.4.3.1 Railway Passages Entering Yunnan

The key projects underlying these passages include the construction of second line for the Nanning—Kunming, Guiyang—Kunming and Chengdu— Kunming railways, the ongoing construction of the 145 kilometres long Kunming—Zhanyi section of the second line of Guiyang—Kunming railway, and the construction of the 253 kilometres long Zhanyi—Liupanshui section, which, according to initial planning, is to planned to be started within the year. According to initial planning, the construction of Kunming—Guangtong section, 99 kilometres long, of the Chengdu—Kunming railway will also be kicked off within the year. In addition, the construction of Dali—Lijiang section of the Yunnan— Tibet railway passage is already under way. It measures 164 kilometres long. The construction of the Lijiang—Shangri-La section, which measures 130 kilometres long, is to be started during the period of the 11th Five-Year Plan. The Yunnan— Guangxi railway is a part of an inter-provincial railway, which starts at Xiamen (廈門) of Fujian in the east and ends at Jinghong of Yunnan in the west. It is the only railway parallel to the Shanghai—Kunming railway passage within the hundreds of kilometres distance between the Shanghai—Kunming railway passage

24 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) and the Coastal railway passage, and it is also an important horizontal artery in the south of Yunnan. Inside Yunnan province, it runs from Yunjiang (元江), to Mengzi, through Wenshan (文山), and ultimately to Baise, with a total mileage of 530 kilometres. It meets with the railway from Yuxi to Mohan at Yuanjiang, and connects with Guangxi’s railway at Baise. According to initial planning, the Yunnan—Guangxi railway will be completed by 2020.

1.4.3.2 International Railway Passages

1 The China—Vietnam International Railway Passage. It connects the railway networks of China with Vietnam and supports the construction of the Pan-Asian Railway East Line, which is proposed by the ASEAN countries to run through Bangkok (曼谷) of Thailand, Poipet (波貝), Sisophon (詩梳風) and Phnom Penh of Cambodia, Cong Pong Cham (祿寧), Saigon and Hanoi of Vietnam, and Heikou and Kunming of China. Inside Yunnan province, a new 309 kilometres long section, linking up Yuxi South, Mengzi and Hekou, will be constructed. The construction of the part from Yuxi to Mengzi, which is 141 kilometres long, is already under way. The construction of the other part, from Mengzi to Hekou, which is 168 kilometres long, will start in 2007, and will be finished in 2010.

2 The China—Laos—Thailand International Railway Passage. It connects the railway networks of China with Thailand and supports the construction of the Pan-Asian Railway Central Line, which will link up Bangkok and Nong Khai (廊開) of Thailand, Vientiane, Lang Prabang ( 琅勃拉邦) and Boten ( 麽丁) of Cambodia, and Mohan and Kunming of China. within Yunnan province. A new 599 kilometres long section from Yuxi and Mohan will be constructed, which according to initial planning, will be started in 2008 and will be completed during the 12th Five-Year Plan. Beyond Mohan, a new railway running through Boten, Lang Prabang, Vientiane and Nong Khai needs to be built in Laos in order to connect with Thailand’s railway networks. This rail will be about 500 kilometres long.

25 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

3 The China—Myanmar International Railway Passage. It connects the railway networks of China with Myanmar and supports the Pan-Asian Railway West Line, linking up Bangkok and Bantatongna (班塔通納) of Thailand, Ye (耶城), Rangoon (仰光) and Lashio (臘戍) of Myanmar, and Ruili and Kunming of China. The construction of a new section from Dali to Ruili, which is 340 kilometres long, will be started, according to initial planning, within the year. A section of 132 kilometres long streching outside Chinese borders from Ruili to reach Lashio will be built to connect with Myanmar railway networks.

4 The International Railway Passage to South Asia by way of Myanmar. It connects China with the railway networks of North Myanmar, India, Bangladesh (孟加拉), and even with West Asia, Europe and Africa, forming the third Eurasian Continental Bridge alongside the Siberian railway and Longhai railway. The railway passage will pass through Baoshan, Tengchong (騰沖) and Houqiao (猴橋) of China, Myitkyina (密支那) of Myanmar and Ledo (雷多) of India. The Baoshan—Tengchong—Houqiao railway, about 120 kilometres long, will be constructed during the 12th Five-Year Plan Period. A total mileage of 480 kilometres of railway lines outside Chinese borders will have to be built to connect with the railway networks of India and Bangladesh22.

Yunnan railways are of great strategic significance in the national railway network. While there are only 7 customs ports along all of China’s railway passages currently, 4 other ports will be added in Yunnan in 10—15 years’ time, namely, Ruili, Jinghong, Houqiao and Kunming. According to the standards laid down by the Ministry of Railways on train speed acceleration, trains should depart at sunrise and arrive at sunset for a travel distance of no more than 500 kilometres; they should depart at sunset and arrive at sunrise for a travel distance of no more than 1,500 kilometres; and the travel time should be limited to one day for a travel distance of no more than 2,500 kilometres. After completion, the three international railway passages, together with the existing Hekou railway passage,

22 The above content is quoted from “Qin Guangrong, Yunnan Provincial Deputy Party Secretary, discusses about the construction of international railway passages in Yunnan (雲南省委副書記秦光榮縱論雲南國際通道建設)”, Webpage of the Western Development Program Office of the State Council, http://www.chinawest.gov.cn/web/NewsInfo.asp?NewsId=32261.

26 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) will make it possible for passengers to arrive at Hanoi, Vientiane, Bangkok and Rangoon respectively in a day’s time. By then, the conception of a traveller departing at sunset and arriving at sunrise will be materialized between Kunming and Jinghong, and Kunming and Ruili. Following Harbin, Kunming will become China’s second inland railway port, and the railway hub connecting China with ASEAN and South Asia. Such a strategic advantage is unique to Yunnan23.

1.4.4 The Visionary Qinghai—Tibet Railway: Constructing Yunnan— Tibet Railway

According to Li Jincheng (李金城), chief engineering designer of the Qinghai—Tibet railway, the conception of railways entering Tibet is in fact to construct two railways, namely, the Qinghai—Tibet railway and Yunnan—Tibet railway. Similarly, Song Yongfu (孫永福), Vice Minister of the Ministry of Railways, has stated clearly that the construction of the Yunnan—Tibet railway is always on the agenda and that the completion of the railway from Kunming to Dali will lay a solid foundation for it. On the other hand, officials from the Tibet Autonomous Region also said that once the construction of the Qinghai—Tibet railway is finished, Tibet will continue extending its three lines in 10 years, namely, Lhasa ( 拉薩)—Nyingtri ( 林芝), Lhasa—Shigatse ( 日喀則), and Shigatse—Yadong (亞東). It is no coincidence to discover that the Lhasa— Nyingtri line is actually one section of the planned Yunnan—Tibet railway. The Lhasa—Nyingtri line will enter Yunnan, pass through Lijiang and end at Dali, where it will meet with the newly constructed Kunming—Dali railway. For the time being, as a part of the Yunnan—Tibet railway, the Dali section (Dali— LiJiang Naxi Autonomous County) is under construction and will come into full operation by 2008. Preparatory work is also under way for the Lijiang—Shangri La section. The Dali section will ultimately be extended to Deqing, at the border of Yunnan and Tibet; and the Qinghai—Tibet railway will ultimately be extended to Nyingtri, where it will meet the Yunnan—Tibet railway.

Once in use, the Yunnan—Tibet railway will bring two beneficial results. For Tibet, the railway will provide it with a southeast route to the coastal ports, and will also serve as a southwest grand passage for it to connect more

23 Li Ping (李平), Mo Taiyao (莫泰堯) and Zhang Hui (張輝), “Yunnan is in dire need of train speed acceleration (雲南：呼喚鐵路建設大提速)”, Yuxi Net, 10th July 2002, http://www.yuxi.gov.cn/docdetail.asp?id1=20020710150524.

27 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) closely with South, Central and East China, thereby facilitating the economic development of Tibet. For the Southwestern region, the Yunnan—Tibet railway will be integrated with the Yunnan—Vietnam railway and Kunming—Bangkok highway. By then, a transportation artery composed of highways, railways and airways will come into effect for the first time in this region. The artery will take Yunnan as its centre and expand southwards and northwards. At that time, the Greater Kunming Area will have a reasonable chance to become the centre of the economic zone thus formed24.

1.5 Implications for Hong Kong

1.5.1 A New Outlook of Railway Construction in the Southwestern Region

Among the grand railway passages of Southwestern region is the Dali— Ruili railway, which is an international railway extending to Southeast Asia. Once completed, it will help Yunnan become a major convergence hub connecting China with the Southeast and South Asian countries along the new Silk Road, and help Kunming become the logistics centre of the ASEAN countries.

Another concern of railway construction is the renovation of the convergence hubs to achieve greater flows and capacities. The reconstruction of the Chengdu, Chongqing and Kunming convergence hubs are big projects that may cost hundreds of millions, or even thousands of millions, of renminbi. The reconstruction of the Chengdu convergence hub will comprise four major parts: to construct the most advanced bidirectional marshalling yard, Chengdu North Marshalling Station; to construct the nation’s biggest container distribution centre with a customs clearance function; to construct a modern passenger station which provides passengers with all the public transport means with no transfer needed; and to construct a large locomotive maintenance station. The reconstruction of the Chongqing convergence hub will focus on constructing a container distribution centre. The construction of the Yunnan provincial logistics and distribution centre will be the centrepiece in the course of the reconstruction of the Kunming container distribution centre, which will also serve as the window for Yunnan’s

24 The information on Yunnan—Tibet railway is quoted from “Yunnan—Tibet railway will be constructed sooner or later (滇藏鐵路遲早要修)”, Webpage of Yunnan Information Net, 8th August 2006, http://news.yninfo.com/yunnan/yaowen/2006/8/1155005500_20/index.html.

28 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) foreign trade. Its area of service will cover Yunnan, Guizhou and Guangxi provinces/region, and extend further into Sichuan province and Chongqing municipal, even as far as the Southeast Asian countries. It will also provide such services as international carriage of goods and direct customs clearance. Such customs will make the Kunming convergence hub immensely important. When these reconstruction projects have been completed, the inadequate transportation capacity of Southwestern railways which has long pulled back the development of this region will see a considerable improvement25. By then, railway transportation in Southwest and South China will be speedy and smooth, making it the most vigorous infrastructural platform of the Pan-PRD region.

1.5.2 Implications for Hong Kong

The 11th Five-Year Plan has two profound implications for China, namely, the change of economic growth pattern and the acceleration of the construction of the national railway transportation system. These are clearly complementary. In terms of railway construction, the Four Southwestern Provinces/Region is pulling ahead of the 2003 National Medium and Long-Term Railway Network Planning, with two significant implications.

First, the Four Southwestern Provinces/Region will have a high-density railway network. Interregional communication is especially strengthened by the three railways of north-south direction, namely, the Luoyang—Zhanjiang railway, Guizhou—Guangxi railway and Nanning—Kunming railway. However, improvement in the railways of east-west direction, which lead the Southwestern region to the port blocs in the Pan-PRD region, is very limited. There are only two railway lines in this direction, namely, the Luoyang—Zhanjiang railway which meets the Coastal railway, coming from Hangzhou (杭州) and going through the PRD region, at the west of Guangdong, and the Nanning—Fangcheng railway. The result will be the strengthening of interregional communication in the Southwestern region and its connections with Central China at the expense of the Pearl River Delta region. The construction of international railways in Yunnan and Guangxi will also make it possible to reduce the transport time and costs for accessing ports in the Beibu Gulf (Gulf of Tonkin) or neighbouring countries

25 “A Blueprint for Southwestern Railways—Report on the Upcoming High Point of Railway Construction in Yunnan, Guizhou, Sichuan, and Chongqing (西南鐵路新藍圖──寫在雲貴川渝鐵路建設高潮到來之際)”, Xinhua Net Qinghai Channel, 29th April 2005, http://www.qh.xinhuanet.com/qztlw/2005- 04/29/content_4155178.htm.

29 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) across the land mass. The role of Nanning and Kunming as central cities will be strengthened. The Chengdu convergence hub is not only the major hub in this region, but also an important hub connecting this region with Northwest, Central, North and even East China.

The PRD has long been a traditional source for imports and exports of Guangdong and Hong Kong. In the past 7 years, statistics from Guangdong show that the value of imports and exports by commodity destination/origin has been higher than the value of imports and exports by the location of commodity trading units (see the table below). In other words, a small portion of Guangdong’s external trade depends on ports in other provinces, from which it can be inferred that goods produced and consumed in the PRD are the mainstay of Guangdong’s and Hong Kong’s trade. From January to September in 2006, import and export of Guangxi and Guizhou witnessed the same trend as that of Guangdong. Sichuan and Yunnan, on the contrary, saw a different pattern, being instrumental in other provinces’ efforts to export. In 2005, 13% of the goods exported through Sichuan customs are from outside Sichuan; at the same time, 12% of the goods consumed in Sichuan are imported through the customs of other provinces. In Yunnan, Guangxi and Guizhou, a considerable proportion of the goods are also imported through customs of other provinces, 67%, 25% and 24% respectively, to be precise. In the four Provinces/Region, the total value of goods imported through customs outside this region stood at USD 2.04 billion in 2005. Even if all imported through Guangdong customs, they would hardly account for 1% of the total value imported through it.

