Domestic Westward Expansion in Mainland China Causes , Effects , Foreign Investment , and Local Regulations

Kunming City, the capital of Yunnan Province, is known through the People’s Republic of China (hereinafter “PRC”) for its beautiful gardens and scenery. Recently, tourists are not the only people visiting this Southwestern city. Kunming is undergoing rapid expansion as companies from throughout the PRC and abroad enter the local economy. This relatively small capital now has Apple Stores, Louis Vuitton, and Starbucks. Surprisingly, most of the foreign luxury car companies have also entered Kunming. Ferraris, Lamborghinis, and Mercedes are now a common sight in the PRC’s “Spring City.”


Introduction
Kunming City, the capital of Yunnan Province, is known through the People's Republic of China (hereinafter "PRC") for its beautiful gardens and scenery. 1 Recently, tourists are not the only people visiting this Southwestern city.Kunming is undergoing rapid expansion as companies from throughout the PRC and abroad enter the local economy. 2This relatively small capital now has Apple Stores, Louis Vuitton, and Starbucks. 3Surprisingly, most of the foreign luxury car companies have also entered Kunming.Ferraris, Lamborghinis, and Mercedes are now a common sight in the PRC's "Spring City." 4 This article discusses domestic westward economic expansion in the PRC.In the context of the PRC's progress towards a developed and globalized society, this article focuses on foreign participation and examines the effects of expansion on developing areas in Western China and more developed areas in Eastern China.This article also explores local regulations that affect foreign investment and local expansion.This article begins by examining the current extent of foreign manufacturing and sales in the PRC, the causes and effects of domestic westward expansion, and the local regulations that either promote foreign investment or protect society and the environment from the adverse effects of rapid development.This article then analyzes local regulations, the current economic situation in Eastern China, and the future of Western China.This article concludes by providing insight on the effectiveness of local regulations and the relationship between foreign companies and Western China.
Jeffrey Hays, Foreign Companies and Foreign Investment in China, FACTSANDDETAILS.COM (Apr.2012), http://factsanddetails.com/china.php?itemid=349. 10 Eastern China. 26 Western China also attracts FDI due its attractive corporate regulations.For example, the business duration of a wholly foreign-owned enterprise (hereinafter "WFOE") in Western China is ten years longer than its Eastern counterpart. 27It should be noted, however, that local incentives are not the principal reason for the increase in Western China's FDI.

Effect of Eastern China's Economy on Westward Expansion
Foreign manufacturing is moving into Western China because of Eastern China's development. 28There are three primary factors in Eastern China that influence whether a foreign company will relocate into Western China: labor, land, and standards of living. 29(1).Labor Costs The increasing cost of labor in Eastern China is the most influential factor on foreign relocation. 30In 2012, a survey of foreign manufacturers in the Pearl River Delta 31 reported that labor costs rose ten percent in the previous year. 32Some companies are reporting up to 20 percent increases for the past four years. 33Labor costs in the PRC are now the third highest of all of the developing Asian countries, behind Malaysia and Thailand. 34Although the PRC has exhibited higher labor costs than most Southeast Asian countries for more than a decade, its costs began to increase dramatically in 2007. 35However, even if its minimum wage were to increase 30 percent a year, the rise in labor costs would only result in a one to five percent decrease in profits because labor costs are only one of the factors that affect profitability. 36Therefore, despite steadily rising labor costs, it is unlikely that the majority of foreign companies will suddenly abandon manufacturing in Eastern China. 37Rather, foreign companies will gradually shift their manufacturing focus to Western China and Southeast Asia. 38).Land Costs The PRC classifies land into different categories including residential, commercial, and industrial. 39Residential property in Eastern China's most populated cities is extremely expensive. 40However, the increase in residential property prices is beginning to slow down as local governments enact regulations in order to curb housing costs. 41n comparison, the PRC's commercial land continues to increase in value. 42Foreign companies are most interested in industrial land prices and whether local governments will provide low rent and tax rates. 43Although the cost of industrial land only increased 2.7 percent in 2012, 44 the cost of industrial land in Eastern China soared 26  from 11 USD to 21 USD per square foot. 45Generally, local governments seeking to promote FDI will often provide an investor with inexpensive or free industrial land. 46However, Eastern China has already stopped granting large incentives to foreign investors.Instead, industrial land prices continue to rise as local governments implement new taxes and even reclaim land. 47Consequently, foreign companies are becoming increasingly aware of Western China's local incentives.
