CityReads│The Gift of Development?
The Gift of Development：Is China's Economic Assistance Good for Tibet's Sustainability?
China's economic assistance to Tibet since the 1980s is massive and committed. Is it effective and sustainable? Tibet sustained high levels of growth but it's trapped in an assistance-dependency pattern.
Jin, W. 2015. Tibet as Recipient of Assistance and Its Sustainable Development, China Policy Institute Policy Paper, No 9, accessed on Dec 4, 2015,https://www.nottingham.ac.uk/cpi/documents/policy-papers/cpi-policy-paper-2015-no-9-jin-wei-final-051015.pdf
Andrew M. Fischer, 2015. Fiscal Policy in the Tibet Autonomous Region under the Hu-Wen Administration: Effects of New Surge in State Subsidies after 2008, TIBET GOVERNANCE PROJECT RESEARCH BRIEF, accessed on Dec 4,2015, https://tibetgovernanceproject.files.wordpress.com/2015/03/andrew-fischer-brief1.pdf
Picture source: http://eng.tibet.cn/xzgk/201012/t20101216_784016.html
What is “Assistance to Tibet”
‘Pairing-up support’ is a specific Chinese policy model: developed provinces and cities are made responsible for providing economic support (finance, skilled workers and projects) to less developed areas with which they are paired. It was introduced and then implemented in the early 1960s. There are currently three main categories of ‘pairing-up support’: support in border areas (such as support of Tibet and Xinjiang); support in important projects (such as the resettlement of immigrants affected by the Three Gorges Project); and, support in regions seriously afflicted by natural calamities (such as reconstruction ofWenchuan and Yushu in the aftermath of earthquakes).
In the 1980s, the central government started to provide massive assistance to Tibet and 1994 witnessed the formation of assistance institutions which were characterized by region-based responsibility, ‘pairing-up support’ and periodic rotation. Since then, the central government has pooled nationwide resources to support the development of Tibet.
‘Pairing-up support’ for Tibet
Assistance to Tibet mainly consists of finance, projects, skilled workers and preferential policies.
First, over 90% of expenditure supporting the functioning of Tibet’s society and economy depends on the central government’s fiscal transfer payment. Between 1952 and 2013, the central government’s financial subsidies (a cumulative total 542.343 billion yuan) accounted for 91.45% of Tibet’s total financial revenues (a cumulative total 593.06 billion yuan). The central government’s financial subsidies account for 92.36% of Tibet’s total financial expenditures.
Second, the growth rate of the central government’s financial subsidies is higher than the growth rate of Tibet’s financial revenues.
The average annual growth rate of financial revenues between 1952 and 2013 was 14.69% for Tibet’s financial revenues (from 2.582 million yuan to 11.042 billion yuan) and 16.02% for the central government’s financial subsidies (from 10.466 million to 90.249 billion).
Third, Tibet’s economy also depends on the central government’s financial support. Tibet’s financial revenues were negative over the 21 years between 1968 and 1989. Apart from its governmental agencies, the survival of Tibet’s economic entities, such as factories, also relied on the central government’s financial support. For example, in the period 1967-1970, the proportion of the central government’s financial subsidies to Tibet’s total financial expenditures were 119.3%, 176.35%, 160.28% and 172.84% respectively.
After the Second Tibet Work Symposium in 1984, project assistance became a new method to support the development of Tibet. Project assistance refers to specific financial and project construction assistance to designated infrastructure and social development projects.
With respect to sources, there were two categories of assistance projects in Tibet between 1984 and 2013: First is central government assistance projects. A number of large projects were approved by the central government in a series of “Tibet Work Symposium” and “Five Year Plan” projects. So far there have been 678 projects, involving a total input of 607.085 billion yuan (see Table 1). Second, Provinces and Cities’ Assistance Projects A number of assistance projects are supported by provinces and cities, state agencies and stateowned enterprises involved in the ‘pairing-up support’ programme in accordance with Tibet’s needs. Up until 2013, these participants had, in total, carried out 7,615 assistance projects and provided 26 billion yuan in support of Tibet.