Table 1-1a: Export Performance of Guangdong and the Four Southwestern Provinces/Region (USD 100 Million) 2006 Provinces Items 2000 2003 2004 2005 (Jan—Sep) Value of exports by location of Guangdong commodity trading units 919.2 1,529.4 1,915.6 2,381.6 2,132.8 Value of exports by commodity destination/origin 934.3 1,538.1 1,923.9 2,409.8 2,155.4 Value of exports by location of commodity trading Sichuan units 13.9 32.1 39.8 47.0 46.8 Value of exports by commodity destination/origin 14.3 30.3 34.9 40.9 39.7 Guangxi Value of exports by 14.9 19.7 23.9 28.8 25.0 location of commodity trading 30 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

2006 Provinces Items 2000 2003 2004 2005 (Jan—Sep) units Value of exports by commodity destination/origin 16.4 17.8 23.1 28.7 26.5 Value of exports by location of commodity trading Yunnan units 11.8 16.8 22.4 26.4 23.8 Value of exports by commodity destination/origin 10.9 14.7 20.2 23.9 21.4 Value of exports by location of commodity trading Guizhou units 4.2 5.9 8.7 8.6 7.5 Value of exports by commodity destination/origin 4.8 8.1 12.7 11.3 9.6

Table 1-1b: Import Performance of Guangdong and the Four Southwestern Provinces/Region (USD 100 Million) 2006 Provinces Items 2000 2003 2004 2005 (Jan—Sep) Value of imports by location of Guangdong commodity trading units 781.8 1,307.0 1,655.7 1,898.2 1,626.3 Value of imports by commodity destination/origin 820.6 1,355.5 1,709.7 1,982.2 1,709.7 Value of imports by location of Sichuan commodity trading units 11.5 24.3 28.9 32.0 32.9 Value of imports by commodity destination/origin 13.4 27.5 32.1 35.9 38.0 Value of imports by location of commodity Guangxi trading units 5.4 12.2 18.9 23.1 22.1 Value of imports by commodity destination/origin 6.4 14.4 25.2 28.9 26.6 2006 Provinces Items 2000 2003 2004 2005 (Jan—Sep) Value of imports by location of commodity Yunnan trading units 2.4 4.0 6.5 5.4 4.1 Value of imports by commodity destination/origin 3.7 7.4 11.0 9.0 6.1

31 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

2006 Provinces Items 2000 2003 2004 2005 (Jan—Sep) Value of imports by location of Guizhou commodity trading units 6.4 9.9 15.1 21.0 22.8 Value of imports by commodity destination/origin 7.9 12.5 17.2 26.1 26.9 Note: “Value of exports and imports by location of commodity trading units” refers to trade volumes handled by those trading enterprises registered with the local customs. “Value of exports and imports by commodity destination/origin” refers to trade volumes handled by the local consumption and production enterprises. Source: China’s Customs Statistics (Monthly Exports and Imports)

In the railway planning section of the 11th Five-Year Plan, a proposal has been put forward “to construct 18 container distribution centres in Shanghai, Tianjin, Guangzhou and other major cities. These centres will then rely on the newly constructed and reconstructed railway lines to promote the development of double-decker container transportation passage…thereby improving transportation efficiency and quality. The overarching goal is to meet the demands of the structural adjustments of the economy, foreign trade and the development of ports, as well as the demands of cargo owners for speedy, safe and “door-to-door” transportation.” In the Four Southwestern Provinces/Region, only Kunming is listed as a candidate for being a container distribution centre. Since Kunming is the terminal station of Pan-Asian railway, Chengdu—Kunming railway, Nanning—Kunming railway and Guiyang—Kunming railway, cargos from the central and eastern regions could then enter into the southwestern region through the related container transportation passage. It is much cheaper to rely on railways for transportation than to solely depend on highways, especially when foreign trade is conducted with such regions as Southeast Asia, South Asia and Middle East. It is much better to turn to Yunnan in such cases. If foreign trade is conducted with Japan and the USA, it will be much more cost-effective to do so from Shanghai. It then follows that the PRD may be marginalized.

Although it takes a lot of time to construct a railway transportation system for containers in the Mainland, it is upheld that the construction will be in close coordination with foreign trade expansion in the Four Southwestern Provinces/Region. In the short term, foreign trade volumes of the Four Southwestern Provinces/Region are negligible compared with those of Guangdong, which are managed through the Pearl River Delta Region. Therefore, it is understandable that Guangdong is not active in promoting the construction of freight railways leading out of the Four Southwestern Provinces/Region. However,

32 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) from a long-term perspective, some cargo transportation businesses in the area of foreign trade in eastern Guangdong may find their way to Yunnan and Guangxi, if there is no major development of cost-effective freight railway transportation in the PRD.

Second, the vigorous construction of inter-city express railways will help shape large-scale local city circles, like Chengdu—Deyang—Jinyang one hour economic circle centred on Chengdu and Nanning—Guilin—Liuzhou two hours economic circle. Deepening urbanization will result in a more optimal economic scale and the aggregation effect will not only make these cities become a more active part in this region as central cities, but also produce larger consumption-based and service-based cities, thus greatly spurring local development. This implies many great opportunities for Hong Kong’s service industry and trading enterprises. However, like neighbouring countries, production in the Southwestern region is mainly catering to the domestic market, which differs from the developed countries in Europe and North America , which Hong Kong has traditionally been serving and exporting to. Therefore, Hong Kong enterprises should make necessary localized adaptations rather than directly follow the existing business practices, if they hope to develop service or trade businesses in this region. The Hong Kong SAR Government should take on the responsibility to provide them with local economic and social information.

33 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

2 Trends and Updates on the Four Provinces/Region

2.1 Economic Performance of the Four Provinces/Region

The economies of the Four Provinces/Region operated more or less steadily from January to July in 2006. However, compared with the period from January to July, all the four economies saw signs of slowing down in the growth rate of value-added of industry and urban investment, except for Guizhou, where the growth rate of value-added of industry increased. Moreover, urban disposal income per capita also fell in August compared with July in Sichuan, Guangxi and Yunnan, again except for Guizhou, where it rose.

Although the aggregate ratio of sales of industrial products in the Four Provinces/Region was lower than that of the same period of last year, and was also lower than the national average, it kept increasing, setting a new record in the past three months. The ratio in Yunnan was the highest, above 98%. And after many a month’s adjustment, Guangxi saw its ratio reach the height of 95% again, up from 84.76% 26 —its lowest point—in January and February, and was poised to outperform Guizhou.

26 The national average of the ratio of sales of industrial products stood at 96.99% from January to February in 2006. Taking into consideration the fact that the national average ratio and that of Guangxi were 97.24% and 88.89% respectively from January to February in 2005, while those of the national average and Guangxi for the whole of 2005 were98.10% and 97.92%, which shows a great gap of Guangxi’s ratios between the first two months and the following ten months, we conclude that Guangxi’s ratio of sales of industrial products is influenced by seasonal factors, possible related to its sugar industry.

34 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

Table 2-1: Economic Performance of the Four Provinces/Region, January to August 2006 Value-Added by Urban Investment in Urban Sales of Industrial Industry fixed asset disposable Product (%) Region (100 mil. Yuan) (100 mil. Yuan) income per Yr.-on-yr. Jan- Yr.-on-yr. capita in August Jan-Aug Change Jan-Aug growth Aug growth (Yuan) Nationwide 54,354 17.3% 97.79% 0.07 52,594 29.1% 918 Guangdong 6,682 17.9% 97.11% -0.77 3,507 14.5% 1,214 Sichuan 1,642 23.9% 97.22% -0.26 2,351 36.7% 715 Guangxi 668 22.5% 95.72% -3.06 1,001 35.2% 750 Yunnan 779 17.0% 98.19% -0.77 1,024 26.8% 804 Guizhou 432 17.2% 95.83% -0.52 582 20.7% 727 Source: Website of the National Bureau of Statistics of China: http://www.stats.gov.cn/tjsj/index.htm

In terms of foreign trade, the growth rates of both import and export in the Four Provinces/Region saw some increase. Sichuan was still second to none in terms of growth of import and export, and compared with the period from January to July, the growth rate of its export accelerated, while that of import slowed down. At the same time, Guizhou has undergone a similar trend, meaning that trade surpluses of these two provinces are increasing steadily.

Table 2-2: Imports and Exports of the Four Provinces/Region, January to August 2006 Export Import Import and Export Surplus Region Jan-Aug Year-on-Year Jan-Aug Year-on-Year Jan-Aug (USD 100 mil) Growth (USD 100 mil) Growth (USD 100 mil) Nationwide 5,996.3 25.9% 5,049.8 21.6% 946.5 Guangdong 1,841.4 28.5% 1,408.6 20.3% 432.8 Sichuan 40.2 36.9% 28.9 47.6% 11.3 Guangxi 21.8 19.6% 19.3 30.4% 2.5 Yunnan 20.8 19.6% 19.0 40.5% 1.8 Guizhou 6.5 20.6% 3.5 5.4% 3.0 Note: statistics in this table was compiled by the location of commodity management units. Source: Monthly Digest of Chinese Maritime Customs, Issue 204, August 2006, pp16—17.

Due to the celebration of national independence holiday—the so-called Golden Week holiday—starting on 1st October, the latest statistics and related data for analysis were not put up on the statistics and business websites of Yunnan and Guizhou provinces until 5th October. Therefore, the analyses on the economic

35 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) performances of these two provinces will not be treated in this report. They will be added in the next issue.

36 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

2.2 Trends and Updates on Sichuan Province

2.2.1 Economic Performance of Sichuan Province

Although Sichuan experienced the most severe drought in sixty years during the summer, which disrupted its economy to some extent, it still performed reasonably well in foreign trade, government revenues, and people’s consumption, among other areas. The economy was growing steadily.

Table 2-3: Major Economic Indicators of Sichuan (January to August 2006) Items Jan-Aug (RMB 100 million) Year-on-Year Growth Total investment in fixed assets 2,675 35.2% Total Retail Sales of Consumer Goods 2,125 14.6% Government revenue 384 27.6% Government expenditure 607 23.6% Note: Local statistics is preliminary, which may be subject to adjustment in the future, and may differ from the statistics published by the National Bureau of Statistics later. Sources: 1. “Sichuan’s economy grew steadily between January and August in 2006”, China Real Estate Information, September 19th, 2006, http://www.realestate.cei.gov.cn/files/20069/2006f9d19c1439393.html. 2. Website of National Bureau of Statistics, http://www.stats.gov.cn/tjsj.

Economic operations in Sichuan from January to August were mainly characterized by a decline of industrial production and the slowing down of growth rate in investment. Since growth rates of light and heavy industries in August were 0.7% and 2.7% lower than those in July respectively27, the growth rate of the value-added of industry from January to August was 0.1% lower than that of the pervious seven months. Such results may be a reflection of the effects brought about by the drought; as to social investment, growth rate further slipped by 1.9% since it first fall in the previous seven months of this year. Growth rates of investment in primary, secondary and tertiary industries all slowed down, but industrial structure saw further optimization. Growth rates of investment in both

27 “A brief analysis on the economic performance of Sichuan as of August (8 月份四川經濟運行簡要分析)”, Sichuan Statistics and Information Website, 15th September 2006, http://www.sc.stats.gov.cn/stats_sc/zxtjxx/200409170037.htm.

37 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) superior and bottleneck sectors were higher than the provincial average, of which the most prominent is the electronics and information technology industry. The growth rate was 75.9% higher in comparison with that in the same period of preceding year. Moreover, investment in transportation, storage and postal services also grew by 50.9%28, much benefiting future economic development.

Nevertheless, problems linger in Sichuan’s economic operations from January to August, and they call for special attention. First, the drought seriously disrupted agricultural production, hence peasants’ income, in some areas in the second half of the year. Besides, urban residents’ income grows very slowly. Both of them will contribute negatively to the development of social investment and the retail market. Third, it will be a herculean task to reach the ambitious goals set to reduce energy consumption and pollution. Failure will hinder industrial development.

It is worth noting that investment from Hong Kong investors is surging high, with the total amount among the largest. From January to August, the amount of investment in Sichuan from Hong Kong investors through signed contracts accounted for 50.1% of the total, registering an increase of 20%, the actual investment accounted for 30% of the total, an increase of 19.4%29.

2.2.2 The Main Focus of Sichuan Province - Sichuan Experienced the Severest Drought in 60 Years

Since summer began this year, many areas in China have been afflicted with a host of natural disasters. While typhoons and flooding were tormenting the coastal areas of the Southeast, summer droughts were hitting hard on China’s western region. Together with Chongqing, Sichuan suffered the severest drought in 60 years. The summer drought started in the central area of Sichuan basin in late

28 “The growth of total investment in fixed assets in Sichuan between January and August kept decreasing (1-8 月四川全社會固定資產投資增速繼續回落)”, China Statistics and Information Website, 14th September 2006, http://www.stats.gov.cn/tjfx/dfxx/t20060920_402354824.htm. 29 “Investment in Sichuan from Taiwan and Hong Kong businesspersons between January and August surged (1-8 月港臺商在四川投資勢頭強勁) ”, China Business and Enterprise Website, 14th September 2006, http://www.863171.com/info/Class.asp?ClassID=143&page=2.

38 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

June. By early August, it had spread to most parts of the province30, affecting 481.7 million people, over half of the total population of Sichuan. By early September, the drought, which was characterized by its “swiftness of striking”, “unusually high temperature” and “extraordinary endurance”, had inflicted direct economic losses worth more than RMB 10 billion31.

Meteorologists and geologists from the Mainland discussed at length about the causes of this drought and reached various conclusions. A prevalent view with less controversy is that global warming and the anomalous atmospheric circulation are to blame for the severe drought. The frequency that warm currents with extreme temperature (for example, heat waves) strike the high and middle altitude regions of northern hemisphere has become more and more intense since 1960s, and the drought in Sichuan seems to be just a case in point. And the anomaly of atmospheric circulation is the more immediate cause: West Pacific subtropical high during this year was stronger than usual and extended further westward than usual, so that warm and wet air from the South could not reach the eastern areas of the Southwest, resulting in the persistent windless and cloudless weather, and making Sichuan basin another Wuhan, the famous “Furnace City” in China. However, some scholars point out that the construction of too many canyon dams, including the well-known Three Gorges Dam (三峽大壩), is the real culprit. They argue that the construction of several dozens of dams in the recent decade across Jinsha River (金沙江) and Mekong River (瀾滄江，即湄公河) has blocked moisture coming from the Indian Ocean through the transversal mountain ranges, and has reduced the amount of snow covering the Qinghai—Tibet plateau. The thermal effects produced by these dams ultimately affected the precipitation along the Yangtze River, resulting in the loss of important water sources for the Sichuan basin. And with the “cast effect” brought about by the Three Gorges Dam serving as a clog to moisture circulation, the drought thus fell on Sichuan32. This argument has created quite a stir, but there is not enough evidence to substantiate it.

30 “Sichuan encountered disastrous drought, with tens of millions left without drinking water (四川特大旱災，近千萬人缺食水)”, Xinhua Net Jiangxi Channel, 22nd August 2006, http://www.jx.xinhuanet.com/ztdj/2006-08/22/content_7846269.htm. 31 “Memorandum on Sichuan’s disastrous drought in 2006 (2006 四川特大旱災備忘錄)”, Sichuan Daily, 8th September 2006, Economic News Section. 32 Jian Guangzhou (簡光洲) and Yin Yusheng (殷玉生): “Reconsidering the causes of Chongqing＇s centennial drought (重慶百年大旱成因再探)”, Xinmin Evening News, 9th September 2006, USA Edition, Special Report.

39 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

This rare drought has caused serious and widespread disruption to Sichuan’s economic activities and the everyday life of its citizens. A severe shortage of water became the most immediate concern as it might threaten the lives of both human beings and livestock. Although Sichuan is well endowed with water resources and is even dubbed the “Province with A Thousand Rivers” as there are altogether more than 1,400 rivers in the province, the problems are that there are only 110 large and medium-scale reservoirs, which account for only 1.6% of existing reservoirs nationwide; and the total storage capacity of these reservoirs is 10.5 billion cubic meters, and accounts for only 4% of the nation’s water resources—both below the national average 33 . A large proportion of Sichuan’s water resources are yet to be fully utilized. Since the onset of the dry weather with high temperature and long endurance along the Yangtze River, 70% of Sichuan’s creeks, rivers, and ponds and small reservoirs have dried up. Except for Anning River, water flows of Sichuan’s major rivers were more than 56% less than the same period of last year. Yalong River (雅礱江), Dadu River (大渡河) and Bailong River (白龍江) saw their water flows drop to the lowest level34, compared with the same period in the previous years. Minjiang River (岷江), Sichuan’s premier water supplier, dried up for the first time in history35. Sichuan was plunged into a dire situation with insufficient water storage and with the risk of losing its water sources. By the end of August, reservoirs in many cities either had dried up or saw water levels drop to the point of non-functioning. 7.71 million people and 8.84 million livestock were confronted with a temporary shortage of drinking water36. Local governments made such emergency measures as putting into use 670,000 suits of drought-relief facilities and more than 1,000 water tanks, and drilling 35,000 wells, only to the aid of 223 million people and 288 million livestock37, in trying to minimize the losses incurred as a result of the drought.