(3).Standard of Living The third factor that affects the determination of whether to move manufacturing out of Eastern China is standard of living.The average factory worker in Eastern China has a higher standard of living than a factory worker with a similar position in Western China.The standard of living in Eastern China is a direct result of its economic development. 48Additionally, local governments in Eastern China have implemented more regulations due to local development. 49These regulations address issues such as food safety, housing regulations, employees' rights, and corruption. 50Although the higher standard of living is certainly beneficial to the general population, it also affects manufacturing costs.For example, workers require higher salaries because food safety regulations drive up food prices. 51A greater percentage of workers in Eastern China enter into employment contracts and strike. 52As a result, these workers receive more protection than other workers.The construction industry is a good example of how corruption actually reduces initial costs.Public officials may receive bribes from contractors and, in return, allow them to falsify their building material records. 53This allows contractors to build less expensive, albeit more dangerous, buildings. 54However, although corruption reduces initial costs, cheap building materials cause additional expenses such as repairs, heat loss, electrical failures, fires, etc. 55 The higher standard of living factor includes the other factors such as labor and land.Developed areas generally have higher standards of living, and Eastern China is no exception to this rule.Eastern China has already outgrown its period of rapid development when it would sacrifice its workers and natural resources for investment and growth.As Eastern China continues to become progressively more expensive, local governments in Western China are seizing their opportunity to attract investment and stimulate development.This section covers the primary regulations that Chongqing has enacted in order to promote and regulate its economy.In 2008, the Chongqing Municipal People's Congress enacted the Measures of Chongqing Municipality on the Promotion of Development. 57These measures are the general backbone for related legislation and actions by local administrations for industry and commerce (hereinafter "AICs").Their purpose is to promote rapid and healthy development within the city. 58They begin by directing each of the city's governmental institutions and organizations to focus their efforts on expanding the local economy. 59They then designate duties for local governments and AICs. 60e municipal and county-level governments must promote the city's economy by providing aid to local enterprises and complying with the needs of the local business community. 61County-level governments should establish a forum related to local investment. 62This forum will provide information related to investment and discourage local monopolies. 63Local governments must also promote expansion by participating in the international market and allowing FDI. 64These measures also refer to several activities that local governments should support such as manufacturing, exports, and research associated with economic expansion. 65ese measures further state that local governments must do more than facilitate the expansion of Chongqing's economy.They should also incorporate investment into their budgets. 66Local governments should focus their efforts on companies that are either established by Chinese citizens with experience abroad or that are related to new and advanced technology. 67On the other hand, local governments must conduct careful due diligence if they intend to invest in banks, insurance companies or venture capital firms. 68These measures provide how local governments should regulate their promotion of the economy.For example, they suggest that local governments should focus on the legality of the investments made by private citizens, and suggest that they share information amongst themselves in order to learn from their mutual experiences. 69These measures provide detailed information as to how local governments should promote expansion in Chongqing.Lower-level local governments interpret some of these duties as suggestions rather than requirements.As a result, the Chongqing legislature also enacted specific measures related to the expansion of the city's economy.
The Chongqing Municipal People's Congress enacted another piece of legislation on the same date as the general measures discussed above.This regulation is called the Measures of Chongqing Municipality on the Promotion of Small and Medium Enterprises. 70These measures inform local governments and AICs how to promote small and medium enterprises (hereinafter "SMEs") and list the approved methods of local financial assistance. 71These measures include the duties of the municipal government such as that it must establish the city's procedures for the promotion of SMEs, procure funds for investing in these companies, and process any complaints that these companies have. 72The primary assistance that the local government provides to SMEs is investment.These administered municipalities are Beijing, Shanghai, and Tianjin.8 See id.art. 1. 59 Id. art. 5. 60 See generally id. 61Id. art.8. 62 Id. art.13. 63 Id. 64 See id.art.14. 65 See id.art.15. 66 Id. art.20. 67See id.art.22. 68 Id. art.25. 69  measures state that investment in a company may take the form of providing credit, being a guarantor for the company, and compensating for certain risk-associated losses. 73nicipal and county-level governments may also support SMEs by arranging land for their use. 74Local governments may carve out certain land in their annual plans for companies. 75These measures also prioritize land use for rural collective economic organizations. 76In addition, local governments may support SMEs through tax exemptions. 77For example, SMEs may receive exemptions associated with training employees or conducting recruiting on campuses. 78Furthermore, local governments should prioritize SMEs in their dealings with large companies. 79Although these measures prioritize SMEs over large companies in certain situations, Chongqing has also enacted regulations that promote its own larger companies.
The Measures of Chongqing Municipality on Famous Trademark Recognition and Protection were enacted in June, 2012. 80The purpose of these measures is to promote Chongqing's economy through the recognition and protection of its local famous trademarks. 81The owner of a local famous trademark has the right to advertise on a particular good that the good is associated with a famous mark.For example, products in Chongqing that have attained this mark always have "重庆著名商标" (Chongqing Famous Trademark) printed on their labels.Companies will also use this status to promote famous products on their websites and during live promotions.These measures only allow relatively large local companies to attain these marks because they require a local famous trademark applicant to be a frontrunner in its industry, have economic success, have used the mark continuously for at least three years, and reside in the city. 82A Chongqing local famous trademark is valid for three years, 83 and local AICs must protect and strengthen local famous trademarks. 84The owner of a local famous trademark may request a local AIC to investigate another party if the owner reasonably believes it is infringing the company's rights. 85These measures further state that local AICs must investigate the possible infringement of a local famous trademark. 86e three measures mentioned in this section are the main regulations that Chongqing has enacted in order to promote its economy.All of these measures were passed in the last few years.As shown above, these measures give local governments and AICs a substantial amount of power to promote the local economy.They also allow Chongqing's local governments to make many of their own decisions.These measures show that the Chongqing legislature places a high priority on economic expansion.However, the legislature is also cognizant of the adverse effects of rapid development.