Table 1 The Central Government’s Programmes in Support of Tibet, 1984-2014
Tibet Is Trapped in an Assistance-Dependency Pattern
The enormous assistance of the past three decades has failed to pull Tibet out of the bottom in the national ranking. In 2010, some of Tibet’s indices were at the bottom of national ranking or behind most of its counterparts: Tibet’s human development index was 0.569 compared with the national average of 0.693; Tibet’s average education level was 4.8 years in comparison with the national average of 8.2 years; Tibet’s GDP per capita was 16,875 yuan, ranking 27th in China (average 29,992 yuan) .
Tibet is dependent on assistance, both in finance and investment.
First, Tibet has the lowest financial self-sufficiency rate in China. In 2013, Tibet’s financial self-sufficiency rate was 10.52%, ranking last in China.
Second, Tibet’s average financial expenditure is the highest in China. In 2013, Tibet’s per capita financial expenditure was 32,509 yuan, higher than the national average (8,797.94 yuan), making it the highest among the regions of China.
Third, Tibet Still Lacks Self-development Capability. Between 1952 and 2013, Tibet’s aggregate financial self-sufficiency rate was 8.37%.
Investment increases dependence. First, investment mainly depends on the central government. Up until 2013, 56.59% of Tibet’s investment in fixed assets was still state budgetary appropriation, far higher than the national average of 4.53%, and occupying first place in the national ranking. By contrast, the proportions of domestic loans, foreign investment and self-raised funds were quite low. Second, economic growth is driven by investment GDP growth rate was high, but the share of local financial revenues in GDP was very low. Between 2001 and 2013, Tibet’s growth rate was 12.36% compared to the national average of 10.03%. Notwithstanding this, local financial revenues only accounted for 7% of Tibet’s GDP.
Both the growth of investment in fixed assets and the growth of investment exceed the growth of
GDP. Between 1959 and 2013, the average annual growth rate of Tibet’s investment in fixed assets was 15.78% and the average annual growth rate of GDP was 11.81%. Between 2003 and 2013,Tibet’s investment in fixed assets had consistently accounted for
more than 75% of GDP. In the period 2012-2013, the proportion even exceeded 100%: the amount of investment in fixed assets exceeded GDP.
It has been increasingly apparent in recent years that Tibet’s economic growth is driven by investment which comes from the central government’s financial transfer payment and support of inland provinces and cities .
Third, economic growth rate is lower than the amount of capital input. As shown by several key economic indices from 1959 to 2013, there was a wide gap between economic input and economic output (see Table ).
Tibet’s per capita GDP increased by a factor of 92; average financial revenue increased by a factor of 13; average local financial expenditure increased by a factor of almost 590. Average financial subsidies increased by a factor of 103; average investment in fixed assets increased by a factor of 1,246.
Table2 Tibet’s Main Economic Indices Growth
More assistance brings more poverty. Based on an analysis of the data, in spite of the growth of Tibet’s urban and rural residents’ absolute income, there appears to be “relative poverty”, demonstrating that Tibet’s per capita income is increasingly lower than the national average, which is a strange phenomenon.
Urban residents’ disposable per capita income has become increasingly low.In 1987, Tibet’s urban residents’ disposable per capita income was 137% of the national average. The massive ‘pairing-up support’, which started in 1994, did not alter the downward trend of urban residents’ per capita income. There has been an increasingly wide gap between Tibet and the national average since 2003. In 2013, Tibet’s urban disposable per capita income was 74% of the national average (Figure 1). 2. Rural residents’ per capita annual net income decreases rather than increases Since the second half of the 1970s, the per capita net income of Tibet’s farmers and herdsmen has been consistently lower than the national average. The gap has become increasingly wide since 1980. In 2013, Tibet’s average amounted to only 74% of the national average.