33 Peng Shuming (彭述明): “Fully exploiting water resources is the fundamental way to tackle drought problems (興水才是治旱的根本出路)”, Sichuan Water Net, 8th September 2006, http://www.scwater.gov.cn/info_detail.jsp?cid=12&id=4532. 34 “Memorandum on Sichuan’s disastrous drought in 2006”( “2006 四川特大旱災備忘錄”), Sichuan Daily, 8th September 2006, Economic News Section. 35 “Sichuan suffered severe drought, leaving Min River, its drinking water source, dried up for the first time in history (四川旱情嚴重，飲用水源岷江斷流歷史上首次)”, Sing Tao Web, 21st August 2006, http://www.singtaonet.com/society_focus/t20060821_304836.html. 36 “Fully exploiting water resources is the fundamental way to tackle drought problems (興水才是治旱的根本出路)”, Sichuan Water Net, 8th September 2006, http://www.scwater.gov.cn/info_detail.jsp?cid=12&id=4532. 37 “The reconstruction work and the recovery of production in drought-stricken areas have tasted first success (各地災區重建家園恢復生產工作取得初步成效)”, Guangming Daily, 7th September 2006, News, Page 01.

40 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

On the other hand, the hot weather made life almost unbearable for citizens of Sichuan and Chongqing. Those who are not affluent enough to afford air-conditioners even sought relief in air-raid shelters. Unsurprisingly, electricity consumption on air-conditioners increased drastically, 34.3% more compared with the same period of last year 38 . As a big province in terms of hydroelectric resources, Sichuan has made intensive efforts to develop hydroelectric power generation, with its generating capacity largely coming from hydroelectric power stations. As water flows of its rivers kept declining, Sichuan was confronted with increasing difficulty in power generation. Except for Er-tan Hydroelectric Power Station, other major hydroelectric power stations reached or nearly reached the point of non-functioning 39 , there was resulted in a daily reduction of power generation by almost 40 million kilowatt-hours40. Thermal power stations, which account for only one third of Sichuan’s power generation, became the principal power-generating force. However, due to a lack of coal and natural gas, plus their poor quality, the amount of electricity generated by these thermal power stations was far from enough. In order to bring some relief to the much-strained power supply and to guarantee to the maximum extent the supply of household and drought-relief electricity, Sichuan adopted two measures. First, it reduced the amount of electricity supplied to other provinces, and also bought electricity from Gansu and some other provinces of Central China. Second, a general limit on the use of electricity was set all over Sichuan to ensure the supply of household electricity. 1,250 enterprises were required to strictly carry out the plan of peak load shifting on the use of electricity41, severely interrupting the operations of such high power-consuming industries as the chemical, machinery and manufacturing industries. All of the enterprises suffered economic losses to various degrees.

The drought of Sichuan has exerted such an impact that it called into question the adequacy of the two major policies long pursued by China on resource allocation, namely, West-to-East water delivery and West-to-East electricity transmission. In the face of abnormal weather conditions, Sichuan even had to rely on neighbouring provinces to deal with its power shortages, let alone cope with the problem itself. Although widespread power shortages caused by such a severe drought is a rather rare occurrence, the Central Government may

38 China Business News. 39 “Water flows continue diminishing, Sichuan’s electricity supply might be inadequate during this winter and next spring (流域來水持續減少，今冬明春四川供電堪憂)”, Sichuan News Net, 25th August 2006 http://scnews.newssc.org/system/2006/08/26/010105001.shtml. 40 “Sichuan and Chongqing combating drought, electricity supply has withstood the severest strain (川渝抗旱，電力挺過尖峰)”, China Electric Power News, 7th September 2006, News, Page 01. 41 “Memorandum on Sichuan’s severe drought in 2006 ( 2006 四川特大旱災備忘錄)”, Sichuan Daily, 8th September 2006, Economic News Section.

41 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) well reconsider its policy on thermal power generation and may keep the generating capacity stable at a certain scale, in order to deal with similar emergencies that may arise in the future. In the future, the Central Government will more likely formulate the planning on the allocation of China’s water resources in terms of the distribution of river basins, taking more contingency factors into consideration. As for Sichuan, which has long prided itself on its rich power capacity and natural resources to attract enterprises and investment, it is quite likely that the government will have second thoughts on its industrial structure after this hard battle against the drought to avoid further development of highly energy-consuming industries.

Implications of Sichuan’s Drought for Hong Kong

Compared with Sichuan, water storage of Hong Kong’s reservoirs is often not enough to meet everyday demands. Hong Kong draws its drinking water heavily on one single source, the East River. Since 1982, Hong Kong has not issued any major planning on water resources and with the industry gradually moving outside Hong Kong, the scarcity of water resources has been basically addressed. In recent years, Hong Kong even directly pumped water flowing from the East River to the sea, which is quite a rare phenomenon. However, with global warming and extreme weather frequently visiting the earth, the PRD may face the threat of drought at any time. The salt tide phenomenon early this year in Shenzhen and Zhuhai is just another warning to the authorities in Hong Kong in the management of its fresh water resources. As an international metropolis, Hong Kong will be see its tourism affected in a detrimental way unless it strengthens the management of its water resources. Pressured by its national defence needs, Singapore, the neighbouring city-state, has put enormous efforts on the desalinization of sea water and the recycling of water resources. On the contrary, what Hong Kong has done is far from enough.

42 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

2.3 Trends and Updates on Guangxi Zhuang Autonomous Region

2.3.1 Economic Performance of Guangxi

From January to August in 2006, Guangxi’s economy enjoyed balanced and healthy development, with major indicators, such us industry and government revenues, recording the highest growth rates in the same period in 10 years.

Table 2-4: Major Economic Indicators of Guangxi (January to August 2006) Jan-Aug Items Year-on-Year Growth (100 mil. Yuan) GDP (Jan-June) 2,013 13.6% Total Retail Sales of Consumer Goods 1,031 14.0% Foreign Trade (USD, 100 million) 41 24.3% Government revenue 360 22.1% Consumer Price Index (%) 100.8 0.8 Note: Local statistics is preliminary, which may be subject to adjustment in the future, and may differ from the statistics published by the National Bureau of Statistics later. Source: Guangxi Statistics and Information Net, http://www.gxtj.gov.cn.

The value-added of industry saw an increase of 22.5% than the same period of the preceding year, the highest since 1995. Heavy industry grew rapidly, 24.5% higher than the same period of last year. Six principal sectors, including agricultural and sideline products processing, non-ferrous metallurgy and power industry and so on, have become the pillars of industrial expansion, contributing 68.3% to the growth of industrial enterprises above the designed size42.

Industrial investment kept its momentum to expand, and its structure was further optimized. Industrial investment was mainly concentrated on superior sectors, such as agricultural and sideline production and power industry, with investment of RMB 43 billion, registering an increase of 51.5% and 15.2% higher in growth rate than that of urban investment. Investment in industrial technological upgrading projects, which are helpful to deepen benefits, increased by 37.1%, 4.9

42 “Guangxi’s economy kept growing rapidly between January and August (廣西 1 至 8 月經濟繼續保持快速增長)”, Guangxi Statistics and Information Website, 28th September 2006, http://www.gxtj.gov.cn/report/news_display.asp?sendid=11192.

43 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) higher than that of the same period of last year43. As to those industries which experience overcapacity and are specially controlled, investment expansion has continuously slowed down. The most prominently affected industries include ferrous metallurgy and smelting and rolling processing industries, which saw a decrease of 45% than the same period of the preceding year44.

Market consumption kept booming, with urban and rural consumer market growing side by side. Retail sales of consumer goods in rural and urban district areas at or below the county level increased by 13.5% and 14.3% respectively, showing the gradual implementation of the “three rural issues” polices and a set of other preferential policies, and the gradual strengthening of peasants’ purchasing power45.

However, two negative aspects in Guangxi’s economic operations demand special attention. First, starting in July, the growth rate of investment is falling, and in August there was a decrease as high as 4.5%46, with the apparent risk of dropping too fast; second, the ratio of sales of industrial products in several key sectors is too low. For example, the ratios in tobacco manufacturing industry and transportation equipment manufacturing industry reached only 93.3% and 93.2% respectively47. It may affect enterprises’ profit margins and may hinder the overall industrial development and economic growth.

43 “The growth of Guangxi’s urban investment in fixed assets between January and August decreased ( 1-8 月廣西城鎮固定資產投資增速回落)”, Guangxi Statistics and Information Website, 14th September 2006, http://www.gxtj.gov.cn/economy_news/news_display.asp?sendid=11120. 44 “Guangxi’s economy kept growing rapidly between January and August (廣西 1 至 8 月經濟繼續保持快速增長)”, Guangxi Statistics and Information Website, 28th September 2006, http://www.gxtj.gov.cn/report/news_display.asp?sendid=11192. 45 “Guangxi’s consumer market between January and August took on five features ( 1-8 月我區消費品市場呈現五個特點)”, Guangxi Statistics and Information Website, 15th September 2006, http://www.gxtj.gov.cn/economy_news/news_display.asp?sendid=11130. 46 “The growth of Guangxi’s urban investment in fixed assets between January and August decreased ( 1-8 月廣西城鎮固定資產投資增速回落)”, Guangxi Statistics and Information Website, 14th September 2006, http://www.gxtj.gov.cn/economy_news/news_display.asp?sendid=11120. 47 “Guangxi’s industrial production of enterprises above designated size grew by 20.1% in August ( 8 月份廣西規模以上工業生產增長 20.1%)”, Guangxi Statistics and Information Website, 14th September 2006, http://www.gxtj.gov.cn/economy_news/news_display.asp?sendid=11118.

44 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

2.3.2 The Main Focus of Guangxi Zhuang Autonomous Region - The Industrialization and Urbanization Policy Pursued by Guangxi’s New Party Secretary

Liu Qibao (劉奇葆) was appointed by the Central Government as the new Party Secretary of Guangxi Zhuang Autonomous Region on June 29th 2006. During the three months after assuming office, he has been busy on his tour around Guangxi, trumpeting new thinking in public speeches on Guangxi’s development in the next five years, of which the “M strategy” and Guangxi’ industrialization and urbanization are the most notable.

On July 20th, Liu Qibao proposed the so-called “M strategy” at the Forum on Beibu Gulf Rim Economic Cooperation held in Nanning, namely, the building of “a centre with two wings” in China-ASEAN regional cooperation, including a Pan-Beibu Gulf Rim Economic Cooperation Area48; on July 24th and 25th, Liu Qibao stressed during the work conference held by the Autonomous Region Government in the first half of the year that Guangxi should seize new opportunities in regional cooperation, catch up with the mainstream developments of industrialization and urbanization, and vigorously promote these developments49; during August and September, Liu Qibao went on a number of fact-finding missions to Baise, Hechi and Liuzhou, among other places. In Liuzhou, he emphatically said that the 11th Five-Year Plan is a key period for Guangxi to push forward its industrialization, and Liuzhou should step up its efforts on industrialization, strive to establish itself as a model city in that respect and take the lead to fully realize industrialization in Guangxi50.

On September 29th, 2006, the work conference with the theme Pushing Forward Industrialization and Urbanization was held in Nanning, Guangxi. During the gathering, Liu Qibao pointed out that Guangxi should make the fostering of superior industries and competitive corporations the key to its

48 We have introduced “the conception of M strategy and analysis of its impact on Hong Kong” in the fourth monthly report in September 2006. 49 “Guangxi holding work conference of the first half of the year, Liu Qibao and Lubing made important speeches (廣西上半年工作匯報會召開，劉奇葆陸兵作重要講話)”, Guangxi News Net, http://www.gx.cei.gov.cn/xwsd/xwsd/20060726105242.htm. 50 “Liu Qibao is on a fact-finding mission in Liuzhou about the acceleration of industrialization; Liuzhou aims to become a model city in taking the lead to realize industrialization (廣西上半年工作匯報會召開，劉奇葆陸兵作重要講話)”, People’s Daily (South China Edition) 12th September 2006.

45 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) industrialization efforts, of which the development of such superior industries as non-ferrous metallurgy, automotive and machinery industry, petrochemical industry, iron, steel and manganese industry, electric power industry, sugar manufacturing industry, agricultural products processing industry and hi-tech industry are the most important. Besides, Guangxi should put its focus on the development of large and medium-sized cities to raise the urbanization level, stick to the strategy of developing centre cities as pulling strings, and fully exploit the Nanning-Beihai-Qinzhou-Fangcheng city cluster as the locomotive in Guangxi’s urbanization process, putting in place as soon as possible the so-called “Four Clusters and Four Belts”51 as the new urban development scheme. The overall objective is to achieve a reciprocal and coordinated process where industrialization will help push forward urbanization and urbanization will be conductive to industrialization. He further demanded that governments at various levels in Guangxi should treat industrialization and urbanization as their foremost tasks and entrust them directly to the highest-ranking officials, expand the scope of opening and reform, and pursue a new path of industrialization and urbanization which takes Guangxi’s actual conditions into consideration52.

Apart from concentrating on the development of cities, Song Jidong (宋繼東), Director-General of the Department of Construction of Guangxi Zhuang Autonomous Region, said during the work conference on Guangxi’s township construction and intra-county economic development that Guangxi should establish counties and a couple of model towns or major towns as “growth poles”

51 “The first cluster” refers to Nanning—Beihai—Qinzhou—Fangcheng costal city cluster along the Beibu Gulf, which centres on the provincial capital Nanning, and relies on the coastal highway and railway networks; “the second cluster” refers to Central Guangxi city cluster, which centres on Liuzhou, and relies on its being a transport hub and industrial heavyweight; “the third cluster” refers to North Guangxi city cluster, which centres on Guilin and relies on Hunan—Guangxi railway; “the fourth cluster” refers to Southeast Guangxi city cluster, which centres on Wuzhou, Yulin and Guigang, and relies on Xi River waterway, Nanning—Wuzhou highway and Lizhou—Zhanjiang railway; “the first belt” refers to Guizhou—Guangxi corridor city belt with Hechi and Yizhou as the axis, which relies on Guizhou— Guangxi railway, Nanning—Kunming railway, Guilin—Wuzhou highway and Nanning—Friendship highway; “the second belt” refers to the You River corridor city cluster with Baise and Pingguo as axis; “the third cluster” refers to Northeast Guangxi city cluster with Hezhou, Chuishan and Fuchuan as the axis; “the fourth belt” refers to Southwest Guangxi city cluster with Chongzuo, Pingxiang and Ningming as the axis, which aims to make sound Guangxi’s urban system. Sources: “Guangxi is to construct ‘four clusters and four belts’ to push forward urbanization in the 11th Five Year Plan”, Xinhua Net Guangxi Channel, 6th March 2006. 52 “Treading on a new industrialization and urbanization path which suits Guangxi’s actual conditions (走適合區情的新型工業化道路和新型城鎮化道路)”, Guangxi Daily, 30th September 2006.