b. Protections for Society and the Environment
Chongqing has also enacted regulations to protect society and the environment from the adverse effects of development.The regulation that tackles this issue most directly is the Measures of Chongqing Municipality on the Promotion of Forest Expansion. 87The purpose of these measures is to promote the development of forests and improve Chongqing's environment. 88Surprisingly, these measures also state that they promote Chongqing's economy. 89They require that at least 45 percent of Chongqing's land is covered by forest, and that the urban areas should be at least 39 percent forest. 90However, these measures do not state what percentage of Chongqing is covered by forest nor do they indicate the reasoning behind these percentages. 91cal governments must engage in activities that develop and protect forests. 92They should also promote green living, low-carbon usage, a green economy, and the establishment of an ecological and cultural society. 93urthermore, they should encourage the use of more types of seeds, protect the fertility of the land, and prevent runoff. 94These measures state that the act of selling or moving ancient trees is illegal, 95 and define ancient trees as over 100 years old. 96Local governments should also plant trees along roads and railways. 97In addition, local governments have the responsibility of planting trees along their portion of highways. 98Local governments must also protect against forest fires and insects that harm forests. 99Finally, they should provide loans and mortgages to enterprises that seek to develop forests. 100Companies that engage in tree planting or seed production are also given corporate income tax exemptions and VAT exemptions.Although Chongqing has enacted regulations that cover natural resources such as forests, most of the regulations that protect society and the environment focus on regulating development.As a result, the Chongqing government has largely ignored local environmental concerns. 101 example of a regulation on economic development that improves the environment is the Measures of Chongqing Municipality on Energy-Saving Buildings. 102These measures apply to new construction, reconstruction, and expansion. 103They primarily regulate the materials and technology that buildings use in order to decrease the amount of heat lost in a building. 104They set the requirements for the departments of local AICs that control construction projects, and state that related departments must apply the national guidelines for energy-saving buildings when determining whether to grant a construction license. 105If a department determines that a proposed project does not satisfy national standards, then it cannot issue a construction license. 106ese measures also place requirements on companies that sell corporate space.These companies are required to provide their clients with information regarding the technology that a building uses to save energy. 107All of their sales contracts must include a five-year warranty for the insulation in the corporate space. 108These measures also encourage building owners to request local AICs for an efficiency evaluation. 109As opposed to most local regulations, these measures institute criminal penalties for certain behavior from construction department employees including negligence, abuse of power, and fraud. 110As shown above, Chongqing has enacted various regulations that promote the economy as well as protect the environment and society.Chengdu, which is Chongqing's main competitor in Western China, has done the same.

Sichuan Province and Chengdu City
90 Id.art. 5. 91 See generally id. 92Id. art.6. 93 Id. art.9. 94 Id. art.17. 95 See id. 96Id. art.56. 97Id. art.25. 98 Id. art.26. 99Id.art.37. 100 Id. art.46. 101See, e.g., James Fallows, 'Gingko Fever in Chongqing': The Billion-Dollar Trees of Central China, THE ATLANTIC (May 13, 2011), http://www.theatlantic.com/international/archive/2011/05/gingko-fever-in-chongqing-the-billion-dollar-trees-of-central-china/238885/(reporting that Chongqing unearthed a substantial portion of its urban trees in order to make room for trees preferred by a famous local figure). 102 Sichuan has passed a variety of regulations in order to regulate and promote its economy.One of the regulations that focuses on foreign investment is the Measures of Sichuan Province on the Protection of Investment Rights of Overseas Chinese Citizens (2011 Revision). 111These measures seek to promote investment from Chinese living outside of the PRC by providing incentives and additional protections. 112Overseas Chinese investors, their spouses, their children, and their employees who are also Chinese citizens from abroad are treated as Sichuan citizens. 113Related departments also provide them with convenient procedures for applying for residency. 114dditionally, companies started by overseas Chinese receive preferential treatment. 115ese measures allow Chinese citizens that are overseas to start a company with a patent, scientific research or proprietary technology. 116Furthermore, these companies can take advantage of any policies implemented to attract Chinese citizens that have studied abroad. 117These measures also provide tax exemptions to these companies if they either incorporate new and advanced technology or are part of an encouraged industry. 118One of the primary concerns of many foreign companies participating in the PRC is whether they will be able to transfer their profits outside of the country.Chinese from abroad and their employees do not face this problem in Sichuan because these measures specifically state that they may remit their profits. 119Additionally, these measures provide various rights to companies started by overseas Chinese.For example, these companies have the right to deny the police access to their premises if the police do not present required paperwork. 120Overall, these measures grant substantial incentives to overseas Chinese.In addition to measures that promote investment from overseas Chinese, Sichuan has also enacted several regulations pertaining to the technology market.
