TAIPEI (TheStreet) -- Chinese officials have spent well over a decade recruiting foreign investors to the country's vast northwest. Now repeated acts of violence linked to Uighur Muslim separatists are threatening the region's reputation.
But the rash of attacks linked to Muslim separatists in or from the Xinjiang region of China will not take the fabled trans-Asian Silk Road trading route stop off the modern investment map.
The reason comes down to global politics. China sees the Muslim autonomy seekers as "terrorists," generating quiet nods from the normally skeptical U.S. and other Western countries which occasionally face their own restive fringe elements.
China announced Sunday a one-year campaign against what state-run China Daily calls "terrorism and religious extremism." Foreign governments already fearful of violent Muslim causes will say little or nothing as the government strikes back. They might quibble with a similar Chinese crackdown in Tibet, which is fiercely defended by Western human rights groups.
China has probable cause on its side, as well. Explosives killed 39 people in a public market on Thursday and hurt 94. A railway station bomb and knife attack in the same region last month left one dead and 79 injured. China blamed Xinjiang separatists for another railway station attack outside the region that killed 29 people on March 1.
Xinjiang's ethnic Uighurs, who have a central Asian appearance, follow Islam and speak a language unlike Chinese. They form an underclass across the tract of mountains and deserts bordering Mongolia. Since China annexed Xinjiang in 1951, ethnic Chinese have run the economy. Beijing also controls religious expression, use of native languages, the time zone and architectural styles, preferring modern post-Soviet over traditional central Asian.
Some locals now want a separate nation. Uighur people are "committing suicide" via mass violence for lack of other recourse against Chinese rule, says Wu'er Kaixi, an ethnic Uighur and 1989 Tiananmen Square democracy protester now exiled in Taiwan.
Xinjiang will "no longer be conducive" to foreign investors as China cracks down, argues Alim Seytoff, U.S.-based spokesman for the World Uyghur Congress, an international organization of groups representing people exiled from Xinjiang.
Crackdowns, however unpopular they may be with locals, tend to keep channels safe for investors. Beijing has particularly prized this outside investment over the past two years. As of September 2012, foreign investment in Xinjiang was growing at its fastest ever and had reached $3 billion, with more than 500 foreign entities seeking a stake, China Daily said then.
GDP in the region of 22 million people grew more than 10% in the first nine months of last year. Foreign investors dominate exports with 88% of the total, the Hong Kong Trade Development Council found in February.
Mining leads the trend. Peabody Energy (BTU - Get Report) signed an agreement in 2011 with the Xinjiang regional government to develop a large-scale coal mine. JES International Holdings of Singapore signed a deal last year to invest in another Xinjiang mining operation. Investors are also bubbling over for Xinjiang's natural gas, 34% of China's total reserves. Just ask BP (BP - Get Report) what it's been up to over the past 13 years.
"These companies, particularly those orientated towards natural resources, are in for the long haul for key strategic reasons -- profitable growth and expansion," says James Berkeley, managing director of U.K.-based management advisory service Ellice Consulting. "While the events are disturbing, short of sanctions or a trade embargo, the capital, human and physical resource is fully committed."
At the time of publication, the author held no positions in any of the stocks mentioned.
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