46 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) to fuel intra-county economic development, strengthen township capabilities, make sound the functions of township, expand the scope of township, and optimize the environment of township, so as to help speed up Guangxi’s industrialization and urbanization processes53.

In fact, Liu Qibao’s policy platform is nothing new but well traceable to the 11th Five-Year Plan of Guangxi. According to the Plan, the structure of Guangxi’s primary industry, secondary industry and tertiary industry should be adjusted, with the goal to revise the ratio of each industry from 22.3%:39.0%:38.7% in 2005 to 18%:44%:38% in 2010, and the urbanization level should be raised from 33.5% in 2005 to 40% in 2010. Guangxi’s industrialization and urbanization levels are always lagging behind the national average, in fact more than 10% lower54. It therefore follows that industrialization and urbanization will be the twin tasks of utmost importance in Guangxi’s development in the next five years. The Central Government demanded in the National 11th Five-Year Plan that the national average of urbanization level should reach 47% by the year 2010, but did not set any specific goal on the industrialization level. Therefore, it is predicted that the pressure Guangxi will be facing is mainly from the urbanization goal set by the Central Government, while industrialization is primarily a means to achieve that end. Industrialization will not only speed up economic development and strengthen the economy in that respect, but will also further the concentration of population and service industry in urban areas through economies of scale, thereby raising the urbanization level, reducing the disparity in development and income gap between the urban and rural areas, and reaching the ultimate goal of building a “harmonious society”. The media in Guangxi reported that the Autonomous Region Government would finalize Urbanization Development Planning of Guangxi during the 11th Five-Year Plan Period and Industrialization Planning of Guangxi during the 11th Five-Year Plan Period 55 , in which new development concepts would be put forward.

53 “Major approaches to the combination of urbanization and the development of intra-county economy (城鎮化建設與發展縣域經濟相結合的主要途徑)”, Guangxi Construction Net, http://www.gxcic.net/zj/showzj.asp?id=1399。 54 In 2005, the structure of first, second and tertiary industries nationwide stood as 12.5% : 47.3%: 40.2%, and the urbanization level was 43%. 55 “Guangxi pushes forward industrialization and urbanization (廣西推進工業化與城鎮化)”, Guangxi Daily, 1st September 2006. Song Chunfeng (宋春風): “Fully exploiting the locomotive role of central cities—review on Guangxi’s efforts to speed up urbanization and promote economic and social development (充分發揮中心城市帶動作用—廣西加快城鎮化促進經濟社會發展述評)”, Guangxi Daily, 12th September 2006.

47 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

2.4 The Main Focus of Yunnan - The Production of Natural Rubber in Yunnan

The Central Government demanded in the 11th Five-Year Plan that the growth pattern of foreign trade must be changed, that the quality and benefits of foreign trade should be enhanced, and that the highly resource-consuming approaches to achieve foreign trade and low value added in related production should be reduced, thereby transforming China from a large trading nation to a strong trading power. Besides, it emphasized the development of a recycling economy, environmental protection and efficient use of resources. Since 2005, China has launched a series of export tax rebate reforms on Highly Energy- Consuming, Highly Polluting and Resource-Oriented products, and has exerted a negative impact on Yunnan’s foreign trade56.

The adjustments on export tax rebate policy, although detrimental to Yunnan’s export, indirectly highlight the scarcity of resources. As a resource- oriented province, especially rich in renewable resources, Yunnan will actually benefit from the adjustments in the long term. Aside from the flowers and wild edible mushrooms mentioned in earlier reports, natural rubber is also one of Yunnan’s highly competitive renewable resources. As early as 1995, the 6th Yunnan Provincial CPC Congress decided to invest great efforts to cultivate the industry of exploration and innovative use of bio-resources. By 2000, the Provincial CPC Committee and the Provincial Government issued the Decisions on Accelerating the Development of the Industry of Innovative Use of Bio- Resources, and proposed improving on, and focusing the development on, ten major bio-industries, namely, tobacco, sugar, tea, natural rubber, animal husbandry, forestry, modern medicine comprising chiefly natural medicine, green healthcare, flower and plants, and bio-chemical industry, to realize the goal of turning Yunnan into a strong green economic province57.

Of Yunnan’s exports of agricultural products, natural rubber is of particular importance. On the one hand, natural rubber, along with petroleum, iron

56 About the impact of the export tax rebate reform on “highly polluting, highly energy-consuming and resource-oriented products” and the analysis, please see the August report. 57 Chen Lian (陳蓬): “Turning rich resources into economic strengths—the successful experience of the development of bio-resources exploitation and innovation industry in Yunnan province (把資源優勢轉化為經濟優勢——雲南省生物資源開發創新產業發展的成功實踐)”, Webpage of China Green Times, 25th July 2006, http://www.greentimes.com/News/lm_105/61568.asp.

48 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) and steel, and coal, is one of the four major strategic industrial raw materials, and is especially important in transportation and military industries. As strategic materials, natural rubber and petroleum (including natural gas, both can be used to produce synthetic rubber) are alternatives. Natural rubber has been listed into the Plan for the Development of China’s Western Region and into one of the five specific administrative plans of the National Agricultural Reclamation Action Plan. It is also included by Yunnan province into the ten superior industries and key sectors for integration and regrouping, and specifically, it is listed as a biological innovation project and as a project of constructing a green economic province58. On the other hand, the production of natural rubber in China is far from meeting domestic demand, and the gap between supply and demand is widening in recent years. In 2001, China became the biggest importer of natural rubber in the world. From 2003 onward, China has become the biggest consumer of rubber in the world. In 2005, total consumption of rubber in China reached 4.406 million tonnes, but domestic production of natural rubber and synthetic rubber were only 428,000 tonnes and 1.632 million tonnes respectively. The gap stood at 2.346 million tonnes, and imports accounted for 53.2% of total consumption, with the self- sufficiency rate of natural rubber below that of synthetic rubber produced by petroleum and natural gas. In 2005, only 21% of the total consumption of natural rubber59, which was 2.04 million tonnes, came from domestic production, far below the alert line of 30% for strategic security. China’s import of natural rubber in 2005 accounted for 30% of total international trading60, sending shock waves through the international market on supply and demand as well as on prices. Consumption of natural rubber in China was 64% higher in 2005 than in 2001 and consumption of synthetic rubber also rose by 50%. In fact, China’s strong demand is the major factor that turned around the situation of excess supply in the international market in 1995, and that caused the price to rise since 2001. In 2005, in particular, due to the decreased production of major natural rubber producers, and China’s 8.3% expansion on demand (higher than the 2.4% increase of global average, and China’s growth accounts for 80% of global increase), international market price rose drastically (Every ton of Singapore RSS3 rubber was 2,057 Singapore dollars in the first quarter of 2005. It rose to 3,283 Singapore dollars in the first quarter of 2006, an increase of 59.6%)61. However, China’s import of

58 “The development trajectory of Yunnan’s natural rubber industry (雲南天然橡膠產業發展歷程)”, Yunnan Caiyun Zhinan Net, 30th November 2005, http://traityn.cyzn.cn/cyzn-front/traitYN/xiangxi.asp?Mcount=ok&news_id=2313。 59 According to domestic statistics, total production is 490,000 tons and the proportion would be 24%. Here the statistics of IRSG, which is 428,000 tons, is used. 60 “China’s strong demand has strained world supply (中國的強勁需求已令世界供應緊張)”, Website of Shanghai Futures Exchange, 25th May 2006, http://www.shfe.com.cn/docview.jsp?docid=64252243. 61 International Rubber Study Group, Quarterly Statistics, www.rubberstudy.com/statistics-quarstat.asp.

49 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) natural rubber to compensate for its insufficient production only drives global price hikes and China’s import costs higher, whereas China’s consumption will not decrease, and will keep up its strong expansion. The year 2005 saw China’s economic growth reaching 10.2% and industrial growth reaching 11.4%. Auto industry and tyre industry, closely related to the consumption of rubber, developed even more rapidly, and national automobile production at that year stood at 6.1534 million units, an increase of 13%, which saw China overtaking Japan as the second largest automobile producer in the world only after the USA. National tyre production (including various tyres) broke the record of 300 million pieces, 28.3% higher than that of last year. Since the global production of automobile tyres and rubber products are now being concentrated in China, demand for rubber will only rise rather than fall. China’s statistics show that consumption of natural rubber in 2005 grew by 19% than last year, and between 1999 and 2004, domestic consumption increased by nearly 80%, import volumes doubled, and 2005 also saw a 10% rise. Because of these developments, the International Rubber Study Group (IRSG) has estimated that global natural rubber supply and demand will stay unbalanced in the future, and by 2009, a gap of 228,000 tonnes will ensue62. On the other hand, China Rubber Industry Association predicted in 2005 that China would consume 2.3 million tonnes of natural rubber, thus even if domestic production rises, China still needs to import 1.55 million tonnes of natural rubber63. Although compared with the imports of 2005, 2006 only saw an increase of 9.9%, if domestic production is not properly regulated and planned, imports will increase dramatically, thereby dealing a heavy blow to the international market. Moreover, according to relevant planning, China aims to raise annual production of natural rubber to 750,000 tonnes in five years’ time, which is more than 50% higher than the expanded production in 2004. Therefore, this goal sounds somewhat farfetched.

Besides, two more factors will compel the Central Government to support Yunnan province (and Hainan province) for further expansion of natural rubber production and to support safeguard policy measures for supply.

Firstly, the international natural rubber market is mostly subject to the influence of The International Tripartite Rubber Organization (established in 2001) founded by the world’s three largest producers (Thailand, Indonesia and Malaysia). The production of these three countries accounts for 70% of the world’s total production. They have even established international rubber corporations to

62 “Forum on China’s natural rubber production and market development (中國天然橡膠生產與市場發展論壇)”, Huicong Net Oil Industry Channel, 5th April 2006, http://info.oil.hc360.com/uml/001/004/003/218723.htm. 63 “China to consume 2.3 million tons of national rubber by 2010”, Xinhua, 26th December 2005.

50 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) control production and intervene in market supply, and have effectively pushed up the prices in the past several years. In September this year, these three countries even threatened to cut down exports by 10% to prop up the falling prices of natural rubber 64 . They were in fact targeting at China since China recently increased imports from Vietnam, including imports through border trade 65 , resulting in the fall of international prices. Malaysia has demanded for a long time the Association of Natural Rubber Producing Countries (including Malaysia, Thailand, Indonesia, India, Papua New Guinea, Sri Lanka, Singapore and Vietnam) to jointly control international prices, and has a strong desire to interfere with the international prices. At the same time, countries like Thailand and Malaysia are also vigorously promoting industrialization, demanding that natural rubber be processed locally as final products and then exported. It is expected that global market supply in the future will be constrained (by the major producers), and China is unlikely to get enough imports at a proper price.

Secondly, natural rubber and synthetic rubber are, to some extent, alternatives to each other. About 10% of the demand in the global rubber market is exchangeable between natural rubber and synthetic rubber. The supply of global petroleum and natural gas is limited. Between 2005 and the first half of 2006, one of the factors that have caused the rise of international price of natural rubber is the rising prices of petroleum and natural gas, which caused the price of synthetic rubber to rise, hence increasing the demand on natural rubber. Globally, countries such as Japan have begun conducting researches on products which can incorporate more natural rubber so as to reduce demand for synthetic rubber66. In tyre production in particular, with the shift of global production, China will become the largest producer and exporter (11 of the 12 world’s largest corporations have set up plants to produce tyres in China). Current tyre production

64 The Jakarta Post, 13th September 2006. 65 China lifted import quotas on rubber this year, which saw Guangxi and Guangdong increase import from Vietnam by 50%. China has become the largest importer of Vietnam’s natural rubber. See “China is still the largest export market for Vietnam’s rubber (中國仍是越南橡膠最大出口市場)”, China Auto Parts World Net, 29th September 2006, www.qpsj.com/xiang.asp?newsid=20029; “Imports of natural rubber through Guangxi’s ports saw dramatic increase in the first quarter (一季度廣西口岸天然橡膠進口大幅增長)”, Ministry of Commerce, 21st April 2006. 66 For example, many Japanese rubber enterprises (Yokohama Rubber Corporation, Toyo Tire and Rubber Corporation and Sumitomo Rubber Industries) have done research on and even sold environment friendly tyres. Naoki Watanabe, Firms for years sought non-petroleum material that provided good traction, The Nikkei Weekly, 9th January 2006, Takefumi Hotta, New rubber mixture recipe helps cut gas consumption in the eco-friendly tires, The Nikkei Weekly, 12th June 2006. Natural rubber products are environment friendly in two aspects: 1. Rubber tree can reduce carbon dioxide; 2. Natural rubber products are biodegradable.

51 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) in China uses over 60% natural rubber, higher than that of EU countries and the USA, where the utilization rate hovers around 40%. Since radial tyres made of natural rubber have become the mainstream tyres, China also starts focusing on producing those more advanced tyre67. Even if China is expanding the production of synthetic rubber, its demand for natural rubber will still increase drastically. China’s dependence on petroleum and natural gas has become a threat to its national and energy security, and therefore its expansion on synthetic rubber will slow down, with rubber consumption gravitating towards natural rubber. Thus, China’s unbalanced supply and demand in the international market will be more and more pronounced.

Domestic and international prices this year continue to rise as last year, reaching a historical high in the recent decades. In the first half of 2005, China’s import price of natural rubber was RMB 12,000 per ton, which increased to RMB 15,000 in the second half of that year. The price increased further to RMB 20,000 in the first half of 2006, which rose to between 26,000 and 28,000 in July and even broke the record of 30,00068. Even as the international price was falling down in June, the domestic price was still staying high, and fell temporarily to between 18,000 and 20,000 during August and September. On the other hand, influenced by the price changes of crude oil, the import price of synthetic rubber once shot to between 16,400 and 16,800 per ton, which kept steady and lowered to some extent as the price of crude oil fell in late September. However, compared with 2005, the average prices of both natural rubber and synthetic rubber still grew tremendously (which were over 300% higher than those of 2001)69. This has brought enormous pressure upon enterprises making rubber products such as tyres, and has compelled a number of enterprises to raise the prices of these products. Besides, in September, the Rubber Committee of India, which is the fourth largest natural rubber producer in the world, also predicted that the price of natural rubber would not fall significantly this year, since natural rubber would still be in short supply before 2020 all over the world70.

67 “Four measures safeguard domestic rubber supply ( 四項措施保障國內橡膠供應)”, Shanghai Futures Exchange, 19th September 2006, http://www.shfe.com.cn/docview.jsp?docid=68192662. 68 “China’s natural rubber suffers wide gap and inadequate self-sufficiency rate, and highly depends on imports (我國天然橡膠缺口大，自給率不足，高度依賴進口)”, China Chemical Industry, 11th July 2006, http://www.chchin.com/news/shownews.asp﹖newsid=35758typename. 69 Vissuta Pothong & Lewa Pardomuan, Rubber hard to find as China, India devour supply, Reuters, 2nd August 2006. 70 L.N. Revathy, Drastic Fall unlikely in natural rubber prices, The Hindu Business line, 15th September 2006.

