XI’AN, China — After nearly 30 years of coastal development, infrastructure is shifting with China’s “Go West” campaign. While the International Monetary Fund, best known as the IMF, warns against the unprecedented rate of investment, the Communist Party is confident that urbanization will ease poverty rates in Xi’an and neighboring Xianyang.
An industrial smog hazes the crane-cluttered skyline in Xi’an. Business complexes and residential buildings steadily gain height, towering above a $1.4 billion airport extension, a $5.2 billion bullet train and Samsung’s planned $7 billion electronic plant.
Once ancient emblems of the Western Zhou dynasty, Xi’an and Xianyang are now tangible signs of unparalleled economic growth.
“There are experiments everywhere in China. Some good points emerge and the best points are what the center tries to identify and encourages others to learn from,” Zhang Wei Wei, a leading scholar of China’s development model, said.
These development strategies also double as poverty alleviation techniques, driving domestic and international growth through propping up infrastructure and employment. From just 2005 to 2010, the average annual income in Xi’an roughly doubled to 22,244 yuan. Though this lags behind Shanghai’s 71,874 yuan average, it symbolizes movement away from the rural poverty that is so indicative of China.
According to a 2014 report, nearly 82 million rural Chinese still get by on less than $1 a day. Engaged in farming, forestry, animal husbandry and fishing, these largely autonomous provinces are fraught with depleted natural resources, unsanitary drinking water, discriminatory illiteracy and limited access to markets.
As Zheng Wenkai, a vice-minister at a government office responsible for poverty alleviation and development, suggests, “poverty is still a salient problem in China.”
“It’s a tough nut to crack,” Wenkai said. “Poverty is a weak point for our goal of building a moderately prosperous society in all respects by 2020.”
With nearly $325 billion in investment since its launch in 2000, however, the “Go West” initiative has transformed Xi’an and Xianyang, once rural areas, into industrial municipalities. Applied Materials, a multinational chip-fabrication equipment maker, even constructed a $300 million research center in Xi’an. Samsung is quickly following suit, building a memory chip plant that will pump $7 billion into the city’s economy over several years.
Still, the IMF fears that this rate of investment is not sustainable, which may contribute to a boom-and-bust business cycle. Reports from the World Bank have found that investment in fixed capital, such as buildings, roads, bridges, railways, airports, industrial equipment and machinery, rose from 36.3 percent of gross domestic product to 45.4 percent in just eight years.
“Our fear is that China continues to invest so heavily as a share of GDP over the next four or five years that vulnerabilities begin to emerge,” Murtaza Syed, the IMF’s chief representative in China, said.
Already disabled by low incomes and social instability, these vulnerabilities may be assumed by individuals living in Xi’an and Xianyang. Despite this risk, many international financial analysts are placing their confidences in the Communist Party.
“China is large and disparate enough for industry to shift and take advantage of comparative advantages and cheaper labor elsewhere in the country,” said Eric Fishwick, head of economic research at brokerage Credit Lyonnais Securities Asia.
– Lauren Stepp