Given the ethnic and geographical nature of violence in southern Xinjiang, the centerpiece of the state\u2019s efforts to reform southern Xinjiang have been focused on Kashgar, the largest town in the southern region. While domestic engagement is surely the key to prosperity, the style of state-directed investment must change.<\/p>\n
China and Pakistan: the world\u2019s highest border crossing. Photo by Pamir Times<\/p>\n Kashgar, known in recent times as a city of mainly historical and cultural significance, has become more and more politically important over the last ten years. Indeed, the conditions in southern Xinjiang have implications for China\u2019s opening to Central and South Asia. Announced<\/a> in 2011 as part of the Silk Road Economic Belt initiative, Kashgar has been partnered with Shenzhen to become China\u2019s next Special Economic Zone (SEZ). With visions of \u2018Asian tiger\u2019-style transformation<\/a>, the goal is to make Kashgar the base for China\u2019s expanding regional economic engagement in the hope that greater economic opportunity will reduce what China calls \u2018extremism and separatist sentiments\u2019.<\/p>\n While much of China\u2019s trade with Central Asia (along with most road, rail, and pipeline connections) runs through Northern Xinjiang, the Chinese government is busily working to exploit the growth potential of the southern commodity trade with Central Asia through Kyrgyzstan. Large marketplaces such as Qorasuv and Dordoi in Kyrgyzstan rely heavily on the re-export of cheap Chinese commodities. The extent of this reliance became evident<\/a> in Dordoi earlier this year when annual turnover, estimated at over $2.9 billion USD, dropped drastically in response to Kazakhstan raised its import tariffs as part of its transition into Russia\u2019s Customs Union. As for imports into southern Xinjiang, Kashgar and the Naryn Free Economic Zone in Kyrgyzstan signed an agreement in April<\/a> 2014 on trade cooperation that included the expansion of places for Kyrgyz entrepreneurs in Kashgar markets. But the westward flow of cheap Chinese commodities, depending as it does on favorable tariff rates and economic inequality between China and Central Asia, is not a viable model for sustainable economic development.<\/p>\n More promising for Kashgar is its status as the foundation of southern Xinjiang\u2019s trade with Pakistan. Indeed, last year the China Overseas Port Holding Company formally took over operational responsibility for Pakistan\u2019s Gwadar port, which was completed<\/a> in 2007. Every day in spring and summer, buses leave Kashgar International Bus Terminal and head along the Karakoram Highway into the mountains to Sost, the first town after the Sino-Pakistan border. From Sost, Chinese construction workers are paving a 335 kilometer road to Gilgit, at which point Chinese commodities will take the Indus Highway south west to Balochistan\u2019s Gwadar. The journey is about 1,500 kilometers total, compared<\/a> to a distance of around 3,000 kilometers from Kashgar to China\u2019s rich coastal east.<\/p>\n While much of China\u2019s trade with Central Asia (along with most road, rail, and pipeline connections) runs through Northern Xinjiang, the Chinese government is busily working to exploit the growth potential of the southern commodity trade with Central Asia through Kyrgyzstan. Large marketplaces such as Qorasuv and Dordoi in Kyrgyzstan rely heavily on the re-export of cheap Chinese commodities. The extent of this reliance became evident<\/a> in Dordoi earlier this year when annual turnover, estimated at over $2.9 billion USD, dropped drastically in response to Kazakhstan raised its import tariffs as part of its transition into Russia\u2019s Customs Union. As for imports into southern Xinjiang, Kashgar and the Naryn Free Economic Zone in Kyrgyzstan signed an agreement in April<\/a> 2014 on trade cooperation that included the expansion of places for Kyrgyz entrepreneurs in Kashgar markets. Ultimately, with 70% of Xinjiang\u2019s exports to Central Asia originating <\/a>in other provinces, southern Xinjiang must look elsewhere for near term economic assistance.