52 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

The hefty prices of natural rubber have brought enormous benefits to the producers in China’s two major producing areas, Yunnan and Hainan. In 2005, production fell dramatically in Hainan, while it rose in Yunnan, thus benefiting Yunnan a lot. In Yunnan’s agricultural reclamation area, average income per capita that year reached RMB 10,732, an increase of 69% over 2000. Average income for rubber tappers stood at RMB 16,000, and every family on the Jing Hong Farm, the largest one in this area, earned an average of RMB 25,00071. Apart from the 180,000 workers in the agricultural reclamation consortia, there are also 300,000 persons from 23 counties, 15 ethnic nationalities in South and Southwest Yunnan working in the rubber producing industry72. Xishuang Banna’s ( 西雙版納) rubber plantation area (accounting for 90% of Yunnan’s total production) accounts for 65% of Yunnan’s total natural rubber plantation area, and 24% of the national total. The rising price of natural rubber has brought about extensive economic benefits, and has a greater impact on ethnic minorities living in the border areas. This contributes to sustained economic growth, political stability and social cohesion.

Table 2-5: World’s Ten Largest Rubber Consumers in 2005 Country Consumption (10,000 Compared with the previous year tonnes) China 440.60 8.3% The USA 311.38 2.1% Japan 204.03 4.0% India 101.84 5.2% Germany 89.51 3.3% Brazil 71.88 0.9% South Korea 70.32 1.8% Russia 62.36 0.9% France 58.46 -10.1% Malaysia 55.10 1.7% Others 600.42 -0.8% Total 2,065.90 2.4% Note: Statistics used here may differ from China’s domestic statistics. Source: International Rubber Study Group (IRSG)

71 “A survey on Yunnan’s natural rubber futures—futures market serves the interests of natural rubber farmers (雲南天然橡膠期貨調查 — 期貨市場服務膠農)”, Website of Shanghai Futures Exchange, http://www.shfe.com.cn/docview.jsp?docid=66212906 72 “Natural rubber helps Yunnan achieve a win-win situation in economy and environment (天然橡膠幫雲南實現經濟、環境雙贏)”, Website of China Rubber Industrial Association, 30th November 2005, http://traityn.cyzn.cn/cyzn-front/traitYN/xiangxi.asp?news-id=2309.

53 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

Table 2-6: World’s Ten Largest Natural Rubber Producers in 2005 Country Consumption (10,000 Compared with the tonnes) previous year Thailand 291.1 -2.5% Indonesia 227.0 9.9% Malaysia 113.1 -3.3% India 77.0 3.8% Vietnam 43.6 4.9% China 42.8 -11.9% Cote d’Ivoire 15.3 7.7% Liberia 11.2 Unavailable Sri Lanka 9.5 Unavailable The Philippines 8.0 Unavailable Total 868.2 0.4% Source: IRSG Note: Statistics used here may differ from China’s domestic statistics. For example, according to Jingyi Futures, China’s production in 2005 was 490,000 tonnes, quoted from the website of Shanghai Futures Exchange: http://www.shfe.com.cn/docview.jsp?docid=6324772.

Table 2-7: World’s Ten Largest Sythentic Rubber Producers in 2005 Country Consumption (10,000 Compared with the previous year tonnes) USA 236.6 Unavailable China 163.2 10.5% Japan 162.7 0.7% Russia 114.7 2.8% Germany 84.2 -6.9% South Korea 75.5 6.3% France 65.7 -15.3% Taiwan, China 54.5 level Brazil 41.6 -3.1% UK 34.4 -2.0% Total 1,196.5 -0.1% Note: Statistics used here may differ from China’s domestic statistics. Source: IRSG

54 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

Table 2-8: Natural Rubber Production in Yunnan and Hainan in 2005 (10,000 tonnes) Yunnan Total 23.3 Rubber Plantation in Agricultural 14.0 Reclamation Area Private Rubber Plantation 9.3 24.7 Hainan Total (-25.1%) Rubber Plantation in Agricultural 16.24 Reclamation Area Private Rubber Plantation 8.48 China Mainland Total 49.0 Source: “Yunnan’s rubber may be the best in China’s rubber industry”, Yunnan Economic Information Net, April 17th, 2006: http://www.yn.cei.gov.cn/fgwnet/communication.nsf/deskShow/1876fe73c9d3fc4748257153000 b8872?OpenDocument&Click=.

Rosy pictures notwithstanding, Yunnan, like Hainan and other sub- producing areas, such as Guangdong, have greatly expanded natural rubber plantation areas in recent decades. Hence there is little space left for further expansion of production. Hainan’s major production reduction in 2005 further shows that it is more and more difficult for China to increase domestic production, while the Central Government hopes the imbalance could be addressed to some extent by establishing overseas production bases.

The Technology Group, established by the Department of Commerce of Yunnan province, signed in August 2004 with Ministry of Agriculture and Forestry of Laos a Memorandum of Understanding on Rubber Plantation, and signed in October 2005 with Namtha (南塔), Oudomxai (烏多姆塞), Xaignabouri (沙耶武里), Louangphrabang and Vientiane of Laos agreements and contracts of intent on rubber seedling cultivation and rubber plantation. Up to 2006, more than 30 enterprises from Yunnan have planted rubber in Cambodia and Laos, covering an area of 400,000 acres73, which is equivalent to more than 10% of the plantation area in Yunnan province. However, these are all private enterprises, with little capital and poor technology, and they have not instituted enough changes.

73 “Yunnan’s rubber planting covers an area of about 400,000 acres (雲南種植橡膠面積約 40 萬畝)”, Website of China Polymer, 27th September 2006, http://info.cec.ceda.org.cn/hg/pages/20060928_28186_8_2.html。

55 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

Since 2005, the situation has been turning around. Hainan Natural Rubber Group (the largest rubber enterprise in China) formally inked a contract with Cambodia Suigang Development Investment Limited to rent farm land for rubber plantation, which covered an area of roughly 940,000 acres. It is reported that the Group also plans to invest RMB 1.3 billion in 2010 to set up a 300,000-ton primary rubber product processing plant and an overseas rubber trading company in Southeast Asia. It also aims for the exploitation rights of 2.1 million acres of farm land in Southeast Asia and Africa74.

In response to Hainai’s aggressive overseas investment, Yunnan’s Department of Commerce also published a research report in early September this year entitled Developing international cooperation on natural rubber, launching alternative plantation, and meeting China’s demand on strategic materials. In the report, it proposed that, in 10 to 20 years, Yunnan’s enterprises can develop transnational rubber plantations measuring 40 to 50 million acres in Laos and Cambodia, which could then be joined by plantations in Xishuang Banna as an international natural rubber plantation base75. According to He Jian’an, Director of Technology Division of Department of Commerce of Yunnan province, growing every acre of rubber abroad costs about between RMB 600 and 1,000, and could then be harvested in seven years. By then, annual profits per acre will reach RMB 2,000 to 3,000, and the rubber production of 40 to 50 million acres will be worth RMB100 to 150 billion, which, together with trade on related materials, will drive Yunnan’s imports and exports up by RMB 150 to 200 billion76.

This large-scale overseas plantation requires the full support of government, and Yunnan province plans to issue a medium- to long-term planning on natural rubber, and enact pertinent supporting policies. Yunnan Provincial Government will reach framework agreements with neighbouring countries such as Laos, Cambodia and Vietnam as soon as possible on loan interest subsidies for enterprises and the facilitation of border trade77. Hainan’s example proved that

74 “Planting rubber overseas—China made the first step (到國外種橡膠，我國邁出第一步)”, Shanghai Futures Exchange, 24th April 2006, http://www.shfe.com.cn/docview.jsp?docid=6324772。 75 “Yunnan plans to build trans-national natural rubber plantations ( 雲南擬建跨國橡膠園)”, Metropolis Times, 11th September 2006. 76 “Yunnan’s rubber industry will earn much if ‘going abroad’, and joint planting will stimulate exports worth 200 billion (雲南橡膠業 ‘走出去’大有賺頭，合作種植帶動 2 千億)”, Xinhuan Net Yunnan Channel, 18th September 2006. 77 “Yunnan appeals: look beyond China, and explore overseas natural rubber bases (雲南呼籲：走出國門，開辟中國天然橡膠基地)”, Xinhua Net Yunnan Channel, 8th September 2006.

56 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) large-scale renting of overseas farm land to plant rubber was a viable option. However, in Yunnan’s case, the scale is too large for individual enterprises to manage, and the key lies in the support of Yunnan Provincial Government. Since natural rubber is a strategic material, which China relies on heavily through imports, it will certainly get the support of the Central Government. Besides, under the framework of China—ASEAN bilateral free trade agreement, related policies are also in place. In 2006, import tariff of natural rubber in China stood at 20%, and that of synthetic rubber was 8%. But under the free trade agreement with the ASEAN, the agreed tariffs this year will be cut down to as low as 5%78, and will be reduced further in the future, thereby facilitating the construction of international rubber production bases spreading from Xishuang Banna to the borders of Cambodia and Laos. This is also in line with the latest trend in China to establish overseas raw material production and supply bases. Because of the inconvenient transportation, the outward transport of Yunnan’s natural rubber is often delayed79, and rubber traders usually fail to transport natural rubber promptly out of Yunnan, when the market price is at the best. Therefore, futures trading could be very useful. Local enterprises often buy recent contracts on Shanghai Futures Exchange and conduct trading over such contracts, and then provide goods to buyers from the nearest Futures Delivery Reservoir. Due to the effective use of futures trade, Yunnan’s agricultural reclamation consortia could sell natural rubber per acre at RMB 1,000 higher through futures delivery than through spot market. Since 2004, despite poor transportation, rubber price in Yunnan has been higher than major producing areas, such as Hainan. This is quite beneficial to small- and medium-sized private plantation enterprises and processing enterprises80. Natural rubber price rose exponentially this year, and the delivery of natural rubber futures

78 “The bouncing back of natural rubber price will be short-lived (天膠反彈難成氣候，短多長空思路把握行情)”, China Auto Parts World Net, 29th September 2006, http://www.qpsj.com/xiang.asp?newsid=20025. 79 Yunnan mainly supplies rubber to Shanghai, Qingdao and Tianjin, and the costs of time and transportation are higher than Hainan. Take Qingdao for example, it usually takes seven to nine days to ship goods from Haikou’s Xiuying Quay to Qingdao, often by way of Guangdong＇s Huangpu Port. It takes ten days from Yunnan by train and takes a longer time to deliver goods from Knming by trucks, which costs about RMB 400 per ton. Due to the differences of transportation costs, the price of Yunnan’s rubber futures is often RMB 200 to 300 lower than that of Hainan. “Why Yunnan’s natural rubber is unsalable? (為何雲南天然橡膠出現滯銷?)”, Website of China Rubber Industrial Association, 30th November 2005. http://traityn.cyzn.cn/cyzn-front/traitYN/xiangxi.asp?news_id=2306. 80 “A survey on Yunnan’s natural rubber futures—futures market serves the interests of natural rubber farmers (雲南天然橡膠期貨調查一期貨市場服務膠農)”, Website of Shanghai Futures Exchange, http://www.shfe.com.cn/docview.jsp?docid=66212906; “Futures market helps break natural rubber transportation bottleneck (期貨市場疏通天橡運輸瓶頸)”, Website of China Securities, 14th June 2006: http://www.cs.com.cn/qhsc/200606/t200606/4_93960.htm.

57 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) contracts in Shanghai Futures Exchange also increased dramatically, which often forces the exchange to suspend trading temporarily. The accumulated transaction value of natural rubber in the first half of the year was among the highest in domestic futures trade, with natural rubber ranked as the bestselling commodity together with copper81.

Implications for Hong Kong

As an important natural resource enjoying rising international demand, rubber will become a major futures after crude oil, copper, aluminium, cotton, coffee and soybean. Its importance in the market is more and more visible, which could bring business opportunities to Hong Kong. As a financial centre, Hong Kong depends too much on the securities market, and it leans more towards stock market, which in turn is mainly supported by state-owned enterprises and red chips. Even stock warrants and options, as derivatives, are mostly derived from large state-owned enterprises. This reflects the overall simplicity of Hong Kong’s financial market, with too much emphasis on stocks and too much reliance on Mainland China. Should China’s financial policies change significantly in the future, it would be disastrous for Hong Kong—the most extreme case would be for China to deregulate its RMB exchange rate. Even if the worst scenario case does not take place, the recovery of financing in the Mainland stock market has prompted some enterprises to give up their desire to list in Hong Kong. In addition, such measures as raising amount for QFII (qualified foreign institutional investor) and the simultaneous listing on A-share and H-share for large state-owned enterprises have in effect already damaged Hong Kong’s interests. More importantly, Hong Kong has no initiative at all on this issue, and the continuous listing of large state-owned enterprises on the Hong Kong stock market seems to result from the Central Government’s particular concern with Hong Kong’s economy. Besides, quite a few Mainland enterprises have made their listings in New York and Singapore. Hong Kong is no longer the only choice.

Therefore, Hong Kong should broaden its financial markets, and developing the futures market is a viable option. In fact, futures trading of commodities such as oil and copper have been monopolized by New York and London, and there is no place for Hong Kong. On the other hand, natural rubber is a new product, which Hong Kong could well make use of. As a matter of fact, although the Mainland has a futures market, it is somewhat insulated from the

81 “International demand for natural rubber is surging, and a bull market is expected (國際市場天膠需求旺盛，牛市步伐再度展開)”, China Securities, 26th May 2006.

58 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) international market, since the exchange rate of RMB is still fixed. If a futures market can be established in Hong Kong, it will not only help Mainland enterprises offset commodity price risks, but also help them directly take part in the international market, using Hong Kong as a stepping stone. Recently, the Hong Kong SAR Government hold an economic summit conference, at which it proposed to strengthen the functions of Hong Kong’s futures market, including the development of futures products.

China has become the world’s biggest consumer of copper and natural rubber. In Shanghai Futures Exchange, futures varieties and transaction volumes on related commodities increased, and their prices also began to influence the international market. Perhaps Hong Kong should develop futures varieties of such commodities at an appropriate time. Hong Kong should take full advantage of China’s demand and the producing enterprises to compete with the futures markets outside China.

However, facing competition from Shanghai and the international market, Hong Kong should make detailed planning and invest more to enhance its competitiveness.

Take natural rubber for instance. The global futures trading gravitates to Singapore Commodity Exchange (SICOM), chiefly because natural rubber production in the neighbouring Thailand, Malaysia and Indonesia accounts for 70% of the global production. However, governments in the producing countries are pushing for the development of indigenous futures exchanges to compete with Singapore, such as Kuala Lumpur Commodity Exchange, National Multi- Commodity Exchange of India, and Agricultural Futures Exchange of Thailand established only as recently as in 2004. On the other hand, as far as the big consumers are concerned, the gravity sits in Japan, mainly through Tokyo Commodity Exchange (TOCOM), and to a lesser extent, Osaka Mercantile Exchange. The TOCOM and the SICOM compete with each other for the domination of the global price, with financial investment going to the former.

