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China is currently building the fastest and safest overland channel for use of overseas energy resources through its Xinjiang Uygur Autonomous Region. Additionally, Xinjiang also plans to construct a processing and manufacturing base servicing Asian areas, said officials attending an industrial construction working conference held in Urumqi in late January.

Local officials said that the project is also aimed at providing a stable, safe, economic, and comprehensive global resource supply system.

Niu Li, an economist with the State Information Center and an expert on energy, said that the building of the channel will have profound significance.

"Currently most of China's energy imports have to go through the Strait of Malacca. The over-dependence on the waterway has brought about potential risks to China's energy safety," said Niu, adding that China should start to make full use of overseas resources in Central and West Asia and East Europe over land.

Experts point out that if China, via Xinjiang, connects its oil pipeline with that of Central Asia, and thus connects oil suppliers (Middle Eastern and Central Asian countries as well as Russia) with main oil consumers (China, Japan and South Korea), it will not only solve the bottleneck problem that Central Asian countries commonly face, but also put Xinjiang in an advantageous position of "pan-Asian and global energy bridge."

In July 2006, the oil pipeline linking China and Kazakhstan was formally put into operation with crude oil transportation volume totaling 2.16 million tons that year. The Ministry of Commerce announced that, in addition to Kazakhstan, China hopes the pipeline will also transport oil from Siberian regions of Russian territory.

Ren Bin, secretary of the board of directors of the Xinjiang Dushanzi Tianli High & New Tech Co Ltd, said that with the implementation of the China-Kazakhstan energy strategy, his company has begun to build the projects refining 10 million tons of oil and 1.2 million tons of ethylene. With the completion of the projects, the region will become the largest petrochemical industrial base in China.

"The oil refinery will be completed and put into operation at the end of 2007 and the ethylene project will start in 2008," said Ren.

In addition to the petrochemical industry, the energy channel will give impetus to the development of other industries like building materials and service with local industrial outputs to be doubled, said Ren. The number of migrant workers and engineering and technical personnel will also increase.

Forging a safe energy channel is only one of the key links in the future development of Xinjiang. Experts predict that the central government plans to develop the region into a processing and manufacturing base servicing Central and South Asia and East Europe.

Xinjiang is bounded by many Central Asian countries that have rich mineral resources of oil and natural gas and thus is mutually complementary in economy with these countries. Xinjiang is also the only overland channel linking China with Central Asia and Europe. Most of the surrounding countries are not developed in the manufacturing industry and thus have a great demand for China's industrial products. Xinjiang hopes to attract and accept inland capital, technologies and personnel by using its rich raw materials, energy, and land priorities.

Talking about the goal of building an industrial base in Xinjiang, Ren Bin said that the region can only play a minor role in the country's economic development if it only develops its preliminary resource and processing industry by depending on outside resources. It must develop industries other than resource supply and tourism, Ren suggested.

"Industrial transfer from developed northeast China to Xinjiang has become an inevitable trend," said Ren, "though the pace of the transfer is decided by the pace of northeast provinces' industrial updating. But it is still related to the development of Xinjiang itself."

Ren analyzed that the implementation of state policies on western development and expansion of domestic demands has enabled Xinjiang to enjoy a comparatively fast development in infrastructure. The current largest bottleneck is the "software" environment including concepts, education, science and technology, and service. "To build a processing and manufacturing base, the region must achieve a lot in these fields," Ren said.

Statistics from local government show that Xinjiang is home to 30 percent of the country's oil, 34 percent of natural gas, and 40 percent of coal resources. In 2006 the region made great progress in the utilization of saltpeter, uranium, steel, coal and nonferrous metals resources.

Of the resources, natural gas is an outstanding example with the output reaching 16.1 billion cubic meters in 2006, up 5.5 billion cubic meters from the previous year, and with export reaching 9.8 billion cubic meters, ranking first in China. Driven by the west-east gas transportation project, the region has enjoyed a continuous growth in natural gas output and is expected to supply the country for at least 20 years.

More than 20 listed local enterprises will benefit from the completion of the channel. For example, the LNG project of the Guanghui Shareholding Co Ltd will transport its natural gas to all parts of the country. The Xinjiang Urban Construction Shareholding Co Ltd has invested in infrastructure projects in Central Asian countries. The Xinjiang Chalkis Tomato Product Co Ltd that used to transport its tomato jam products to Europe via north China's Tianjin Port will do the business directly through the overland channel.

Some inland enterprises also have their eyes on the region. The Shandong Luneng Group, the Shenhua Group, the State Development & Investment Corp, the Baosteel Group, and the China National Cereals, Oils and Foodstuffs Corp have entered the region one after another. The Suntime Wine Corp is making full use of the largest grape production base in Asia and comprehensively enlarging its wine business.

The autonomous region's 11th five-year plan on petrochemical development stipulates that during the 2006-10 period Xinjiang will realize a two-digit annual increase in investment in the exploitation of oil and natural gas and yields in refinery. The development of the petrochemical industry will center on further stretching its oil and natural gas industrial links, improving production technologies and equipment, and achieving the best energy development and usage efficiency.

(China.org.cn by Li Jingrong, February 7, 2007)