The central part of China accounts for about a quarter of the country's population but only a fifth of its wealth, and after a long wait it seems like help is finally on the way.

The State Council, China's cabinet, will not only set up a special office to help pluck the region's sinking economy up by the bootstraps, but is also planning to apply the preferential policies used to promote the development of the western and northeastern regions.

To encourage the "rise" of the central provinces Shanxi, Anhui, Jiangxi, Henan, Hubei and Hunan the State Council released a landmark notice on January 16 that granted some central cities and villages tax exemptions or reductions, and put in place policies favorable to the development of the region's social security, agriculture, land and mineral resources.

Now that all of this support is coming its way, will the central region sink or swim? It is already falling behind both the eastern coast and the vast west in terms of per capita gross domestic product growth.

The first answer, and perhaps the wished-for one, is that the policies, if used properly, will usher in change.

The central region is the last to be covered by a national development plan. In terms of investment, it has lagged behind not only the provinces on the eastern coast, which opened up in the 1980s, but also its neighbors to the west, which have benefited from a "go-west" scheme since the late 1990s.

For example, for each $1 of investment in the central region in 2003, the eastern region absorbed $3.37 from both private and foreign investors. The western region attracted $1.02 largely from the central government.

Infrastructure and industrial projects financed with money from the central budget, in conjunction with other incentive policies, have long been the engines driving regional economic growth in China, according to the Blue Book of China's Central Region, published recently by the Social Sciences Academic Press.

The government approved 270 investment projects in Northeast China between 2004 and 2005. Local officials in the central part of China have said they anticipate similar investment schemes for their region.

"If the central region, with reference to the Northeast, can also get funds from the central budget for investment in infrastructure and key industrial projects, it would undoubtedly be good news for Hubei," said Ye Qing, deputy chief of the Hubei Provincial Bureau of Statistics.

Given the important role investment is expected to play in leading the region's growth, a second answer to the sink-or-swim question emerges: Experts said the central region may not be able to swim if it relies too heavily on government support, or if it fails to learn from the experience of its eastern cousins.

Wang Dongjing, a native of the central region and the director of the Economic Department at the Party School of the Central Committee of the Communist Party of China, said the central region should not pin its hope of attaining prosperity on funds from the central government.

Instead of looking to Beijing for help, the central region should take a lead in reforming its government administrative system, particularly the administrative approval regime, Wang said.

Such reforms would also promote regional integration and help build the region into a unified market, in which resources can cross provincial boundaries and flow freely, said Fan Hengshan, chief of the National Development and Reform Commission's Department of Regional Economy.

Eliminating the administrative approval system might benefit the central region. Without the system, the allocation of resources would be decided by the market, and the central region is not uncompetitive, Wang told a forum held in Beijing earlier.

Source:China Daily