An analysis on regional economic development released by the State Information Center (SIC) believes that China's regional policies in 2005 would be characterized by increased help to backward regions and decreased support to developed regions. However, due to the polarization effect of market system the gap among the east, the center and the west would continue to expand. The leading position of the Yangtze Delta would be further strengthened.

The SIC believes that due to relatively large number of major investment projects, a majority of key investment projects and the support of national policy, investment in the west region would continue the rapid growth in 2005. Newly-started projects in the east region have begun to increase evidently since the latter half of last year. Because of this, plus the growing investment capacities of enterprises, investment growth in the east would approach that of the west. Driven by intensified investment in basic products such as energy investment in the center would also see fast growth.

The report predicts that since market system can produce polarization effect the leading position of economic growth in the east particularly in the Yangtze Delta would continue into 2005 and the gap among the east, the center and the west would continue to expand. Growth in hot areas (the three city group areas) would be relatively high.

Growth prospect of world economy in 2005 is believed to be good and external environment of China's export favorable. According to the forecasts export growth would still be the pattern led by the east region. Nevertheless, export growth gap between the east and the center, the west may shrink.

The report suggests that to boost the economic development in less developed regions China needs to implement differentiated tax rate policy. Meanwhile taxation preference policy also should consider working on reduction and exemption of state taxes such as value added tax. It may be possible for the central government to "regionalize" the value added taxes and tax sharing percentages, that is, to implement different VAT rates and sharing percentages on economically weakest provinces, weak provinces and normal provinces.

By People's Daily Online