Aside from these exchanges, the Chicago Board of Trade, America’s second largest futures exchange, and the SICOM also jointly established Joint Asian Derivatives Exchange (JADE), and commenced the trading of natural rubber futures contracts in September 25th this year. The establishment of this joint exchange aims at making use of the clearing capability of the SICOM in Asia and the reputation of the Chicago Board of Trade, its international user terminal and

59 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) trading platform, to develop an all-electronic commodity exchange in Asia futures market82. After rubber futures, JADE will introduce palm oil futures at the end of the year.

The joint investment and cooperation between the Chicago Board of Trade and the SICOM reflect the increased importance of Asian commodity futures trading in the international market. International financial capital led by the USA has forayed the Asian agricultural futures market. All these developments deserve special attention. At the same time, however, they also mean stiffer competition between different futures markets in the future.

82 Big Commodities Exchanges Targeting Asian markets, The Nikkei Weekly, 10 July 2006, Chicago Board of Trade and SGX to launch new Asian venture, JADE, The Associated Press, 22 September 2006.

60 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

2.5 The Main Focus of Guizhou – Plan for Medium and Long-Term Scientific and Technological Development in the Guizhou Province

On July 19th 2006, Guizhou Provincial Government issued Plan for Medium and Long-Term Scientific and Technological Development in the Guizhou Province, 2006-202083, in which a comprehensive plan for Guizhou’s scientific and technological development layout in the next 15 years was made, and key areas and key special technologies were established (see Table 2-9). The Plan called for Guizhou’s overall spending on R&D reaching 1.2% of its GDP by 2010 (the goal was also written into the 11th Five-Year Plan of Guizhou Province), and over 2.0% by 2020; it also called for the contribution rate of scientific and technological development reaching 40% by 2010 and 50% by 2020 respectively84.

Table 2-9: List of Key Development Areas and Key Special Projects in the Plan Key Development Areas (11) Key Special Projects (18) 1. The cultivation of new seedling of major 1. Agriculture, Forestry, agricultural products and related planting 12. （omitted85） Water Management. techniques 2. The reproduction and breeding techniques 13. Resource exploration and 2. Energy of major animal, poultry and aquatic comprehensive utilization products 3. The production of featured agricultural 14. New products in fine phosphorus 3. Material Industry products and food safety chemical industry 4. Tobacco, Wine and 4. Energy exploration and energy-saving 15. New products in coal chemical Featured Food Products technology industry 16. Comprehensive techniques to combat 5. Ethnic Medicine 5. Non-ferrous metallic material and products Karst rocky desertification 17. Prevention of endemic fluorin and 6. Information Industry 6. Polymer material and products arsenic poisoning 7. Advanced Manufacturing 18. Research infrastructure for science 7. Electronic functional material Industry and technology 8. Modern Service Industry 8. Famous brands of cigarette and wine

83 “ Plan for Medium and Long-Term Scientific and Technological Development in the Guizhou Province, 2006-2020 is enacted for implementation (《貴州省中長期科學和技術發展規劃綱要》頒佈實施)”, Website of Department of Science and Technology of Guizhou Province, http://kjt.gzst.gov.cn/content.jsp?type=2&id=827. 84 Plan for Medium and Long-Term Scientific and Technological Development in the Guizhou Province, 2006-2020 ( 《貴州省中長期科學和技術發展規劃綱要(2006—2020 年)》), Website of Department of Science and Technology of Guizhou Province, http://kjt.gzst.gov.cn/content.jsp?id=835&type=1. 85 In the original text of the Plan, it is marked by “omitted”, which may be caused by the sensitivity of this project. The project is believed to be involved in national defence.

61 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

Key Development Areas (11) Key Special Projects (18) 9. Resource and 9. New medicine and ethnic medicine Environment 10. Transportation, 10. New electronic components and Construction and information storage products Urbanization 11. Population Health and 11. Key parts and complete equipment Public Security Source: Plan for Medium and Long-Term Scientific and Technological Development in the Guizhou Province, 2006-2020.

It is worth noting that in accordance with Guizhou’s own characteristics, the Plan listed the industries which are closely related to the province’s social and economic development as the keys, such as agriculture, forestry and water resources, energy, and material industry. At the same time, the Plan emphasized that, under the guiding force of the Provincial Government, a regional scientific and technological innovation system should be established86, aided by such factors as enterprises, market, and industry, university and research partnership, so as to comprehensively push forward the transformation of Guizhou’s economic growth pattern and enhance the competitiveness of Guizhou’s enterprises.

Guizhos’s scientific and technological plan is largely in line with the thinking of the Central Government on development. On February 9th 2006, the State Council published the Outline of National Plan for Medium and Long-Term Scientific and Technological Development and made serious reviews on the previously pursued strategy of “trading market for advanced foreign technology”. It pointed out that fundamental core technology could never be bought, and boosting the capability of indigenous technological innovation must be treated as a national strategy and be put as top priority. The Outline established key areas and their priorities, key special technologies, and the directions of cutting-edge and basic technological research of the nation’s scientific and technological development for the next 15 years. The Outline also proposed that by 2020 overall national spending on R&D should reach more than 2.5% of the nation’s GDP, that contribution rate of scientific and technological developments should reach over 60%, and that the dependency ratio on foreign technology should be reduced to less than 30%, among other long-term goals.

86 “Guizhou is to implement Plan for Medium and Long-Term Scientific and Technological Development in the Guizhou Province, 2006-2020 ( 貴州實施中長期科學與技術發展規劃綱要)”, Website of Guizhou Provincial Government, http://www.gzgov.gov.cn/shouye_tc/showzwxx.asp?id=25879.

62 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

Statistics from the National Bureau of Statistics show that overall national spending on R&D accounted for a mere 0.9% of the nation’s GDP in 2000, while the figure rose to 1.3% in 2005. In this respect, Guizhou’s overall spending was only 0.5% of its GDP in 2000, and the figure increased only slightly to 0.54% by 2004. Therefore, it will be an arduous task for the nation as a whole and Guizhou in particular to realize their respective goals of reaching 2.0% and 1.2% (of their respective GDP) by the end of the 11th Five-Year Plan period.

Impact of Guizhou’s Scientific and Technological Policy on Hong Kong

The science and technology policy of any place in any country basically reflects the trend of the industrial development in this place. Guizhou’s scientific and technological projects usually favour the exploitation and utilization of local resources, and therefore involve little so-called international cutting-edge technology. In fact, the investment Guizhou puts into its R&D is less than RMB 1 billion, which is far from adequate to support large-scale projects. Generally speaking, new types of agriculture and material industry that may be derived from Guizhou’s scientific and technological development will be different from the industries Hong Kong is currently developing or is going to develop. Hence, the complementarities between the industries of Guizhou and Hong Kong are not expected to significantly decrease simply because of Guizhou’s scientific and technological developments.

In response to the Outline of National Plan for Medium and Long-Term Scientific and Technological Development, every province and autonomous region has recently released its own science and technology policy, and Guizhou, the poorest province, is no exception. While differences exist in the key areas and special projects of these scientific and technological plans due to particular characteristics of different provinces and autonomous regions, overall speaking, two common features stand out. First, they all call for an increased proportion of GDP being spent on R&D. By 2010, the ratio will basically double that of 2000; if taking into account the fact that GDP will also be doubled in these ten years, real spending on R&D will increase by three times or more. Secondly, they all propose to establish indigenous scientific and technological innovation systems. The changes of the central and local governments on science and technology policies mean that, instead of relying on foreign technology import and technology transfer, driving forces behind the future development will mostly come from local players. China’s dependency on an export-oriented economy will be further reduced. This is actually an alarm to Hong Kong, which has long served as a bridge between China and the international community. In addition, Hong Kong is a business- and

63 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) trade-oriented metropolis, rather than a technology-centred city. It seems that the direction of Mainland’s development is further away from Hong Kong’s economy.

64 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

3 Regional Cooperation

Beibu Gulf Rim Economic Cooperation

The Beibu Gulf Rim Economic Circle consists of China’s coastal provinces of Guangdong, Guangxi and Hainan and some of Vietnam’s northern provinces. It is an important link between China and the ASEAN, and it is also a key to China—ASEAN economic cooperation. Of the Economic Circle, as Guangxi is the only Chinese province bordering both by land and by sea with the ASEAN, its economic cooperation with the neighbouring Vietnam and other ASEAN countries on the Indochina Peninsula will exert a considerable impact on the future of the Beibu Gulf Rim and China—ASEAN economic cooperation.

The Building of Beibu Gulf Rim (Guangxi) Economic Circle

Since the prime ministers of China and Vietnam jointly proposed the building of the “two corridors and one ring” (namely, Nanning—Hanoi— Haiphong and Kunming—Hanoi—Haiphong economic corridors, and the Beibu Gulf Rim Economic Circle) in May 2004, the initial construction of the Beibu Gulf Rim (Guangxi) Economic Zone has witnessed significant progress and improvement.

Starting from 2004, Guangxi began the first phase of its coastal infrastructure construction in the Beibu Gulf Rim, which was targeted at promoting the urbanization and industrialization processes in the cities of Beihai, Qinzhou and Fangchenggang. The infrastructure along the coastal line was improved considerably and the handling capacity of the ports was greatly enhanced. The first phase of construction includes five categories of projects with a total of 37 subprojects, totalling an investment of RMB 6.04 billion. It will soon be finished. The second phase of the construction already saw some of the projects kicked off in the first half of the year. Recently, the implementation plan for the second phase of the construction issued by the Autonomous Region Government has emphatically stated that selected projects for the second phase all must be started before the end of 2006. Altogether, 33 projects are planned to be carried out in the second phase of the construction, targeting five major sectors, namely,

65 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) railway, waterway, water supply, public roads and power grid, and totalling an investment of RMB 5.84 billion87.

In another development, Guangxi has already completed the construction of a highway extending from Nanning to the Friendship Pass near the China—Vietnam border. Currently, another coastal highway is also under construction, which will connect China’s Guangdong, Hainan, Guangxi, Hong Kong and Macao with Vietnam’s coastal cities of Quangninh and Haiphong, and will become an indispensable passage to the Beibu Gulf Rim Economic Circle.

An agreement was also reached between Guangxi and relevant parties in Vietnam to jointly build the second transnational highway bridge over Beilun River (北侖河), the China—Vietnam boundary river, so as to open the Nanning— Hanoi and Nanning—Hanoi—Haiphong—Quangninh passenger/freight transport lines as early as possible. Since the Chinese Central Government made the first public statement that Guangxi should fully play its part as a sea-going passage in the Southwest region in 1992, a three-dimensional transportation network of highway, railway, airport and harbour has been formed after more than ten years of construction. According to the “package plan” presently implemented by the Ministry of Railways and Guangxi, about RMB 40 billion will be invested in four years’ time to build new railway lines and reconstruct the existing lines. By that time, the total mileage of railway lines in Guangxi will be increased from 3,000 kilometres to 3,600 kilometres, thereby greatly boosting the transport efficiency88.

In March this year, in order to integrate resources in Guangxi of the Beibu Gulf Rim, for its part, the Autonomous Region Government established a special commission, the Administrative Commission of Planning and Construction of the Beibu Gulf Rim (Guangxi) Economic Zone, with the Deputy Secretary of CPC Committee of Guangxi Autonomous Region, Chen Wu (陳武), as its director. In a recent interview with the Outlook magazine, Lu Bing (陸兵), Secretary of CPC Committee of Guangxi Autonomous Region, outlined the next steps Guangxi

87 “A total of RMB 5.84 billion will be invested in the second phase of the construction of Beibu Gulf(Guangxi) Economic Zone (北部灣(廣西)經濟區二期項目總投資 58.4 億元)”, People’s Daily Website, 16th August 2006, http://www.fecbg.cn/news_show.asp?bname=環北論壇&sname=最新動態 &id=850 88 People’s Daily, “The construction of Beibu Gulf (Guangxi) Economic Zone is in full steam (北部灣（廣西）經濟區建設全面展開)”, quoted in People’s Daily Website, 16th July 2006, http://www.fecbg.cn/news_show.asp?bname=環北論壇&sname=權威報導&id=164.

66 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) would take in the construction of the Beibu Gulf Rim (Guangxi) Economic Zone. Guangxi will coordinate cooperation between the three major port cities of Beihai, Fangchenggang and Qinzhou through the Administrative Commission of Planning and Construction of the Beibu Gulf Rim (Guangxi) Economic Zone and then build a port alliance; taking full advantage of its rich natural resources and superior geographical position, it will construct the coastal heavy chemical industrial base and develop the marine economy; it will establish the Nanning—Beihai— Qinzhou—Fangchenggang city cluster, and strive to develop a one-hour economic circle around the cluster. As the Beibu Gulf Rim (Guangxi) Economic Zone is developing rapidly, the cities of Guangdong, Hainan and Vietnam in the Beibu Gulf Rim region are also enjoying fast growth and rising to considerable scales. A development pattern centring on large and medium cities and their industries is taking shape.

Economic Cooperation between Guangxi and Vietnam

Guangxi and Vietnam serve respectively as China’s gateway to ASEAN and ASEAN’s gateway to China. Economic cooperation between them is the mainstay of the Beibu Gulf Rim Economic Zone, and is also the central component to the construction of China—ASEAN Free Trade Area (hereafter referred to as “FTA”). As their economies are complementary, there is considerable potential for Guangxi and Vietnam to cooperate with each other.

1 Guangxi and Vietnam are well endowed with tourism attractions with unique characteristics, and the scenic spots of mountains and rivers are fairly accessible by means of convenient transportation. Therefore, a bright future holds for their cooperation on tourism. Besides, natural conditions of Guangxi and Vietnam compel them to put more efforts to develop agriculture. As their agricultural products to some extent are complementary to each other’s due to different latitudes, Guangxi and Vietnam can also consider conducting exchange and cooperation on agricultural production know-how such as planting seedlings, fruit conservation and crop cultivation. For instance, Guangxi Academy of Agricultural Science and Truong Dai hoc Nong nghiep 1 (Vietnam First Agricultural University, Hanoi) jointly established the Comprehensive China—Vietnam Agricultural Technology Research Demonstration and Popularization Base, where the planting of hybrid rice, melon

67 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

and vegetable is demonstrated. Hybrid rice has already been widely planted across Vietnam89.

2 Guangxi and Vietnam also share quite a lot of complementarities in the fields of energy and mineral resources. The two sides can cooperate on the mining of aluminium, manganese and coal. In the power sector, using coal and water power resources, they can cooperate to build thermal and hydroelectric power stations, while Guangxi could provide electricity and power equipment to Vietnam. At present, their cooperation in the power sector is mostly satisfactory. Statistics from China Southern Power Grid Cooperation show that Guangxi has supplied a total amount of 129 million kilowatt of electricity, which is worth USD 5.6 million, to Vietnam since its first transmission of electricity in May 200590. Above that, in October 2005, China and Vietnam also signed a framework agreement in Hanoi concerning the two parties’ joint exploitation of gas and oil in the Beibu Gulf Rim, laying a solid foundation for Guangxi’s future efforts in this regard.

