Over thirty Chinese legislators have proposed a law that would regulate the central government's plan to develop western China while protecting private and foreign investment.

They aim to prevent the excessive exploitation of natural resources and vicious competition between different regions.

The proposal has been submitted to the financial and economic committee of the National People's Congress during the top legislature's ongoing annual full session in Beijing.

Peng Fusheng, who spearheaded the motion, told China Daily Tuesday that competition was becoming more disorderly as different provincial administrations tried to outdo each other with favorable policies to woo capital.

They were also banking on heavy regional protection barriers to win profitable projects and stem the free flow of professionals and capital away from their areas, he said.

Peng, a legislator from Southwest China's Chongqing Municipality, said: "This will increase operating costs for investors and put a brake on the whole economic revival of the western belt."

Liu Weiping, a legislator from Northwest China's Qinghai Province, said: "Scrambling for favorable policies cannot work any more. What investors are concerned about is an equal footing for investment and operations in the western region and they need a law to protect their investment."

China's western region spans 12 provincial administrative regions, including Chongqing. It accounts for two-thirds of China's land and one-third of its population.

The area is now China's main economic priority as the central government has decided to reinvigorate the region with the massive "go-west" campaign.

Beijing has pumped more than 400 billion yuan (US$48.5 billion) into gargantuan projects on infrastructure, environmental protection and technology renovation over the last three years.

To fund the construction boom, the government will this year issue the bulk of a state treasury bond package worth 150 billion yuan ($18.2 billion).

Meanwhile, the central government is revising its income-tax policy, with the aim of bringing in more fiscal revenue to fund education and science in the western region.

Peng said: "But the western region should not rely solely on funding from the central authorities. The central government can help establish the infrastructure facilities but the ball is in the west's court in terms of seeking funds for industrial and business operations."

Lu Hao, a legislator from Northwest China's Gansu Province, said that private and foreign investment in the west was still in a mediocre state. He said reasons for this included the obscurity of the western region and concerns about fickle investment policies.

Liu said limited access to bank loans was another cause.

"In Qinghai, our banks only have a reserve of 40 billion yuan (US$48.5 billion), which is far from enough to feed large-scale private investment in the region, and local banks are still not that willing to offer loans to private entrepreneurs," he said.

However, legislators said China's entry into the World Trade Organization last year is pushing administrative officials in the western region to revise current laws and cut down the amount of red tape on external investment.

In Gansu, for example, 41 regulations were revised last year, more than 90 per cent of which were scrapped in line with WTO requirements.

Lu said: "The local government is starting to get serious about administrative reform."

He said his local government has issued more regulations to slash administrative charges and cut down on the amount of approval procedures needed. This was a good sign of a commitment to investors, he said.

(China Daily March 13, 2002)