The primary technology market regulations are contained in the Measures of Sichuan Province on the Technology Market (2009 Amendment). 121These measures promote the development of the economy by improving technology transfers. 122They apply to patent licensing, consulting, technology-related stocks, etc. 123 They also list the prohibited activities associated with technology transfers: infringing the IP rights or technical interests of other parties, providing false information, collusive tendering, causing a party to enter into an agreement through fraud or coercion, harming national or public interests, and other behavior prohibited by the law. 124second set of regulations on technology is the Measures of Sichuan Province on the Popularization of Science and Technology (2012 Revision). 125The purpose of these measures is to increase economic development through educating the public on science and technology. 126They apply to activities involving science and technology that the public can understand, accept, and utilize. 127Municipal and county-level governments must reserve a portion of their budget for public education on science and technology. 128Methods of education include formal education, cultural education, advertisements, and news. 129chuan must conduct science-related activities every March, and these activities should focus on bringing rural-oriented science to the countryside. 130Also, the first three weeks of every May are called Science and Technology Weeks. 131During this time period, the local government must conduct community-oriented activities involving science and technology. 132A portion of every school's education should be dedicated to science and technology. 133As such, schools must dedicate a certain number of credits to science and technology, participate in competitions, conduct lectures, and organize field trips. 134These measures also place other various responsibilities on local governments such as that they must help fund the gradual improvement of science and technology. 135In addition to regulations that promote and regulate the local economy, Sichuan has also implemented measures in order to protect the environment.
ii. Protections for Society and the Environment Sichuan contains 80 million inhabitants and is roughly the size of France. 136It is much larger than Chongqing which has approximately 33 million people. 137Sichuan also has more forest preserves.In order to protect its nature preserves, the Sichuan Provincial People's Congress passed the Measures of Sichuan Province on the Administration of the Protection of Nature Preserves (2009 Amendment). 138These measures provide detailed regulations that promote the protection and administration of nature preserves, the protection of Sichuan's nature, and the continued existence of Sichuan's plant and animal species. 139They begin by stating that county-level governments have the primary duty to protect their natural resources. 140They also suggest that local governments above the county-level should consider the relationship between the protection of the enviroonment and the development of Sichuan's economy. 141Nature preserves should be established according to national law, the presence of rare species, the location of water conservation areas, geographical features, and other areas requiring special protection. 142ese measures are particularly effective because they establish the duties for specific departments. 143Although county-level governments must protect their nature preserves, specific provincial departments also have duties related to these areas. 144The forestry department is generally in charge of forests and wildlife. 145The agricultural department takes care of animal species related to agriculture, the construction department maintains nature preserves, the geology and mineral departments address issues related to geology and minerals, the livestock 126 See id.art. 1.

See id.
department administers grassland reserves, and the water conservancy department looks after water ecosystems and aquatic wildlife. 146The departments' respective local governments provide the necessary funding. 147ese measures also establish fines associated with nature preserves.Specifically, any employee of the departments listed above that fails to perform his or her duties may receive a fine from 1000 RMB (app.161 USD) to 3000 RMB (app.482 USD). 148In addition to remedying the situation, a more severe fine of 10,000 RMB (app.1,607 USD) to 50,000 RMB (app.8,037 USD) is imposed on any employee who either pollutes a nature reserve or otherwise causes damage. 149However, these protections only apply to official nature preserves.
The Sichuan Provincial People's Congress also passed the Measures of Sichuan Province on the Protection of Natural Forests (2009 Amendment) in order to protect forests that are not part of a nature preserve. 150Local governments should consider how the protection of forests relates to social and economic growth. 151Also, the harvesting of the following types of forest is prohibited: any area of 100 hectares of virgin forest, 152 any amount of virgin forest that is part of the local government's natural forest protection plan, forests along Yangtze River, the Yellow River, and their reservoirs, forests in mountain zones that have suffered multiple natural disasters, and other forests specifically banned by the provincial government. 153These measures also prohibit the commercial logging of natural forests and the destruction of natural forests through land cultivation, quarrying, mining, etc. 154 Loggers must obtain licenses before they begin work. 155Finally, these measures place various fines on activity related to the deforestation of natural forests.For example, a violation of these regulations will result in a combination of 1) compensating the local government in money damages, 2) confiscation of the trees, 3) replanting ten times the number of trees removed, and 4) additional fees calculated by five to ten times the value of the felled trees. 156Sichuan also has measures that protect natural resources other than nature preserves and forests.
Sichuan has enacted a regulation called the Measures of Sichuan Province on the Protection of Wetlands. 157These measures follow the basic form of the other two regulations on the protection of the environment.The following factors establish whether an area qualifies as a wetland nature preserve: whether the area is on Sichuan's list of important wetlands, whether the area is representative of a wetland, the diversity and the amount of rare and endangered species, whether birds use the area as a breeding ground or as a migratory stopover, the extent that animals use the area, and other factors such as ecological, cultural or scientific value. 158Several other activities are also prohibited such as destroying a wetland, dumping chemicals, mining, collecting bird eggs, fishing, and introducing foreign species. 159These measures also list the fines for engaging in prohibited activities. 160These three measures have a different focus than the Chongqing measures for the protection of the environment and society because Sichuan has more natural resources and a much larger area of land covered by forests.However, although the focus of legislation varies between Sichuan and Chongqing, the regulations passed by Chengdu are relatively similar to Chongqing's regulations.
