Shanxi has to find a way for growth

OVER THE LAST THREE quarters, the GDP growth rate of Shanxi province in North China has ranked among the lowest among the two dozen provincial areas that have released their data. Beijing News commented on Monday:

Shanxi province is rich in natural resources, but this is now proving more of a curse than a blessing. Its over-reliance on its coal industry has dragged down the development of other sectors. In economics this is known as "Dutch disease".

What is "Dutch disease"? It dates back to the 1950s when the Netherlands was a manufacturing-dominated industrialized country that discovered natural gas deposits in the North Sea. The Dutch government made great strides in developing the country's oil and gas industry, which brought the Netherlands a high degree of economic prosperity. But the booming oil and gas industry caused a decline in other sectors of the economy.

Harvard University political scientist James A. Robinson and Massachusetts Institute of Technology economist Daron Acemoglu in their book Why Nations Fail, show how easy it is for resource-rich countries to suffer the Dutch disease.

So how can Shanxi province cure its Dutch disease?

The top priority is to create an environment that provides an equal playing field for various industries. The local government should take anti-corruption as an opportunity to awaken the commercial spirit in the province, in particular to guide away from the coal industry to other sectors.