The Chinese government has decided to throw some more money at Xinjiang. The latest reform package, announced at the end of last week, will see 19 of the country’s richer provinces donating around 10 billion yuan ($1.5 billion) to the province next year out of their budgets. This is around a quarter of Xinjiang’s current fiscal income, and a significant boost.
As Hu Jintao, the Chinese president, said: "We must clearly realise this: Just as in other parts of China, the chief source of social conflicts in Xinjiang is rooted in the imbalance between people’s [growing] desire for a better livelihood and the lack of development there." Last year, Xinjiang’s per capita GDP was $2,898 compared to a national average of $3,600.
You may or may not believe that economic development will bring peace to China’s frontier regions. The fact that livelihoods have been transformed in Tibet does not seem to have quelled a desire for greater autonomy.
Clearly, a major source of the bitterness felt by China’s ethnic populations is that they have become second-class citizens in their own land, with less freedom and fewer opportunities than their Han Chinese counterparts.
However, there was one ground-breaking reform in the Xinjiang package that could herald a dramatic change in China’s tax regime.
The taxes on oil and gas produced in Xinjiang will now be levied on price rather than on quantity. This could lead to a dramatic rise in local government revenues. In 2009, oil companies paid 28 yuan per ton of crude oil, and total tax revenues nationwide on crude oil came to 5.8 billion yuan. If the Xinjiang reform goes nationwide, Caixin, the Chinese magazine, reckons tax revenues from oil could rise to 47.3 billion yuan a year.
Since all oil and gas is judged to belong to local governments, they would get all the revenues from the program, in a huge transfer of wealth from the oil companies to municipalities. Which, given the perilous state of many local government accounts, and the determination of the government to cool the property market, may be just the boost needed.