Municipality on Famous Trademark Recognition and Protection (2011 Revision) are very similar to the Measures of Chongqing Municipality on Famous Trademark Recognition and Protection that are mentioned above. 161regulation that promotes the economy and is also different from the Chongqing regulations discussed above is the Measures of Chengdu Municipality on the Promotion of Employment. 162The Chengdu Municipal People's Congress enacted these measures in January, 2013, in order to promote the economy through the advancement and regulation of employment. 163Municipal and county-level governments must place employment has a top priority when considering how to promote the local economy. 164The municipal government must also implement a system that monitors who is employed and who has filed for unemployment benefits. 165Furthermore, the municipal government must support training programs established by local enterprises. 166ese measures also state that municipal and county-level governments shall create entrepreneurial parks and business creation centers which provide training and other services to workers. 167Additionally, the municipal government must provide unemployment insurance which supports unemployed people and helps them find employment. 168The funds for unemployment insurance come from the local governments. 169These measures also institute fines for violations such as using fraud to secure unemployment benefits. 170On the same day it enacted these measures, the Chengdu Municipal People's Congress also passed another regulation on employment.
The Measures of Chengdu Municipality on the Promotion of Vocational Education are the only local regulation in the PRC that separately promotes vocational training. 171The purpose of these measures is to promote the local economy by providing qualified students and employees with vocational training. 172The municipal and county-level governments shall organize joint meetings that convene to discuss related issues. 173The municipal government must include vocational training in its annual budget, 174 and funds are distributed to students in municipal vocational colleges and secondary municipal vocational institutes. 175These measures also state that the amount of funds in the city's budget must meet or exceed national funding standards. 176Additionally, all of the schools that wish to establish secondary vocational programs must apply to relevant local departments. 177cal corporations should also participate in the vocational education of students. 178They are directed to educate students about their business and the skills valued in their industry, create a training model for the students, establish an internship program, and help graduates pursue employment. 179Schools that arrange internships must sign an agreement with these companies and require students to purchase life insurance. 180Also, interns are to be given an appropriate amount of compensation for their work. 181Finally, these measures prohibit specific types of internships that involve danger such as ones related to radiation and explosives, a likelihood of illegal behavior such as work in nightclubs and bath centers or work that is completely unrelated to a student's education. 182In addition to its regulations that promote the local economy, Chengdu has also enacted regulations to protect society and the environment.

ii. Protections for Society and the Environment
The Measures of Chengdu Municipality on the Supervision of Product Quality (2012 Amendment) maintain product quality through the regulation of manufacturing and sales. 183Municipal and county-level governments should consider how to balance product quality with the development of the local economy. 184These measures ban the production and sale of certain products such as those that are obsolete, counterfeit, adulterated, impure or have failed testing. 185To this end, Chengdu will maintain a quality control department. 186Additionally, these measures provide fines for specific violations. 187engdu has also passed regulations to address issues related to the city's sanitation.The Chengdu Municipal People's Congress passed the Measures of Chengdu Municipality on the Administration of Appearance and Environmental Sanitation (2012 Amendment) which apply to all of the areas of Chengdu including outlying towns. 188The owner or supervisor of an area has the duty to maintain a clean and healthy environment. 189These measures also place various restrictions on government departments and private citizens. 190For example, related municipal departments must consider the effects of public lighting during night-time hours. 191Finally, these measures state the fines associated with harming the city's environment. 192e final local regulation discussed in this article is the Measures of Chengdu Municipality on the Protection of Surrounding Ecological Areas. 193These measures determine the amount of municipal land that shall be dedicated to agriculture and gardening. 194Surprisingly, these measures are so specific that they determine the exact amount of square meters in each district. 195They also state that the total area of any supporting buildings cannot exceed half of a square kilometer. 196These measures became effective in January, 2013. 197It is likely that the Chengdu Municipal People's Congress passed them in response to the city's rapid growth.These measures are a prime example that the municipal and provincial governments of western cities like Chongqing and Chengdu are enacting legislation to combat the adverse effects of rapid economic expansion.Chengdu's immigrants is higher than the number of births in the city. 216Migrant workers will continue to come to Western China as it continues to undergo rapid expansion.
(2).Eastern China Eastern China is already experiencing the effects of rising labor and land costs.The migration of domestic and foreign companies substantially affects Eastern China's economy.The PRC has over 250 million migrant workers and, as their home provinces begin to offer them work opportunities, many of them return home. 217This has led to serious labor shortages in Eastern China. 218Cities throughout Western China are contributing to this Eastern labor shortage through job fairs geared towards convincing migrant workers to return home. 219There are currently over 58 million children in Western China whose parents are working in Eastern China. 220Those parents are only working in Eastern China because they could not find work in their own provinces.When work becomes available in Western China, these parents will return home in massive numbers in order to live and work near their children.