<\/p>\n Border controls, regional political disunity, and Central Asian markets that rely heavily on foreign remittances will further limit the potential for Central Asian development to bring substantive economic opportunities to southern Xinjiang in a manner that may enhance the lives of local Uyghur communities. Fortunately, when it comes to Xinjiang\u2019s development, Beijing cannot be accused of inaction. To facilitate Kashgar\u2019s transition from a fringe of the nation to bustling metropolis, the central government has partnered the city with Guangdong officials who will model the new Kashgar on Shenzhen\u2019s successful SEZ, including an initial investment of RMB 1.14 billion<\/a> (USD 186 million) in advance of the region\u2019s 12th<\/sup> Five-Year Plan (2011-2015). The project, set to come into effect in 2011, would see Guangdong invest<\/a> RMB 9.6 billion (USD $1.06 billion) in Kashgar\u2019s infrastructure and social welfare by 2020. It is unclear, however, what the specifics of this plan are, or to what extent it has already been implemented.<\/p>\n Demolition in Kashgar\u2019s old city is ongoing. Photo by Sue Anne Tay<\/em><\/p>\n<\/div>\n The government is not only throwing money at Xinjiang\u2019s problems. Policy changes, less publicized than large-scale investment deals, have also been employed. National tax reforms exempt<\/a> Xinjiang companies from paying corporate income tax for their first two years after establishment, followed by a 50% discount for the following three years for companies founded between 2010 and 2020. A nationwide \u201cpartner assistance program\u201d for each region of Xinjiang has been initiated. The same program which paired Guangdong and Shenzhen with Kashgar requires all 19 of China\u2019s provinces and municipalities to contribute<\/a> 0.3% to 0.6% of their fiscal revenue between 2011 and 2020 to support the development of the whole region.<\/p>\n Evidently, these efforts are not sufficient. While fractured, unevenly developed neighbors in Central Asia make tutelage by China\u2019s eastern provinces Kashgar\u2019s best hope for economic opportunity, the nature of the government\u2019s investment approach towards south Xinjiang must change. As long as rich eastern coastal areas are footing the bill, economic priorities in southern Xinjiang will be determined by eastern interests, not local interests.<\/p>\n Though there is little transparency on the destination of profits from natural resources mined in Xinjiang, financial services, partner assistance programs, and public constructions projects, it is clear this money is not being reinvested locally, at least not in southern Xinjiang. Despite the billions of yuan invested domestically, the development indicators of southern Xinjiang are a fraction of what they are in the north. The 2013 GDP of Kashgar<\/a> was RMB 61.73 billion, with a per capita annual GDP of RMB 15,016 (around USD $2,400); Hotan<\/a>, another southern city, had a GDP of just RMB 17.1 billion for a per capita annual GDP of RMB 7,994 (USD $1,300). This pales in comparison to Urumqi<\/a> (RMB 240 billion GDP for a per capita annual GDP of USD $10,000), Yili<\/a> (per capita GDP of USD $5,000), or oil-producing Karamay<\/a> (annual per capita GDP of USD $36,600).<\/p>\n The lagging GDP of southern Xinjiang may be due in part to the concentration of investment in the formal sector of the local economy, including natural resource extraction, financial services, and urbanization. Indeed, statistical analysis reveals that \u2018market segmentation<\/a>\u2019 between formal and informal economies is the greatest source of income inequality between local Uyghurs and Han migrants to Urumqi, the only city for which such data is available. While exact definitions vary, the difference between the formal and informal economies is generally one of regulation and oversight. Formal sector positions, both in private and state-owned enterprises, are officially acknowledged by the state and subject to review, regulation, and taxation. The informal economy, therefore, exists outside government affirmative action, workers\u2019 rights, and taxation laws. Such positions may include agriculture work, street vending, small-scale manufacturing and day labor.<\/p>\n Despite being more educated (partly through said affirmative action policies available in the formal economy) on average than Han migrants, local Uyghurs were paid 29% less and had less access to formal sector positions. This drove more Uyghurs into the informal sector, which lacks outside investment. The prospects for Uyghurs living in southern Xinjiang, where infrastructure is limited, international trade tightly controlled, and Han cadres parachuted<\/a> into local government positions, are much less conducive to minority growth and local economic empowerment.<\/p>\n![\"khunjerab-pass-4-450x336\"](\"http:\/\/chinaincentralasia.com\/wp-content\/uploads\/2014\/10\/khunjerab-pass-4-450x336.jpg\")
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