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Investing in China
Subject Economic Growth
Topic Developing and Transitional Economies
Key Words Investment, Economic Growth
News Story

China's western provinces comprise more than half of China's territory. The Western area has abundant natural resources, including oil, natural gas and mineral resources. It is also a strategic area for the Chinese and its western border contains important military installations. The only things the western provinces lack are people and economic development. Only about 25 percent of the nation's 1.3 billion people reside there. China's leaders have made economic development in the western provinces a top priority and they are trying to convince the Hong Kong business barons to invest there.

This area has become very valuable to China because of its natural resources. These resources are needed to fuel economic development in the rest of China. Inhabitants of the western provinces include Tibetan and Islamic minorities. These groups have not participated in China's economic growth and increased living standards, and have demonstrated for political independence. China's leaders hope economic development will bring higher living standards to the area and thereby ease ethnic and religious tensions.

China was hoping that Hong Kong's business elite would provide the capital for economic development. China invited a delegation of Hong Kong businessmen to tour the area while making it clear to them that the leadership was expecting them to contribute substantially to the development effort. Chinese Premier Zhu Rongji addressed the Hong Kong delegation and tried soliciting by appealing to the patriotism as well as the business acumen of the participants. Premier Zhu promised that bold investing in western China would be rewarded.

Although the tour was meant to highlight the business opportunities available in the region, upon observing the sheer size, harsh climate, primitive conditions and unrest in the region, it appears to have produced the opposite effect upon the delegation. China was disappointed with the amount of investment the delegation pledged.

(Updated July 1, 2001)

Questions
1. What are some of the reasons for the Chinese leadership to want economic development for the western provinces of China.
2. How would increased investment in the area raise the area's standard of living?
3. Why was the Hong Kong delegation reluctant to provide the capital needed for development?
Source Clay Chandler, "Hedging Their Bets on China," The Washington Post, June 6, 2001.

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