Labor shortages in Eastern China will become increasingly exacerbated due to the One Child Policy. 221Although wages will continue to rise throughout the PRC, its labor force will gradually shrink. 222Furthermore, it is unlikely that the removal of the One Child Policy will alleviate this labor shortage because the One Child Policy has changed fertility preferences in the PRC. 223To put this labor shortage in perspective, the number of migrant workers in Eastern China is decreasing around eight to nine percent per year. 224In comparison, the number of migrant workers in Western China increased 33.2 percent from 2008 to 2009. 225Eastern China will experience increasingly drastic labor shortages as migrant workers return home.
Eastern China is also experiencing several massive real estate problems.In addition to the exorbitant housing costs in Beijing and Shanghai, Eastern China is home to most of the world's distressed malls.The New South China Mall is the world's largest mall. 226It has 7.1 million square feet of leasable area and has space for 2,350 stores. 227he world's largest mall also has a 99.5 percent vacancy rate. 228Like most of the PRC's "ghost malls," New South China Mall has been vacant since its completion. 229e PRC's ghost malls are a result of poor planning and overconfidence in the consumer market. 230These malls are part of a larger real estate problem.The PRC simply has too much commercial and living space. 231A country with the PRC's level of GDP per person should have around 20 square meters of living area per person. 232The PRC has over 30 square meters per person. 233Additionally, the PRC continues to pump out residential property.In February 2012, an astounding 2.98 billion square meters of residential property was under construction. 234ommercial property leased as office space is also suffering from high vacancy rates.For example, the vacancy rate in prime office buildings in Guangzhou City is approximately 20.4 percent. 235Eastern China is on the precipice of a residential and commercial real estate bubble. 236

Analysis
Part A of this section analyzes the local regulations discussed above; Part B evaluates the current situation in Eastern China; Part C considers the future of Western China.

Analysis of Local Regulations
The local regulations discussed above provide an opportunity to understand the policy considerations that influence local legislation in Western China.The most important policy consideration is economic development.The Measures of Chongqing Municipality on the Promotion of Development are a primary example of general measures that promote the local economy.These measures are very broad and discuss various topics related to the economy.The Chongqing Municipal People's Congress clearly knew that the measures would not be effective by themselves and, therefore, passed additional legislation on specific issues that are addressed in these general measures.This shows the emphasis that Chongqing places on economic development.
Chongqing's local regulations also demonstrate that it highly values FDI and local businesses.Chongqing has the opportunity to attract a massive amount of FDI because many foreign companies are moving to Western China and because Chongqing and Chengdu are the two main investment destinations.Chongqing determined that local governments must permit and promote FDI.However, the Chongqing legislature is also concerned that foreign businesses will negatively affect local SMEs.This policy consideration led to the Measures of Chongqing Municipality on the Promotion of Small and Medium Enterprises.These measures protect SMEs from the effects of FDI through tax breaks and free or subsidized land.The Measures of Chongqing Municipality on Famous Trademark Recognition and Protection are also an effective tool for the promotion of local businesses.These measures promote the protection and development of successful local goods.Additionally, local governments including Chongqing will provide monetary incentives for local well-known trademark registration.This proves to be a strong incentive for local companies to develop their brands.
Sichuan and Chengdu also consider the local economy, FDI, and local businesses throughout their regulations.Sichuan distinguishes itself from Chongqing through the Measures of Sichuan Province on the Protection of Investment Rights of Overseas Chinese Citizens (2011 Revision).Although Chongqing's regulations explicitly welcome Chinese citizens with experience abroad, in practical terms they do not function to attract overseas Chinese because they do not offer substantial incentives.The Sichuan regulations attempt to distinguish Sichuan from other western regions by offering substantial incentives in order to establish Sichuan as the center for FDI originating from overseas Chinese.
The Measures of Chengdu Municipality on the Promotion of Employment distinguish Chengdu by further educating its local population and attracting workers into Chengdu.Additionally, Chengdu reinforces local education through the Measures of Chengdu Municipality on the Promotion of Vocational Education.Chongqing, Sichuan, and Chengdu have carefully drafted legislation in order to promote their local economies.Specifically, their regulations focus on FDI and local businesses.Surprisingly, the promotion of the local economy spills over into regulations for the protection of society and the environment.Most of the regulations that protect the environment also state that their purpose is to promote the economy.Furthermore, these regulations remind local governments to consider how the protection of the environment affects economic development.