3 Guangxi also has extensively cooperated with Vietnam in industrial sectors. Compared with Vietnam, Guangxi is more advanced in the technologies of machinery and shipbuilding; the performance, quality and price of walking tractors, agricultural vehicles, multi-cylinder diesel engines, loaders, and excavators are also far more superior. Enterprises from the two sides can strengthen cooperation on the production of complete sets of equipment, machinery processing and the trading of components. Guangxi has a host of well-known enterprises in the pharmaceutical industry, holding famous brands of traditional Chinese medicine such as Sanjin, Golden Throat, Zhenggu Shui and Huahong Pian. Enterprises from the two sides could cooperate in the pharmaceutical industry, investing in the development, production and sales of medicine.

89 “Analysis on the current industrial cooperation and complementarities between the PRD region and the ASEAN (泛珠與東盟產業合作現狀與互補性分析)”, South Net, http://www.southcn.com/nflr/nydkt/kandian/200511060201.htm. 90 “China and Vietnam move towards cooperation on maritime oil and gas resources (中越海上油氣資源呈合作趨勢)”, China Trade News, 3rd August 2006, http://www.chinainfobank.com/IrisBin/Text.dll?db=HK&no=2769476&cs=5153905&str=廣西+越南.

68 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

It is exactly because of their complementary economies and geographical proximity, Vietnam has long been Guangxi’s biggest trading partner. As the Beibu Gulf Rim Economic Zone is further progressing, trade between the two sides is also developing more rapidly (see Table 3-1). In 2005, trade with Vietnam accounted for 19% of Guangxi’s total external trade, while it accounted for 80% of Guangxi’s trade with the ASEAN91. As their trade is enjoying fast growth, two-way investment between Guangxi and Vietnam is continually expanding and deepening. Until the end of 2005, Guangxi has invested in a total of 49 projects in Vietnam, which mainly cover such areas as motorcycle components, gasoline engines, premixed feed, medicine, and polypropylene-made mattress, with the investment worth USD 33.03 million agreed; Vietnam has invested in a total of 19 projects in Guangxi, which mainly concentrate on manufacturing industry, scientific research and development, and comprehensive technology services, with the amount of utilization of foreign capital through signed contracts totalling USD 86.11 million92.

Table 3-1: Guangxi’s Trade with Vietnam (USD 100 Million) Import and Growth Growth Growth Year Export Rate Export Rate Import Rate 2002 4.87 － 3.41 － 1.46 － 2003 6.67 36.8% 4.40 29.2% 2.27 54.4% 2004 7.53 12.9% 4.54 3.2% 2.99 31.7% 2005 9.87 31.2% 6.44 41.7% 3.43 15.0% Jan—June, 2006 6.50 － 3.40 22.2% 3.10 － Sources: 1. Guangxi Statistical Yearbook 2005, China Statistics Press. 2. 2003 Statistical Report on National Economy and Social Developments in Guangxi Zhuang Autonomous Region, Website of National Bureau of Statistics. 3. “Guangxi’s export to members of the APEC exceeded USD 1 billion in the first half of 2006”, Guangxi Daily, July 23rd, 2006. 4. “Trade volumes between Guangxi and Vietnam stood at USD 790 million in the first half of 2006”, China Enterprise News, August 18th, 2006.

As its economy and social environment are improving steadily, Vietnam is soon going to join the WTO. Investment Review, based in Vietnam, reported in July 7th that, in a recent report, the Vietnamese Ministry of Finance had indicated

91 “Guangxi and Vietnam strength and deepen cooperation in many areas (廣西與越南加強和深化多領域合作)”, Guangxi Daily, 6th June 2006. 92 “Guangxi and Vietnam accelerate cooperation (廣西加快與越南合作步伐)”, Xinhua Net, 16th April 2006, http://news3.xinhuanet.com/newscenter/2006-04/16/content_4429318.htm

69 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) that Vietnam would cut down current tariffs by 22% after formally joining the WTO, including the reduction of import duties of agricultural products by 10.6% and industrial products by 23.9% within five years after accession to the WTO93. Vietnam’s accession to the WTO will undoubtedly further increase Guangxi’s export to Vietnam. However, for Guangxi, it is far from that.

Weighing a series of factors such as the volatile political relations between China and Japan, the trade frictions between China and the USA and the EU, the revaluation of RMB and the increasing price of Chinese labour, a lot of Japanese and Taiwanese enterprises have gradually adopted “China (Mainland) plus one” strategy94. Thanks to its fast growing economy and improving business environment, Vietnam has become the primary choice for these Japanese and Taiwanese enterprises to implement their “China (Mainland) plus one” strategy95. Many multinational corporations from Japan, Taiwan and the USA have gradually increased their direct investment in Vietnam. In 2005, for example, Japan undertook a record high of 97 direct investment projects in Vietnam, totalling USD 400 million. Japan is the third largest source of foreign direct investment in Vietnam, after South Korea and Hong Kong, in terms of the total amount of investment. Actually, taking into account the fact that quite a few Japanese firms are registered in Hong Kong, Japan is very likely to rank the first 96 . As the infrastructure construction of the Beibu Gulf Rim Economic Zone is coming to an end, trade between Guangxi and Vietnam will be more facilitated especially after the latter’s entry into the WTO. Guangxi could rely on the complementarities of resources with Vietnam and the comparative advantages in mechanical and electrical industries and then engage in joint production with multinational corporations that have invested in Vietnam so as to integrate into the international industrial value chain. The entry of these multinational corporations into the chain

93 “Vietnam will lower tariffs by 22% after accession to the WTO (越南加入 WTO 後降稅 22％)”, 10th July 2006, http://zcq.ec.com.cn/pubnews/2006_07_10/100307/1185320.jsp. 94 This strategy means that some multinational corporations which have invested in mainland China or are about to invest there will choose another developing country in Asia as investment target other than China, in order to avoid the above risks. 95 Business booming 1 year after riots，Nikkei Weekly, 10th April 2006; George Wehrfritz, Vietnam Revs Up－Asia's upstart is challenging China in light manufacturing and pulling in nearly as much foreign investment as India，Newsweek International, http://www.msnbc.msn.com/id/10117467/site/newsweek/page/2/. 96 Hisane Masaki, Japanese Firms Flock to Vietnam: [Analysis] Vietnam is 'China plus one' for Japan Inc, Ohmynews, 26th August, 2006, http://english.ohmynews.com/articleview/article_view.asp?no=313394&rel_no=1.

70 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October) will also bring great demand for resources and energy, and Guangxi could further its cooperation with Vietnam in this respect.

Pan-Beibu Gulf Economic Cooperation

Relevant ministries and departments in China’s State Council and the ASEAN countries have attached great importance to the strategic conception of building the Beibu Gulf Rim Economic Circle centred on economic cooperation between Guangxi and Vietnam and its rapid development. Between July 20th and 21st, the first Forum on Beibu Gulf Rim Economic Cooperation, co-hosted by the Western Development Program Office of the State Council, Ministry of Finance, People’s Bank of China, Development Research Centre of the State Council, People’s Daily, People’s Government of Guangxi Zhuang Autonomous Region, and Asian Development Bank, was held in Nanning, Guangxi’s capital city. 160 delegates, including government officials and representatives of various research agencies from the six nations in the Pan-Beibu Gulf Region (Vietnam, Singapore, Malaysia, the Philippines, Brunei and Indonesia), and representatives from Guizhou, Sichuan, Yunnan, Hainan and Guangdong, attended the conference. Representatives from developed countries and regions in East Asia, such as Japan, South Korea, Hong Kong and Taiwan, also attended the conference as observers. This Forum was convened under the theme Jointly Build New China—ASEAN Growth Pole, in which the conception of the Beibu Gulf Rim was broadened to the Pan-Beibu Gulf Region to encompass Singapore, Malaysia, the Philippines, Brunei and Indonesia. Deep and pragmatic discussions were held and a broad consensus was reached at the Forum under three topics, namely, the future development of Beibu Gulf Rim regional cooperation, the approaches to the establishment of Beibu Gulf Rim regional cooperation mechanisms, and the initiation and implementation of Beibu Gulf Rim regional cooperation. The Forum is aimed at promoting Beibu Gulf Rim regional cooperation, ultimately making it a long-term and open platform for research, exchange of ideas, discussion and publicity. This Forum was vigorously promoted by Guangxi and received generous support from the Central Government. Although this Forum was largely for interchange of research findings, some viewpoints and suggestions proposed in it hold significant meanings for national strategy, regional economy and Guangxi’s economic development.

1 Promoting Pan-Beibu Gulf Economic Cooperation is conducive to the establishment of China—ASEAN Free Trade Area

71 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

The “M Strategy” for regional economic cooperation proposed by Liu Qibao, Secretary of CPC Committee of Guangxi Zhuang Autonomous Region, at the Forum attracted widespread attention. The “M Strategy” for economic cooperation is so called because its basic structure is supported by the Pan-Beibu Gulf Economic Cooperation Zone and Greater Mekong Sub-region as the wings and Nanning—Singapore Economic Corridor as the central axis, which is M-shaped in the map. The content of the “M Strategy” includes Marine economic cooperation, Mainland economic cooperation and Mekong sub-region cooperation. It will greatly push forward the further development of China—ASEAN Free Trade Area.

Since China and ASEAN signed the Framework Agreement on Comprehensive Economic Cooperation between the People’s Republic of China and the ASEAN in Phnom Penh, Cambodia in November 2002, the construction of China—ASEAN FTA has seen rapid development. In 2003, China and Thailand adopted zero tariff treatment on fruit and vegetables; in 2004, Early Harvest Programme was comprehensively initiated and the Greater Mekong Sub-region Cooperation was started smoothly; and by 2005, bilateral trade between China and ASEAN had reached RMB 130.4 billion97. At the same time, China joined the Treaty of Amity and Cooperation in Southeast Asia, and signed with the ASEAN Joint Declaration on Strategic Partnership for Peace and Prosperity, Declaration on the Conduct of Parties in the South China Sea, and Joint Declaration of China and ASEAN on Cooperation in the Field of Non-Traditional Security Issues, which all signalled the significant progress since made on the development of the China—ASEAN FTA. However, China and the ASEAN share quite a few similarities in industrial structures, and their economic development is not much differentiated. Moreover, their relations are beset by differences in traditional culture and unsolved historical disputes. Therefore, as the development of China—ASEAN FTA is deepening, it will be somewhat difficult for them to proceed further.

97 Guangxi Daily: “Pan-Beibu Gulf Economic Zone—Holding the future of China and ASEAN (泛北部灣經濟區——托起中國與東盟的未來)”, quoted in Website of China Vietnam Machine, 31st July 2006, http://www.cvmachine.com/info/zh/200607/10022.shtml.

72 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

The establishment of a free trade area demands negotiations among the countries involved and the formulation of relevant policies. However, since policies enacted at the national level cover a wide range of areas, they are not always in accordance with regional interests, which are often controversial among themselves. When negotiations and agreements between these countries reach a certain level, different interests are so difficult to coordinate and negotiating costs are so high that they tend to hamper the establishment of the free trade area. On the contrary, sub-regional economic cooperation has a clear advantage, as the geographical area covered is smaller and hence issues concerning interests coordination are fewer. Besides, more opportunities and strengths exist for cooperation between neighbouring regions. Within the agreement framework between nations, sub-regional cooperation can take on various forms, and its development also provides new approaches to, and explores new environments for, further cooperation between nations. Although sub-regional cooperation is largely experimental, the costs are much lower. In the process of globalization, cooperation between sub-national entities has become the mainstream development. For example, in the European Union, it has gained full support from the EU and member states. Sub-regional cooperation will also become more and more important under the framework of China— ASEAN FTA. The three components of “M Strategy” for economic cooperation are the very things that can promote further progress of China—ASEAN FTA, which will make it more substantial and more easily operational. As a matter of fact, the three components in essence make up the overall framework of China—ASEAN FTA under current circumstances, and they will facilitate the emergence of more pragmatic and specific approaches to the construction of China—ASEAN FTA.

Moreover, the conception of Beibu Gulf Rim Cooperation was broadened to Pan-Beibu Gulf Cooperation at this Forum. Put in a broader way, the area of cooperation will be greatly enlarged geographically. This will be beneficial to all the parties engaged in cooperation in finding more space for China and the ASEAN to enrich and deepen their strategic partnership, and for China to lower its strategic risks.

73 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

The Beibu Gulf Rim Economic Circle encompasses Guangdong, Guangxi, Hainan, and some provinces in Vietnam, based on which the Pan-Beibu Gulf Economic Circle incorporates Singapore, Malaysia, the Philippines, Brunei and Indonesia. The former concentrates more on sub-regional cooperation, while the latter focuses more on China—ASEAN cooperation. Guangxi vigorously promoted the conception of Pan-Beibu Gulf Economic Cooperation out of its own interests. According to some sources, senior officials from Guangxi government thought that Vietnam’s attitude towards their cooperation was rather lukewarm, and had reservations about cooperation on the exploration of mineral resources, which, unless changed, will leave little room for cooperation for both sides. Therefore, Guangxi government hopes, on the one hand, to enlarge cooperation with the ASEAN through Pan-Beibu Gulf and the “M Strategy”. On the other hand, it hopes, by building “Nanning—Singapore Economic Corridor”, to pursue direct and active contacts with Singapore, exerting pressure on Vietnam for cooperation. This may count as a foreign strategy of making friends with a distant enemy while attacking the one nearby.

2 Promoting Pan-Beibu Gulf Economic Cooperation is conducive to the execution of China’s strategy on resources and energy

Resources and energy are of vital importance to a nation’s economic and strategic security. Compared with land, huge potential still exists for the exploration of marine resources and energy. The proposition that “the 21st century is the century of marine economy” is as old as it is new. The water around the Beibu Gulf and South China Sea are well endowed with oil and gas deposits, and other maritime resources, and the countries along these areas also have plentiful mineral resources and material resources, especially natural and “eco-friendly” materials. In addition, South China Sea is in a geographically pivotal position, serving both as “sea corridor” and “air hub” to reach the Malacca Strait and to connect the Pacific Ocean with the Indian Ocean and East Asia with Oceania. Owing to the importance of the South China Sea and its strategic value, many great powers, such as the United States, India, Japan, Russia and the EU, have been meddling with affairs in this region, not only

74 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

actively spreading their influence but also complicating matters further indirectly.

Disputes have long existed in the South China Sea. Under current circumstances, they are unlikely to be resolved in a short time. However, by creating common interests, joint exploration is an effective option. Under the guiding principle of “laying aside disputes and conducting joint exploration”, Pan-Beibu Gulf Economic Cooperation will facilitate cooperation on resources and energy between China and other parties, and will become a vital part of China’s strategy on resources and energy. At the same time, it will also ensure the smooth operations of the “sea corridor” and “air hub”, and strengthen China’s as well as the ASEAN’s marine economy.

