West side story

How a single company came to account for 16% of Xinjiang’s GDP

West side story

Views on the legacy of Wang Zhen, one of the ‘Eight Immortals’ of the Chinese Communist Party, are as divided as the races of Xinjiang’s multi-ethnic population.

Many Han Chinese in Xinjiang see the late general as a national hero for leading the People’s Liberation Army into Xinjiang in 1949, thereby securing its resources during the chaos of the post-war years.

The native Uighurs, on the other hand, largely remember Wang as a killer, and blame his arrival for ethnic tensions in the province today. (Xinjiang is categorised as one of China’s autonomous regions, but if it was a province it would be the largest. Chinese emperors have laid claim to the region for centuries, although it has a history of being restive and even declared itself briefly independent in 1933 as the East Turkistan Republic.)

Despite his divided reputation, most people won’t be aware that Wang was also the most prolific matchmaker in the history of modern China.

How so? Some history is necessary.

In 1949 Mao Zedong deployed 100,000 PLA soldiers to Xinjiang only to later demobilise them on condition they remain in the territory and be ready for call-up. The strategy was borrowed from imperial times. Troops sent to secure the farthest reaches of the Chinese empire were occasionally left to fend for themselves in frontier defence, as part of the never-ending effort to keep the foreign barbarians out of Han China. And in the new People’s Republic Wang’s revolution-minded troops were ready to make similar sacrifices. But there was one common concern: they were nearly all single. Promising his troops that no one would die a bachelor, Wang campaigned to solicit tens of thousands of young girls from the country’s eastern provinces to join the PLA in Xinjiang.

“The security of China’s western half was hinged on the marital issue of 100,000 PLA soldiers,” recounts the News of the CPC, an online Party journal, which estimates that the number of women in the ranks in Xinjiang jumped from 1,127 in 1949 to more than 40,000 in 1954.

A massive betrothal programme had begun in earnest, and so began the peopling of Xinjiang with Han Chinese (an act that had important long-range ramifications – they now make up 40% of the local population).

Another upshot of Wang’s policy: in 1954, the Xinjiang Production and Construction Corps (XPCC) was established to employ his demobilised troops.

Today, the quasi-military XPCC has nearly 2.5 million people under its charge. Describing itself as a “special social unit”, it has administrative and judicial authority (albeit not total) over 70,000 square kilometres of land, including 174 giant farms and hundreds of schools and hospitals. Reporting directly to the State Council, XPCC has the same economic status as the provincial Xinjiang government, highly unusual for what is – in effect – a corporation.

Although the XPCC and some of its prefectural units still carry the military structure of “divisions” and “regiments”, it has cut most of its historical ties to the PLA. Despite continuing to maintain its own militia, the XPCC has also headed in a more commercial direction, and is also known as the China Xinjian Group. With 13 listed firms under its control, by last year it had invested Rmb104 billion ($16.8 billion) in fixed assets (such as infrastructure and apartment blocks). That was up considerably from the Rmb24 billion in assets held just five years ago. The growth spurt was hastened by Beijing’s desire to spread the fruits of economic growth further into China’s poorer hinterland, especially after the 2009 Urumqi riots (which killed nearly 200 people, see WiC24). The central government then unveiled an ambitious support package to foster faster economic development in Xinjiang. According to the Beijing News, the central government has advanced a further annual subsidy of Rmb2 billion to XPCC.

The firm’s first ever business delegation arrived in Hong Kong this week to lure more offshore investments. Marketing 144 projects in areas like mining and food processing, the promotional information revealed that the XPCC accounts for 15.9% of Xinjiang’s GDP and has a goal of upping that to 20% by 2020.

It isn’t the only state giant to benefit from its location in China’s far West. Bank of Kunlun, the banking unit of state-owned heavyweight CNPC, is another rapidly-advancing but little-known institution owing much to its strategic presence in Xinjiang (for our first mention of the little-known lender, see WiC45).

In 2008 Kunlun had just Rmb3.8 billion of assets. But according to its most recent annual report last month its total assets have shot up to Rmb185 billion. A 61% growth in earnings last year (to Rmb2.3 billion) also ranks Kunlun as China’s fastest-growing bank. More than 80% of its revenue was derived from Xinjiang, where Kunlun is financing its parent firm’s oil businesses, as well as providing financial services for the likes of XPCC. The 21CN Business Herald said Kunlun is quickly becoming a “first-tier municipal bank”.

Kunlun also makes CNPC (better known internationally by the name of its listed subsidiary PetroChina) unique among the world’s oil majors. Unlike its domestic rivals Sinopec and CNOOC, PetroChina is able to finance its expansion via its own deposit-taking institution.

And it’s not only Beijing-backed investors who are interested in Xinjiang. A fortnight ago, Gary Locke, the American ambassador led a trade delegation to Urumqi, seeking business opportunities for US firms in energy and rail projects. The China Daily said Locke was the first US ambassador to visit the region in this capacity.

In spite of all this economic activity (some might say even because of it) ethnic tensions between the Han and Uighurs never seem too far from the surface. On the same day that Locke arrived in Urumqi, a clash between authorities and members of Xinjiang’s native population left 21 people dead.

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