Chongqing does not have general measures that protect society or the environment.Instead, Chongqing has enacted regulations that address specific environmental issues such as the protection of forests.Although the Measures of Chongqing Municipality on the Promotion of Forest Expansion provide some incentives for expanding Chongqing's forests, they do not promote forest expansion to the extent that other regulations promote the local economy.These measures essentially state that the local population should protect forests and then list illegal activities associated with the destruction of forests.It is also highly unlikely that local governments will comply with the percentage requirements for land covered by forest because the regulations do not provide mechanisms for the implementation or supervision of these requirements.Sichuan's regulations for the protection of the environment are similarly limited.Although Sichuan has more regulations related to the environment than Chongqing, it also fails to provide substantial incentives for the development and protection of the environment.Rather, its regulations establish an outline for the maintenance of the environment and list related illegal activities.Although the Measures of Sichuan Province on the Administration of the Protection of Nature Preserves (2009 Amendment) are also limited, their detailed list of specific responsibilities per department is commendable.Also, Chengdu provides a surprising requirement in the Measures of Chengdu Municipality on the Protection of Surrounding Ecological Areas.These measures state the exact amount of land dedicated to agriculture and gardening.It is possible that Chengdu could enforce this regulation by assessing the extent that each district has reserved land for agriculture and gardening.However, the regulations currently serve as a suggestion to Chengdu's districts and, unless Chengdu rigorously enforces this requirement, it is impossible to determine the extent that its districts dedicate land to agriculture and gardening.
The local governments discussed above have done an outstanding job in enacting regulations that promote their local economies.Their regulations show a deep understanding of the extent that they want to promote the economy, the responsibilities of each department, and the obstacles that they face.Additionally, their regulations consider the relationship between FDI and the local economy.They serve to both invite FDI and migrant workers while simultaneously protecting local SMEs.The Measures of Sichuan Province on the Protection of Investment Rights of Overseas Chinese Citizens (2011 Revision) even show a large amount of creativity which is seldom seen in local regulations.Overall, it is likely that these local regulations will effectively promote and regulate these local economies.
In comparison, these local governments have not enacted meaningful legislation for the protection of the environment.The first red flag that the environment is not a high priority is that these regulations state that their purpose is to promote the economy and that local governments should consider how protecting the environment affects economic development.Also, these regulations do not contain a modicum of creativity.Rather, they are limited to assigning the responsibilities of local departments and listing illegal activities.Although they sometimes provide minimal incentives for the expansion and protection of the environment, their incentives are not adequate as to invite any real investment.The local governments understand that the protection of the environment should be a priority.However, they are more concerned with developing their local economy.

Current Situation in Eastern China
Eastern China is in the midst of transitioning away from being the manufacturing hub of the PRC.It contains all of the developed areas in the PRC such as Beijing, Shanghai, Shenzhen, and Guangzhou.Its labor and land prices will also become progressively more expensive and, accordingly, foreign manufacturing will slowly leave Eastern China for less expensive alternatives.However, the gradual decrease in manufacturing does not mean that Eastern China will cease to develop.Rather, Eastern China has the opportunity to foster its service industry and develop world-class cities. Beijing will remain the political hub of the PRC and Shanghai will maintain its status as the business and financial center.Shenzhen and Guangzhou will also continue to develop due to their proximity to Hong Kong.
Local regulations in Eastern China actually detract from its attractiveness for foreign manufacturers.Local governments no longer provide incentives to foreign companies.Unfortunately, foreign companies are also deterred from Eastern China because of the local promotion of workers' rights and employment contracts.Nonetheless, the development of local regulations in Eastern China shows a more advanced stage of social development than in Western China.Although these local regulations increase the cost of doing business, they also foster a more stable society.This is attractive to foreign companies and, as its service industries grow, Eastern China will experience a positive reaction from foreign companies.
Perhaps the most pressing issue that faces Eastern China is real estate.As discussed above, the real estate bubble in Eastern China extends to both residential and commercial property.Real estate developers should not construct large amounts of residential and commercial property in areas that have already proven that they cannot support growth.The consequences of this practice are empty cities, ghost malls, and vacant office buildings.On the other hand, real estate in Beijing and Shanghai is incredibly expensive.This has led to unfair practices such as purchasing condos under a false hukou 237 and then reselling them at higher prices.Despite the high housing prices in major cities, local price controls are beginning to stabilize the market.Also, local governments are becoming increasingly diligent in monitoring deceptive hukou use.Eastern China will experience complicated societal issues as it transitions from a developing to developed society.However, the changes in Eastern China will pale in comparison to the economic, societal, and environmental effects of development on Western China.

Economy
Western China will undergo considerable transformation as it experiences rapid development.Kunming is a primary example of the effects of this development.In five years, Kunming will have a state of the art subway system, its airport will be one of the largest hubs to Southeast Asia, and it will begin developing its own service sector.Kunming is not even one of Western China's largest cities. Chongqing and Chengdu are likely to become modern metropolises that compare to Beijing and Shanghai.Foreign companies will participate in Western China in the same manner that they are currently in Eastern China.Manufacturing will be the first step.Many foreign companies will choose Western China as their manufacturing location because it is less expensive than Eastern China and also has more reliable energy and a more highly educated workforce than developing countries in Southeast Asia.Foreigners will also funnel FDI into joint ventures (hereinafter "JVs") and WFOEs.Unlike Eastern China, foreigners are likely to prefer WFOEs over JVs because of Western China's relaxed regulations on WFOEs.This will allow foreigners more control and certainty over their business interests.Multinational companies will also increase their sales efforts in Western China as its middle class gradually has more money to spend on consumer products.Western China already has an infrastructure that permits market transparency.Foreigners can perform their own market research and determine which areas are likely to purchase certain types of products.For example, foreign car companies opened stores in Kunming because they were aware that many wealthy Chinese retire and move to Kunming.Stores such as Wal-Mart focus on larger markets such as Chongqing and Chengdu.The final step for foreign companies will be to set up offices in Western China.Many of the Fortune 500 companies have already opened offices in Chengdu.Smaller foreign companies will also open offices in Western China.