Figure 1 Urban Residents’ Disposable per Capita Income and Rural Residents’ per Capita Net Income, Tibet and China
A significant proportion of the government expenditure is spent on imports from abroad and elsewhere in the PRC. Subsidies have been disconnected from living standards of the majority of the permanent resident population (which is primarily Tibetan).
The TAR is therefore exceptional not only because of the extraordinary rates of subsidies flowing to the region, but also because of the sheer disassociation between rapid growth in investment, construction and tertiary services on one hand, and sluggish local productive activities on the other.
That said, the minor portion of subsidies that has managed to reach Tibetan rural areas has been large enough,given the overall flow, to induce rising incomes and a notable degree of local socio-economic transformation. The recent surge in intensive subsidization has thereby exacerbated the dependence of local Tibetan livelihoods on these state strategies.
What Contributes to Tibet’s Dependence on Assistance?
China’s five ethnic minority autonomous regions and three multinational provinces, including Qinghai, Yunnan and Guizhou, share a similar historical background and the same policies. However, only Tibet’s finance revenues and social development funds are mostly supported by financial subsidies from the central government.
In 2010, direct budgetary subsidies from the central government to the local government of the TAR exceeded 100 percent of the TAR gross domestic product (GDP) for the first time. Thereafter, subsidization continued to surge, reaching almost 116 percent of GDP by 2012.
By comparison, budgetary subsidies to the government in Qinghai reached 44 percent of GDP. In Guizhou, the poorest province of China, subsidies reached 16 percent, while in Gansu, the second poorest, they reached approximately 18 percent.
Figure 2 Net subsidies as a proportion of GDP,1990-2012(Fischer, 2015)
During the period 1952 to 2013, the central government subsidized the majority of Tibet’s finance for 29 years and subsidized more than 100% of Tibet’s finance for 33 years. The path from subsidizing deficiency to subsidizing surplus symbolizes the weakening or even shrinkage of a region’s self-development capability.
With regard to formation of Tibet’s dependence on assistance, several reasons listed below merit special attention: simplification of Tibet’s particularities; blind equation of modernization with industrialization; continuation of planned economy; strengthen dependence on investment
First is the simplification of Tibet’s particularities. The central government seeks “unification” in economic development and therefore ignores “heterogeneity” or the particularities of Tibet’s economic development.
The autonomous ethnic group is a high proportion of Tibet’s population According to the 2010 Chinese Census, Tibetans made up 90.48% of Tibet’s total population (3.0022 million). There are huge differences between Tibet and inland regions with respect to language, religious belief, values and mode of production.
Second, Tibet’s geographical location is on the periphery of China, thereby making it difficult for economic trickle-down to have an impact. Tibet is surrounded by massive mountain ranges, such as the Himalayan mountain range, the Karakoram-Tanggula mountain range and the Hengduan mountain range. Its high altitude, cold climate, and enormous desert make Tibet an isolated region, restricting its development as a result. The four provinces adjacent to Tibet are poor regions of China. In addition, the countries adjacent to Tibet, such as India, Nepal, Bhutan and Burma, are located in poorer areas of South Asia. Hence, Tibet’s economic development is barely affected by the economic development of adjacent regions.
Third, the central government lacks comprehensive understanding of Tibet’s particularities. In the 1950s and the 1960s, the central government emphasized the specifics of work in Tibet. After the 1980s, the central government paid less attention to Tibet’s uniqueness. Its adoption of a “convergence” mentality and catch-up growth model serve to solidify Tibet’s dependence on assistance.
Second is the blind equation of modernization with industrialization. Since its foundation, the PRC has focused on industrialization so as to achieve national development and prosperity. Between 1959 and 1965, Tibet started to develop its basic industries. The history of Tibet’s industrial development is mostly a history of losses except for the initial stage of development.
Since 1963, enterprises have continued to suffer losses, exerting negative influence on Tibet’s financial revenues which were always negative between 1968 and 1988. Tibet’s enterprise losses have continued to the present day.In 2013, the amount of losses was far more than profits. It appears that the greater the development, the larger losses.
