World Economy

Tibet Can’t Kick Subsidy Habit

Tibet Can’t Kick Subsidy HabitTibet Can’t Kick Subsidy Habit

As China’s economy settles into slower growth, President Xi Jinping has been touting the benefits of what he calls the “new normal,” including a more equitable distribution of income and less pollution. But one region isn’t ready to give up on double-digit growth. “We must grow faster,” says Deng Xiaogang, executive vice chairman of the Tibet Autonomous Region, one of the poorest, least industrialized areas in the People’s Republic. “There is a gap between us and the rest of the country.”

For the past two decades, Tibet’s economy has outperformed China as a whole. Its growth has averaged 12.4% annually over that period, compared with a national average of about 10% and Beijing’s 2015 target of 7%. But these statistics are misleading: The Tibetan miracle is the result of massive subsidies that have done little to foster productive enterprises in the territory of 3.15 million people, Bloomberg reported.

Since China annexed Tibet in 1951 and its religious and political leader, the Dalai Lama, fled into exile in India, the central government has sent more than 648 billion yuan ($100 billion) to the region. Beijing’s subsidies have funded massive transportation and power projects, including a 156-mile-long rail link from Tibet’s capital, Lhasa, to Shigatse, the region’s second-largest city, completed last year at a cost of 13.3 billion yuan. The 9.6 billion-yuan Zangmu hydropower station, on the Yarlung Tsangpo River, became fully operational in October.

Andrew Fischer, a professor at the International Institute of Social Studies in The Hague and an expert on Tibet, says subsidies from Beijing dwarf the local economy, amounting to about 112% of economic output, which was 80.8 billion yuan in 2013. Fischer says it’s “more than one would see in a highly aid-dependent African country.”

 Chinese Investments

The region’s ethnic Tibetan residents often derive little direct benefit from the investments. Almost all the materials for the infrastructure projects are imported from the rest of the People’s Republic, often along with work crews. “A lot of the construction is not oriented towards building a productive, local economy,” says Fischer. Instead, Beijing’s aim is to tether Tibet tightly to the economies of China’s provinces.

There has been a huge influx of Han—the majority ethnic group in China—into the region seeking to set up businesses. Beijing’s policymakers have paired 18 provinces and cities in China with counties and towns in Tibet. The Chinese counterparts have been ordered to build schools, set up businesses, and send officials to work in Tibet for stints of up to three years. China’s biggest state enterprises, including Sinopec, China National Gold Group, and PetroChina, have also been instructed to invest in Tibet.

One side effect of Beijing’s subsidize-and-invest policy is that Tibet is afflicted by a version of the profligacy that helped lead to China’s own slowdown. The region is plagued by inefficient and money-losing state-owned enterprises. As of 2013, they accounted for about 22% of all companies in Tibet, compared with 2% in all of China, according to a recent research paper written by Jin Wei, an expert on China’s ethnic minority policy at the Central Party School in Beijing.

The state-run companies in construction, mining, and the tourism industry also exacerbate ethnic tensions. They are not big employers of Tibetans, the majority of whom make their living as herders and farmers.