Society
The rapid development in Western China will have both positive and negative effects.Perhaps the most important positive effect is that there will be an increased per capita income.Residents of developing cities in Western China will have more business opportunities and better jobs.People living in the same province or in other provinces will also move to large cities because of these opportunities.Development will also likely lower unemployment rates, reduce the number of impoverished people, and reduce infant mortality.Western China's development will foster education as local governments have more funding and companies require progressively more skilled employees and workers.This will also foster advancements in technology.Another positive effect of development is the awareness of women's rights.It is likely that foreign companies will bring an increased understanding of women's equality in the workplace.
The current divorce rate in Beijing and Shanghai is substantially higher than in their western counterparts.Women outside of these major eastern cities experience incredible pressure from their family and society because of cultural norms and economic restraints.This forces them to remain in unhealthy marriages.Women who are better educated and presented with better work opportunities may become emboldened to make changes in their lives.
Another important positive effect of development is healthcare.Western cities will be able to open new hospitals, raise their medical standards, and import medical devices that they previously could not afford.They will also be able to provide a form of social security and support the unemployed.Although it is difficult to discern the exact benefits that development will bring to cities in Western China, it is clear that it will raise the general standard of living.On the other hand, rapid development will have serious negative effects on parts of society and the environment.
As discussed above, migrant workers in Eastern China will reunite with their families as they are able to return to their own provinces.However, Western China's development will also attract workers that are already in Western China.Developing cities will draw on workers from throughout their province.Many people will leave their families and move several hours away in order to secure a higher paying job.Most of these workers will not be able to see their families more than two or three times a year even though their home is only a few hours away.On a larger scale, the migration from small towns to large cities will cripple the economy of these small towns and substantially affect the elderly.The PRC has a very high number of elderly people.Most of the elderly who live in these small towns will be unable or unwilling to move to a large city.As a result, they will remain in their villages while their families move away.

Environment
Rapid development will also have serious consequences on the environment.The regulations mentioned above will likely be ineffective against pollution caused by construction and manufacturing.Other sources of pollution include the exponential increase in vehicles, energy usage, and waste.This problem may attract international attention in Sichuan because it is the home of most of the PRC's pandas.Also, Western China contains most of the PRC's scenic attractions.Pollution is already a very serious problem in Eastern China.Although Beijing moved most of its factories outside of the city center before the Beijing Olympics, 238 it has been experiencing massive amounts of air pollution. 239The U.S. embassy in Beijing provides online data from its PM 2.5 sensor in order to inform and protect American citizens living in Beijing.This sensor has continuously registered a PM 2.5 level that is above hazardous.In comparison to Beijing, Yunnan has a very low level of air pollution.However, air pollution is gradually rising in Yunnan as Kunming undergoes rapid expansion.Kunming, Chongqing, Chengdu, and other Western cities will be hard-pressed to determine the balance between development and protecting their environment and citizens.

Conclusion
The PRC is the manufacturing center of the world and, even though it faces serious problems on a vast scale, it will continue to offer inexpensive and reliable manufacturing services.Foreign companies have become accustomed to manufacturing their products in the PRC and will continue to do so.Western China provides an inexpensive and reliable alternative to manufacturing in Eastern China and Southeast Asia.Furthermore, Western China has unlimited potential due to its size, large population, and stable infrastructure.Western China is also in a position to learn from Eastern China and, as Eastern China continues to develop, benefit from Eastern China's achievements.
Local regulations enacted throughout Western China demonstrate that local governments highly value development.They also indicate that local governments will promote their economies through FDI.Many foreign companies have experienced great success participating in Eastern China and, considering the rapid development of Western China, will certainly expand into Western China.The PRC is entering a new chapter in its history wherein for the first time it has both developing and developed areas.This situation has the potential to elevate the PRC to new heights.However, it will also create serious societal and environmental problems.Nonetheless, domestic and foreign interests promise to drive Western China's rapid development and transform its major cities.
See Chongqingshi Jianzhu Jieneng Tiaoli (重庆市建筑节能条例) [Measures of Chongqing Municipality on Energy-Saving Buildings] (promulgated by the Chongqing Municipal People's Congress, Nov. 23, 2007, effective Jan. 1, 2008). 103Id. art. 2. Chengdu is the other rapidly developing city in Western China.Unlike Chongqing, which wields both provincial and municipal powers, Sichuan exercises provincial power over Chengdu.The Chongqing regulations discussed above originate from the same legislative body.In comparison, Chengdu's local government and AICs must follow the laws passed by both the Sichuan Provincial People's Congress and the Chengdu Municipal People's Congress.