3 Promoting Pan-Beibu Economic Cooperation is conducive to deepening the Development of China’s Western Region

It has been six years since China first launched the strategy of Development of the Western Region. Although enormous amount of money and resources had been invested, the strategy has yielded few results so far, and the Western region is still the poorest region of China. One of the most important reasons that the Western region is lagging behind lies in the poor transport conditions there. Pan-Beibu Gulf Economic Cooperation is the most convenient sea passage linking China and the ASEAN. China has already laid a solid foundation in the construction of the grand passage connecting the ASEAN, as road and railway passages linking the Southwest hinterland and Guangxi’s coastal ports are already in place. However, two constraining factors lie in the course of the passage. One is a lack of logistics; and the other is a lack of supporting economy in the hinterland, which has to some degree restrained the development of Guangxi’s three port cities in the Pan-Beibu Gulf Region (Fangchenggang, Qinzhou, and Beihai). Whether Pan-Beibu Gulf Economic Cooperation will have a positive impact on the further development of the Guangxi passage will largely depend on how to change the two factors mentioned above.

75 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

4 The impact of Pan-Beibu Economic Cooperation on Guangxi

Although Guangxi is the very neighbour of Guangdong, the most developed province in China, and is not far away from Hong Kong and Macao, the development there is quite slow despite so many years after the opening up and reform of China. The causes are manifold. During the process of Pan-PRD cooperation, Guangxi’s original expectation to take up the industries moved away from Guangdong was dashed when Guangdong, from its own considerations, issued No. 22 document regarding industrial relocation98, which in effect impaired the outward relocation of the industries from the PRD region. Thus Guangxi’s wish to rely on Guangdong’s particular move to develop its economy will hardly realize. However, Pan-Beibu Gulf Economic Cooperation, especially the “M Strategy” proposed at the Forum will provide a new opportunity for Guangxi’s development.

Seen from the central axis of the “M Strategy”, namely, Nanning—Singapore Economic Corridor, Guangxi has both complementary as well as competitive relationships with countries along this line: 1. Agricultural products are quite competitive, while mineral products are complementary. 2. In the production of manufacturing products, three categories of industries have comparative advantage: labour-intensive industry, such as light industry and garments; resource processing industry, such as the production of cement and fertilizers; common mechanical and electric industry, such as the production of diesel engines and agricultural machinery. Nonetheless, compared with countries along the Corridor, markets for these products only exist in less developed countries, and their potential is rather limited. Generally speaking, more of a complementary relationship exists between Guangxi and Singapore, Malaysia and Thailand, whereas more of a competitive one exists between Guangxi and Vietnam, Cambodia and Laos. Due to the coexistence of these complementary and competitive relationships, Guangxi could actually adopt the strategies of “attracting in” and “going out” at the same time. On the one hand,

98 “M strategy created new opportunities for economic development (‘M’型戰略創造了經濟發展的新機遇)”, People’s Daily Website, 4th August 2006, http://www.fecbg.cn/news_show.asp?bname=环北论坛 &sname=最新动态&id=772.

76 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

Guangxi could rely on its resources and industrial bases to attract direct investment from the more advanced countries of Singapore, Malaysia, and Thailand in order to develop hi-tech and high value-added industries. On the other hand, enterprises in Guangxi with comparative advantages could look beyond Guangxi, and invest in Vietnam, Cambodia and Laos, leveraging on their resources and cheap labour force.

Implications for Hong Kong

The development of Beibu Gulf Rim Economic Cooperation and the direction of the development of China—ASEAN FTA have shown that economic cooperation in this region holds a very sanguine prospect. For Hong Kong, apart from taking full use of its superiority in logistics and finance to speed up cooperation with each party in this region, the most important thing is to draw experience and inspiration.

1. Aside from being in a favourable geographical position, an important reason for the rapid development of Guangxi and the Beibu Gulf (Guangxi) Rim Economic Zone is that Guangxi’s government has clenched the opportunity of the establishment of China—ASEAN FTA. Until 2004, the development of the Beibu Gulf (Guangxi) Economic Zone was not much known. However, it notably picked up momentum after China and Vietnam reached consensus on the establishment of the “Two Corridors and One Circle”, thereby spurring the economic development of the entire autonomous region. The “M Strategy” proposed at the Forum in Guangxi, in particular, makes the prospect of the Beibu Gulf (Guangxi) Rim Economic Zone even brighter. The development pattern of Guangxi is in fact the perfect combination of its own characteristics with national strategies and policies: Guangxi blends its own interests into the nation’s overall interests, follows closely the national strategic direction, and makes corresponding moves. The “M Strategy” is the perfect example of such wisdom of Guangxi’s leaders, which not only propels Guangxi’s own development but also helps devise a feasible scheme for the execution of national strategy. The Central Government is highly likely to deliver some favours to the “M Strategy” or Beibu Gulf Rim Economic Cooperation in terms of policy treatment at the

77 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

Commemorative Summit marking the 15th Anniversary of China—ASEAN Dialogue Relations to be held this year.

2. Hong Kong is still falling behind when it comes to capture the intentions of the Central Government and follow up with appropriate measures. It seems that Hong Kong is always waiting for such preferential policies from the Central Government as CEPA. However, these policies have little impact on the overwhelming majority of Hong Kong citizens. Visits by individuals to Hong Kong and their influence on related industries such as tourism, retail and catering, has been diminishing. For ordinary citizens, the new vigorous industries with indigenous initiatives are the most needed. As other parts of China are enjoying rapid economic development, industrial upgrading and deepening internationalization, Hong Kong’s superiority margins which depend on such industries as traditional logistics and financial services are being gradually narrowed. Therefore, cooperation with the PRD region and other regions is perhaps needed to cultivate and develop some new superior and competitive industries or growth industries. Since Mainland China is so important a factor (whether to Hong Kong or to the world economy), Hong Kong should only follow the development trend of Mainland China when developing new superior industries or growth industries. This will involve the elements of both market (industry) and government, and taking on the 11th Five-Year Plan is a viable option. Nonetheless, the development of superior industries cannot be achieved in one day. Thus, if Hong Kong wants to plan on, and invest in, related industries, the gravity should not merely be confined to the 11th Five-Year Plan. Instead, it should concentrate on the direction the 11th Five-Year Plan has demonstrated and on the 12th Five-Year Plan which is under preparation. Meanwhile, in order to overcome its weaknesses and take advantage of its strengths, and to coordinate with local development in the PRD region, Hong Kong should also look into and assess the 11th Five-Year Plan and the preparations made for the 12th Five-Year Plan of the local governments in the PRD region. Since it involves new industries, such research should not simply follow the traditional way of conducting macro-research. Rather, it should be a much more detailed research and take into account various factors, including market competition, demand, supply and technology.

78 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

3. With the implementation of “China (Mainland) plus one” strategy of the multinational corporations from Japan and Taiwan, a few adjustments in terms of geographical positions in the international industrial value chain will take place. A lot of Hong Kong enterprises have operated for many years in Guangxi and Vietnam, and some of them have scored quite an achievement. These enterprises could rely on the business experience acquired and the relationships established in Guangxi and Vietnam, and depend on their advanced management skills and technology to conduct complementary production or provide complementary services together with those multinational corporations which have direct investment in Vietnam.

4. For Guangdong and Hainan, the Beibu Gulf will in effect compete with them and divert resources from them, mainly because these two provinces and Guangxi are in different administrative regions. On the one hand, Guangxi is in an unlikely situation to transfer or extend its local development to these two provinces. On the other hand, direct and convenient transport links are also scarce between the Beibu Gulf and these two provinces. Hainan is an island, and railway transport between Leizhou Peninsula and Hainan is quite limited; and few links exist between local ports and Guangxi’s ports. As for Guangdong, railway links between the PRD region and Guangxi and the Beibu Gulf are very outdated. The newly constructed Luoyang—Zhanjiang Railway largely lies in West Guangdong, and has no direct link with the ports cluster in the PRD region. Therefore, as far as the land route is concerned, cost-effective passenger and freight rail transport links and links between Guangxi’s ports cluster and the PRD region are far from enough. Take the year 2005 as an example, foreign trade through Zhanjiang Customs in East Guangdong reached USD 1.83 billion; it was only USD 200 million for Beihai Port of Guangxi; and the figure for Haikou Port of Hainan stood at USD 2.21 billion. Of Haikou’s imports and exports, 60% of the goods were not of local origin, which also reflects its role as an entrepot for Guangdong. Zhanjiang’s imports were mostly aimed at places outside Zhanjiang, while one third of local exports had to go through customs elsewhere (believed to be in the PRD region). Foreign trade through Beihai Port is largely of an entrepot nature, which has nothing to do with local production and consumption.

79 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

Inside Guangxi, foreign trade is mainly conducted through the land route, and Nanning, Guilin and Pingxiang are the major customs. Foreign trade volumes through Beihai Port account for less than 4% of Guangxi’s total volumes.

The key to the development of the Beibu Gulf region, on Guangxi’s part, is the link between ports of Nanning (Guilin) and Beihai (Fangchenggang). Will Guangxi’s imports and exports be conducted through the land route, or through sea lanes, concentrating in Beihai Port? On the one hand, there are the Nanning—Kunming railway and Guizhou—Guilin railway. On the other hand, coastal railway, linking Nanning, Qinzhou, Beihai and Fangchenggang, is improving. In particular, the latter will decide the result of the vying between Beihai, Fangchenggang and Zhanjiang (by way of the Litang—Zhanjiang railway) for the Southwest’s supply of goods, which will be borne out in five years’ time. However, judging from current development of foreign trade in Guangxi and the Southwest, and the lagging behind of local industry and overall economic development in the Qinzhou Gulf area, Guangxi will hardly have any port or customs comparable to Zhanjiang.

Beibu Gulf Economic Cooperation will never escape the national cooperation framework or the cooperation framework between different customs. Nevertheless, within the framework (as the CEPA relationship between Hong Kong and the Mainland, or the membership relationship between Hong Kong and Vietnam), like the cooperation of Guangxi and Yunnan with local governments in Vietnam, The Hong Kong SAR Government could find experiences and examples for its references, such as the cooperation between cities in the Beibu Gulf region which the report has mentioned previously, and the support or acquiescence of the Central Government is always indispensable. In addition, Hong Kong should establish economic and trade ties with Vietnam and related agencies and organizations.

80 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

Appendix：

Appendix I：Statistical Data for the Pan-PRD Provinces/ Region

Major Economic Indicators for Guangdong and the Four Southwestern Provinces/ Region

Table 1：Economic Performance of the Four Southwestern Provinces/ Region, August 2006 Per Capita Industrial Value-added Sales Ratio of Manufactured Products Urban Investment Disposable Income of Province / Growth Rate over Growth Rate over the in August Urban Residents Region August the same period in August same period in the (RMB 100 Million) in August (RMB 100 Million) the preceding year preceding year (RMB) National Total 7,355 15.7% 98.74% 0.67 7,823 918 Guangdong 914 17.6% 97.29% -0.13 474 1,214 Sichuan 205 23.2% 99.44% 0.59 302 715 Guangxi 78 20.1% 105.06% 1.62 133 750 Yunnan 103 18.9% 100.79% 0.98 137 804 Guizhou 59 15.9% 96.93% -1.06 82 727 Source: National Bureau of Statistics of China, http://www.stats.gov.cn/tjsj/.

81 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

Table 2：Social and Personal Consumption in the Four Southwestern Provinces/ Region, January to July 2006 Per Capita Per Capita Disposable Income of Total Retail Sales Consumption Expenditure of Urban Residents Province / of Consumer Urban Residents Consumer Price Index Region Goods in July Growth Rate over the Growth Rate over Jan-July Cumulative Jan - July Jan - July (RMB 100 Million) same period in the the same period in (RMB) (RMB) preceding year the preceding year Sichuan 271 5,495 10.2% 4,268 10.7% 101.8% Guangxi 126 5,938 10.3% 3,931 7.4% 100.7% Yunnan 85 5,865 8.7% 4,219 5.0% 101.9% Guizhou 54 5,393 11.6% 3,956 11.1% 101.2% Source: National Bureau of Statistics of China, http://www.stats.gov.cn/tjsj/.

Table 3：Total Value of External Trade for the Four Southwestern Provinces/ Region, January to July 2006 Total Value of External Trade Total Value of External Trade by Foreign-Invested Enterprises Province / Region Growth Rate over Jan – July Proportion to Trade Balance Jan – July Proportion to the same period in (USD 100 million) National Total (USD 100 million) (USD 100 million) Regional Total the preceding year Sichuan 57.8 40.30% 0.60% 7.6 14.4 24.9% Guangxi 34.7 20.80% 0.40% 2.3 11.5 33.2% Yunnan 33.5 23.40% 0.40% 1.4 2.7 8.0% Guizhou 8.6 10.70% 0.10% 2.4 1.1 13.3% Source: China’s Customs Statistics (Monthly Exports & Imports), Series No. 202, July 2006.

82 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

Table 4：Fiscal Indicators of the Four Southwestern Provinces/ Region, January to July 2006

Government Revenue (Funds Excluded) Government Expenditure (Funds Excluded) Province / Region Jan – July Cumulative Growth Rate over the same Jan – July Cumulative Growth Rate over the same (RMB 100 Million) period in the preceding year (RMB 100 Million) period in the preceding year Sichuan 345 28.1% 525 24.1% Guangxi 195 25.7% 333 18.8% Yunnan 231 24.9% 334 8.4% Guizhou 279 25.8% 228 13.2% Source: National Bureau of Statistics of China, http://www.stats.gov.cn/tjsj/.

83 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

Appendix II：English-Chinese Glossary of Terms

Beibu Gulf (Gulf of Tonkin) 北部灣

Beibu Gulf Rim Economic 環北部灣經濟合作 Cooperation

Cast Effect 木桶效應

‘China (Mainland) plus one’ “中國加一＂戰略 strategy

Competitive Corporations 強優企業

Constitution of the Communist Party 《中國共產黨章程》 of China

Development of China's Western 西部大開發 Region

Drought 旱災

Early Harvest Programme “早期收穫＂計劃

Economic Circle 經濟圈

Futures Delivery Reservoir 交割庫

Joint Asian Derivatives Exchange, 聯合亞洲衍生工具交易所 JADE

“M Strategy” “M 型戰略＂

Natural Rubber 天然橡膠

84 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

Pan-Asian Railway 泛亞鐵路

Pan-Beibu Gulf Economic 泛北部灣經濟合作 Cooperation

Plan for Medium and Long-Term Scientific and Technological 《貴州省中長期科學和技術發展規劃綱要 Development in the Guizhou （2006-2020 年）》 Province, 2006-2020

Shanghai Futures Exchange 上海期貨交易

Superior Industries 優勢產業

Regional Scientific-Technological 地方科技創新體系 Innovation System

The Chicago Board of Trade 芝加哥商品交易所

The Three Gorges Dam 三峽大壩

Three Asia’s (East Asia, Southeast 三亞（東亞、東南亞和南亞） Asia and South Asia)

Two Corridors and One Ring 兩廊一圈

Two Oceans (Pacific Ocean and 兩洋（太平洋和印度洋） Indian Ocean)

Urbanization 城鎮化

Water Resources 水資源

Western Pacific Subtropical High 西太平洋副熱帶高壓 (WPSH)

85 Social, Economic and Political Developments in the Pan-PRD Region Guangxi, Yunnan, Guizhou, Sichuan (5th Report / October)

Yunnan – Tibet Railway 滇藏鐵路