INVESTMENT FROM THE COAST:WEST CHINA REFORM AND DEVELOPMENT
中西部地区的改革发展与沿海要素西移

Production factors are moving westward from the coastal areas in China. As a result, M/A activities are increasing, beneficial to the check of the enlargement of regional gaps. The westward movement of the factors is caused by the overall rise of cost for the coastal enterprises which are labor intensive, high material and energy consuming. Public listed companies intend to expand towards inland areas.The regional imbalance is mainly caused by the price distortion under central planned economy practised from the 1950s through to 1992. Cheaper resources from Western China made the profits in coastal manufacturing sectors seemingly high. Therefore, after opening and reform in the late 1970s, favorable policies and priority investments were earmarked for coastal areas only, promoting the coastal development effectively as talents, capitals and know hows from all over the nation concentrated in East China, while depriving the development potentials of the inland areas. They were the negative incentives.State intervention in Western China's development is necessary, but not in a traditional sense. The state's role is to improve the infrastructures to facilitate the entry of the coastal investors and set up a favorable policy environment and a better legal framework to induce and protect the new investors. Meanwhile economic policies in Western China have to be readjusted to promote the growth of the non state sectors, which are dwarfed by the state sector.