Beijing also decided to cut corporate income tax and alter resource taxes there as part of a new development strategy, state media said on Tuesday.
The plan was announced on Monday after Premier Wen Jiabao said the Chinese economy was facing an “extremely complicated” situation and two purchasing manager surveys showed manufacturing activity had slowed in June.
The 682.2 billion yuan will be used to build railways, roads, airports, coal mines, nuclear power stations and power grids, the National Development and Reform Commission said on its website.
Construction will start this year to “actively expand domestic demand and promote the fast and healthy development of the western areas,” the top economic planning agency said.
The areas include the northwestern region of Xinjiang, Tibet, Inner Mongolia, Sichuan and Yunnan in the southwest. It is unclear whether the spending is part of a $586-billion government stimulus package unveiled in late 2008 to cushion the impact of the global financial crisis.
Meanwhile, Wen told a meeting that corporate income tax in western China will be cut to 15 percent from the current 25 percent.
The economy of China’s vast west — an area that stretches from the grasslands of Inner Mongolia to the forests of Guizhou and deserts of Xinjiang — has lagged far behind that of booming coastal regions to the east.
Over the past few years China has ramped up investment in transport links with its remote west, and unveiled a raft of measures to encourage companies to set up factories there, as well as built new schools, hospitals and houses.
We must “enable the resource advantages of the west to be transformed into economic advantages,” state television paraphrased Wen as saying.
The premier also confirmed resource taxes on coal, oil, gas and other natural resources in western China will be based on sales price, instead of output. The report gave no other details.
The Ministry of Finance said last month that the far western region of Xinjiang had started levying a 5 percent resource tax on crude oil and gas sales.
Expanded to more regions, this change to the way the resource tax is levied would reduce the profitability of producers while feeding more revenue to local governments.
Firms that could be affected include coal miners such as Shenhua Energy, copper producers such as Jiangxi Copper and energy firms such as PetroChina and Sinopec Corp.
