Shaanxi: Building a Future on State Support

Abstract

Shaanxi province has obtained substantial benefits from the Open Up the West programme. It has developed communications, sped up exploitation of energy resources, and subsidized industrial and agricultural restructuring. Conversion of farmland to forest or grass has been subsidized on a massive scale, even if its lasting effects are quite uncertain. Moreover, local governments were able to receive increasing amounts of subsidies for government services such as education and welfare, which meant the burden of human and social cost of marketization of the local economy could be alleviated. Of the three different regions of Shaanxi, the north has benefited most from energy development and agricultural restructuring. Central Shaanxi with Xi'an as the capital has profited from its advantageous location, existing industrial basis, administrative functions, and strong education and research facilities to improve its industrial structure and upgrade its services. However, the substantial industrial expansion over the past few years was fuelled by heavy policy-driven investment from outside and growing urban income, and most enterprises still have to prove their ultimate competitiveness in the national market.