The biggest winners from China's €400bn economic stimulus are emerging more than 1,000km from Shanghai in the factories and shops of Chengdu and Xi'an.
"Now it's our turn" for development, says Li Chunjie, a 63-year-old retired public servant surveying a construction plot for the future metro system of Xi'an, the biggest city in central China. Next to the site: the Chang An Metropolis Centre, featuring designer boutiques. "Look at all the work they're doing on the city now," he says.
As China's communist regime celebrates its 60th anniversary, spending aimed at combating the slowest national growth in almost a decade has sparked an investment boom in central and western provinces. That's increasing opportunities for jobs and income gains for 700 million people in an area from Anhui, upriver from Shanghai, to Xinjiang on the Pakistani frontier.
The global recession and unprecedented government investment have reversed a three-decade trend of China's coastal export centres leading its expansion, job creation and income gains. The west's 9.3% annual growth pace in the first half of 2009 outstripped a 6.5% rate for the seaboard.
"China's growth is shifting west," says Nick Lord, a banking analyst in Hong Kong at Macquarie Securities, a unit of Australia's biggest investment bank. Government spending in China's interior increased 47% in the first quarter from a year earlier, outpacing the 33% rise in the east, Macquarie estimates.
The investment in transport and buildings means that West China Cement's Lantian Yaobai cement factory, outside Xi'an, operates 24 hours a day, with no stops for holidays. The firm was lately named by Forbes magazine as one of Asia's 200 small- to medium-sized companies with the greatest opportunities for growth.
"What was bad for the world was good for us and China's inland," says Low Poling, finance director at the company, whose profit more than doubled this year to 186.9 million yuan (€19m) compared to 2008. "This is just the starting point."
As global trade flows declined, China suffered a 10-month slide in exports, damping growth in the east and pulling the nationwide expansion rate down to 6.1% in the first quarter, the slowest pace in almost a decade. The government is using its four trillion yuan stimulus and record bank lending to build railways, roads and power plants, mostly in the less-developed west and centre of the country.
The accelerating development lured JPMorgan Chase to open its first branch in western China last month, in Chengdu, Sichuan. The second-biggest US bank was drawn to the area's "tremendous industrial base," according to Lisa Robins, who leads the bank's Chinese branch-expansion efforts.
"Sooner than five years from now, the centre of China will have a thriving financial centre supporting the manufacturing sector and other industries," says Robins. "Chengdu and Sichuan is just an amazing booming economy that is the gateway to the southwest."
Businesses are counting on the government investments and spurt in growth to generate a sustained expansion and advance in household purchasing power after the fiscal impetus fades in 2010.
Great Wall Motor Co, China's largest maker of pickup trucks, is well-placed to capitalise on rising consumption because as much as 70% of its sales come from central and western China, says Hou Yankun, an analyst with Nomura Holdings in Hong Kong. Great Wall's stock price will rise to HK$10 (€0.90) per share within 12 months, Hou forecasts, driven by rising incomes that are making pickups more affordable.
The company "is targeted to the rural area in China, and the major growth for the pickup sector in the future will be in the countryside", added Jack Yeung, an analyst in Hong Kong at BNP Paribas Securities Asia, a unit of France's biggest bank. He estimates the stock will reach HK$9.75 within a year.
Parkson Retail Group is another company with its sights on the interior. Two of the three shops Parkson opened in 2008 were located in Guizhou, according to the Beijing-based company's website. The firm's shares may climb to HK$14.64 within a year, says Randy Zhou, an analyst in Shanghai at UBS, the biggest Swiss bank by assets.
Western and central China together are home to more than the combined populations of the US, Brazil and Mexico. Four cities have more people than London's 7.4 million. Development in the region has lagged behind the east because China's export-led growth strategy favoured investment on the coast.
Gross domestic product per capita in the east is $5,791, more than twice that in the central and western regions, according to China International Capital, an investment bank that's 34% owned by New York-based Morgan Stanley, the sixth-biggest US bank by assets.
Shanghai's per-capita GDP, the nation's highest, is $10,500, compared with $1,270 in the western province of Guizhou, the lowest, according to data prepared by Beijing-based CICC.
Income disparities have contributed to social unrest, along with ethnic tensions in areas with minority populations such as Xinjiang in western China. Five people died in early September during protests in Urumqi, the Xinjiang capital, where ethnic Uighurs and Han Chinese are at odds following clashes in July that led to the deaths of almost 200 people.
China faces an "arduous task" of maintaining steady growth and a stable society, President Hu Jintao said last month. The national job market remains grim, Yin Weimin, the minister of human resources and social security, said.
As many as 41 million Chinese workers have lost their jobs during the global financial crisis, and 23 million remain out of work, according to the Chinese Academy of Social Sciences, a government-affiliated research institute.
"To maintain stability in this country, the government must develop the inland," says West China Cement's Low, a 34-year-old drawn to China's opportunity from her native Malaysia.
Growth in lending helped drive investment in factories and properties higher by 50% in the west and 39% in the central region in the first eight months of 2009 compared to a year earlier, according to the government's central planning agency. Investment in the east rose 27%.
"Xi'an's development hasn't been as fast as the eastern and southern parts of China, but we are catching up, and the space for more development here is much greater than for the coastal cities," says 31-year-old Xi'an resident Zhang Rong. "Life has gotten much better here," Zhang says as he shops in Xi'an for an LCD television with his wife for their new apartment. (Bloomberg)