Tibet has chosen an industrial development strategy, but failed to prevent its economy from relying on a kind of “blood transfusion” from its donors. As a result, it falls into a continuing dependency on the central government’s financial subsidizes.
Third is the continuation of planned economy. The central government’s top-down intensive financial and project assistance have further strengthened an operation mode with the characteristics of planned economy and created low or even negative economic benefits. As a consequence, the central government’s tremendous investment cannot stimulate the momentum of Tibet’s economic development.
First, it solidified planned economy. In 2013, state-owned enterprises accounted for 21.94% of the total number of Tibetan enterprises, far higher than the national average of 1.94%. The contribution of profit and tax of Tibet’s stateowned enterprises only accounted for 0.17% of the total, lower than the national average (6.24%). Of Tibet’s investment in fixed assets, 73.4% was to the state-owned economy, higher than the national average (24.61%). 57% of Tibet’s investment in fixed assets came from state budgetary appropriation compared to a national average of 5%.
Second, planned economy with “no plan”. Since 1980, assistance has come from many different agencies and relevant policies have come from different agencies. There have been 17 provinces and cities, 17 state-owned enterprises and 59 central government institutions providing ‘pairing-up support’ to Tibet. Because there are no coordinating agencies, it is impossible to accomplish thorough consideration and integrated planning, leading to a situation of “no plan”.
Fourth is strengthening dependence on investment. The central government helps Tibet to construct a variety of projects in order to “…initiate energy and momentum of Tibet’s self-development and assist Tibet’s social and economic development to gradually step in the virtuous circle”. Nonetheless, it is hard to achieve the defined aim by making use of massive assistance to help develop Tibet.
First, most assistance projects cannot make money. There are four main types of assistance projects: · social development projects, urban construction projects and grassroots government construction projects belonging to social welfare projects; projects aiming to improve living and production standards belonging to one-time investment welfare projects; infrastructure projects are costly and lay foundation for improvement of living standards and production; Projects should be drivers of economic development and source of money, but usually they make few profits. Most suffer losses or even bankruptcy. All assistance projects still have to rely on financial appropriation after completing construction. The more projects are completed, the heavier is the financial burden.
The continuing investment in assistance projects makes increasing demands for finance and the national financial burden increasingly heavy. At present, a circle of investment dependence exists: project assistance → improvement of living standards in Tibet → financial support to assistance projects by the central government and regions involved in pairing-up support”. This circle of dependence creates an “assistance black hole”.
Furthermore, assistance creates new gaps. There have been stark differences among seven regions of Tibet with regard to the massive project assistance since 1994. In the past 23 years of ‘pairing-up support’, Linzhi region has been the largest beneficiary with a per capita project assistance of 0.538 billion yuan. By contrast, Changdu region has benefited the least with a per capita project assistance of 0.056 billion yuan - 10% of the Linzhi region. Continued increases in assistance are required to narrow the increasing gap between regions.
Conclusions
First, assistance policy contributes to Tibet’s economic growth and social development. TAR Sustained high levels of growth in the past decade.The TAR was the only provincial unit of the PRC to have met its economic growth target in 2014.The TAR economy grew by 12%, precisely on the target set by the local government.
Second, Tibet has sunk into increasingly serious dependency on assistance. Tibet has formed full-scale institutionalized dependency on central government support, project assistance and social management. In recent years, the ever increasing assistance has given rise to the embarrassing situation of more development alongside a poorer society, and more growth bringing greater losses. If current approaches continue, dependence will persist. Economic growth has been less than the increase in government subsidies, especially since 2008.
Third, the assistance system is in urgent need of innovation. The central government has failed to evaluate the benefits and reflect upon traditional assistance approaches over the last three decades, demonstrating a tactical dependence on assistance. The central government, governments in the border area, and scholars should pay more attention to assistance dependency and the negative effects of assistance. Furthermore, they should innovate the assistance system by formulating assistance laws, establishing specific coordinating agencies, performing assistance evaluations, and setting up interactive mechanisms between assistance providers and assistance recipients.
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