China: Wealth and power split new superpower into three

In China, all people are equal; but some are more equal than others. The divide between rich and poor may be the biggest threat to stability in the next global superpower. Teresa Poole in Peking looks at the fault-lines of a nation that seems to be becoming three countries as economic reform takes hold.

It takes almost two days by train to travel from the glass-fronted skyscrapers of Shanghai to the impoverished north-west province of Ningxia, a journey from China's style capital to a part of the country which economic reform and opening up seems to have left behind.

The feeling of travelling back in time as one crosses China is stark. In Shanghai, the benefits and challenges are self-evident after a decade of breakneck growth: a well-dressed and well-heeled middle class, gleaming shopping malls, gridlocked roads, and a massive building site on every corner.

By the time one arrives in Zhengzhou, Henen Province, right in the middle of China, the architecture of the new buildings is utilitarian, private cars are fewer, and a quarter of the workforce is still tied to the ailing state textile industry.

Journey on to Yinchuan, capital of north-west Ningxia province, home of China's Hui Muslim minority, and one is back in yesterday's China. The city's department store offers the sort of old-fashioned clothes worn in Shanghai in the early Eighties; there is little new construction, and no sign of foreign investment. In the south of the province, a sizeable number of people still live in caves dug out of the hillsides, with no electricity or running water.

Such is a snapshot picture of China in the week that the ruling Communist Party ends its 15th Party Congress. China's own economists look at their nation in three slices: the East (comprising Peking, Shanghai, and the coastal provinces), the Centre (which cuts a swathe through the middle and up to the north-east), and the West (the nine most far-flung provinces).

Historically, life was always easier for those living near the coast, but the huge imbalance in the way foreign investment has been received since economic reform started in 1979 has created a regional wealth gap unlike anything seen in China before. The east contains one-third of the country's population but benefits from four-fifths of the foreign investment that has been ploughed into China since 1979.

In terms of standards of living, trade and industry, and prospects for the future, the China shown on our map begins to look more like three different countries. "Yes, according to people's income and the degree of economic advancement you can say that," said Liang Youcai, deputy director of the forecasting department of the State Information Centre. "People in the East can live comparatively well, while many in the West still live under the poverty level."

Mr Liang is among many who have pointed out the obvious dangers of such regional wealth gaps. Two years ago he told the central government that if the situation persisted "social disturbances might be incurred, and economic development be impeded."

By any economic measure one cares to use, the disparities between the East, Centre and West are sharp. Bad transportation, decrepit industry, and difficult climates put the inland and western provinces at such an initial disadvantage, that they cannot compete.

So it is no surprise that standards of living are lowest in the impoverished West. There, the annual expenditure per person in rural areas in 1996 was just 1,149 yuan (pounds 86).

Peasants have already voted with their feet, the disparities being the most severe for rural folk. China's army of around 90 million floating workers behave like a barometer of regional economic prospects, fleeing the countryside and small townships, where underemployment is chronic. The more timid drift towards the big cities in their own or nearby provinces, but the adventurous think nothing of journeying more than 1,000 miles towards the coastal provinces and cities, where they labour on building sites and in export-led foreign-invested factories.

This multi-tiered massive shift of population adds to the government's separate concern of how to maintain social stability in cities as it launches a massive reform and privatisation of state-owned enterprises. Reports of demonstrations by unemployed or unpaid state enterprise workers are commonplace these days. "Those workers are mainly concentrated in the West and Centre. In the East, the economy is more advanced, the government has income and even if there are unemployed state enterprise workers, the government can guarantee their minimum living conditions," said Mr Liang.

How long then for the rest of China to close the gap with the East? A very, very long time, despite central government policies to ease the imbalance. "Judging from the whole situation, it is not possible for the Centre and West to catch up with the East even after another 20 years," said Mr Liang.