Li stresses need for reform (2)

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Labor costs rise

As China's eastern regions are losing strong growth momentum due to rising labor costs and a saturated market, Li demonstrated through this trip his confidence that western regions, comprising more than half of China's territory and home to almost one-third of the population, could become the nation's new growth engine.

He believes that the wealth gap between rural and urban areas, as well as the gap between coastal and inland regions, provides potential for growth.

The government is mulling "differentiated" policies for the region that will feature huge spending on infrastructure, Li said.

"We will roll out more preferential policies tailored for the western region concerning infrastructure projects, to accelerate the construction and upgrading of rail and road networks," he said.

The western provinces should also step up the fight against poverty, as they are home to more than half of those living in poverty in the country.

To achieve all of these goals, "we must rely on deepening the reform and opening-up, and improving the market economy with socialist characteristics," he said.

Also on Monday, the State Council said in a statement that China will diversify railway fundraising methods and encourage private investment in railway construction as the ownership and management rights of intercity, suburban and branch railways, as well as railways for resource development, will be open to local government and social capital.

Guan Qingyou, assistant dean of the Minsheng Securities Research Institute, said directing private capital into the railway sector exemplifies the motif of Premier Li's governing policy: Try to unleash vibrancy from within and avoid resorting to external and additional stimulus.

Xu Hongcai, a senior financial researcher at the China Center for International Economic Exchange, a government think tank, said new investment plans announced recently, such as shantytown redevelopment, are just to make up for past shortfalls. They should not be considered part of a new stimulus package.

He said Li also showed signs that he would transform the role of government in investment, shifting from the "actor" role to the "servant" role, facilitating investment through delegating power, improving service and strengthening supervision.

Xinhua contributed to this story.

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