The Chinese government has approved plans for a new economic zone in the southwest to boost the economy of the inner western areas and promote balanced development among regions.

Known as the Cheng-Yu (Chengdu-Chongqing) economic zone, the planned area will include 31 districts and counties in Chongqing Municipality and 15 cities in Sichuan Province, according to the blueprint approved by the State Council, China's Cabinet, at a meeting held on Tuesday.

Covering an area of over 200,000 square kilometers with a population of about 100 million, the economic zone is meant to be a key economic center in western China.

During the last three decades, China's coastal areas, including the Pearl River Delta, Yangtze River Delta and Bohai Bay, have witnessed significant economic growth, causing authorities to attach more importance to developing western areas, which covers 71 percent of China's territory, said Xu Fengxian, a senior researcher at the Economic Research Institute of the Chinese Academy of Social Sciences.

"Sichuan Province generated a GDP volume of more than 1 trillion yuan (152.23 billion U.S. dollars) last year, and Chongqing is the only municipality in western China.

"The two areas have been leading the development of the inner western region in terms of economy, technology, education and infrastructure."

Yang Qingyu, a deputy to the National People's Congress and the director of Chongqing Municipal Development and Reform Commission, said that Chongqing Municipality and Chengdu City, the capital of Sichuan Province, are the main economies within the western interior. He adds that the construction of the economic zone, with the two cities as its economic centers, can help integrate resources for manpower, capital, technology, industries and the natural reserves of the area as a whole.

The Cheng-Yu economic zone is also expected to become a major modern industrial base for the entire country by 2015, according to the State Council meeting.

Tang Jiqiang, the director of the development planning bureau of the Chengdu High-tech Industrial Zone, said that the economic zone already has a cluster of both traditional and modern industries such as electronic information, equipment and automobile manufacturing, chemical engineering, petrochemicals, and new energy.

Xu Fengxian said, "On the one hand, the development of the modern industries in the economic zone depends on the upgrading of the existing industries in the area, while on the other, it depends on developing the industries shifted from the eastern areas and foreign countries."

During the past few years, China's industries in the coastal areas have been shifting inland, driven by the rising labor cost on the coast and the country's strategy to open its interior.

Yang Qingyu said that the construction of the new economic zone would benefit 83 important projects in Chongqing Municipality, including wind power, railway, Changan automobile, and Foxconn chip projects.

A total of 160 Fortune 500 enterprises have set up branches in Sichuan Province. The Chengdu Hi-Tech Comprehensive Bonded Zone, which was approved by the government last month, already is hosting over 20 companies such as Intel, Foxconn, Dell, and Texas Instruments. With an investment of 2.23 billion U.S. dollars, the bonded zone is expected to become an IT industry cluster with a production value of 500 billion yuan.

"The central government is expected to adopt a set of preferential policies in terms of government investment, financial transfer payment systems and tax collection," said Xu Fengxian, "I believe that local governments will also take up effective measures to achieve the targets of the program."