One year ago, the streets of Urumqi were awash in blood. On July 5, 2009, hundreds of young men belonging to the predominantly Muslim Uighur ethnic minority rioted, beating and stabbing members of the Han majority on the streets of the capital of China’s restive northwestern region of Xinjiang. Two days later, Han residents took to the streets and, armed with clubs and knives, took revenge on the city’s Uighur community. All told, 197 people, mostly Han, were killed, and some 1,700 were wounded.

It was China’s worst ethnic violence in years. The central government blamed the bloodshed on outside agitators, namely overseas Uighur activist Rebiya Kadeer, who has denied any involvement. But the ease with which the city’s running racial tensions exploded into mass violence made it clear that China had some deep problems within its own borders. In the past year it has turned to both economic incentives and a leadership shake-up to rebuild the peace in Xinjiang. (See pictures of last year’s riots.)

Urumqi’s Communist Party secretary Li Zhi was sacked in September following public protests over a series of suspected syringe attacks that targeted the city’s Han population. Wang Lequan, a hard-liner and ally of President Hu Jintao who ran Xinjiang as Communist Party secretary for 16 years, was removed from office in April. Wang was replaced by former Hunan party secretary Zhang Chunxian, who has a reputation as a savvy politician and has advocated using the Internet to better understand public opinion. But while Wang is out, the government’s tough security measures that he helped install in the far west aren’t expected to change. The security budget for Xinjiang is expected to nearly double this year to $423 million, the official China Daily reported. On June 24, Chinese authorities announced they had cracked a terrorist cell that was responsible for a 2008 attack in the southwestern Xinjiang city of Kashgar that killed 17 border police. Ten suspects were arrested. (Read an interview with Rebiya Kadeer.)

The change in Xinjiang’s leadership was followed by a high-level work conference in May — the first ever on the future of the turbulent region. The result was a pledge from President Hu that by 2015 Xinjiang’s per capita GDP would reach the national average, which it currently trails by about 25%, and by 2020 poverty would be mostly eliminated from the region. But worries remain that if fundamental issues of discrimination faced by the Uighur minority aren’t resolved, then the tension will continue to fester. “Xinjiang’s problem isn’t a lack of money,” says Ilham Tohti, a Uighur economics professor at Minzu University of China in Beijing. “It’s how it is allocated.”

In many ways what the Chinese government is attempting to do in Xinjiang is built on a model that has been tested many times before in China. Upon emerging from the violence of the 1966-76 Cultural Revolution, in which hundreds of thousands of Chinese were killed, paramount leader Deng Xiaoping set China on the path of economic reform. It helped develop the country, and this year it will likely become the world’s largest economy after the U.S. A similar pattern followed the 2008 Sichuan earthquake, which left 87,000 dead or missing, including more than 5,000 children who died in collapsed schools. The central government again responded with heavy investment, including programs that linked destroyed towns with prosperous coastal provinces. The result was a remarkably rapid rebuilding effort.

To achieve similar results in Xinjiang, the government has devised several policy initiatives. Over the next five years it will increase fixed-asset investment in the province and the bingtuan, paramilitary work units set up in Xinjiang in the 1950s and staffed with former soldiers. The central government plans to rework a tax on oil and natural gas, so that it will be based on the value of the fuels that are extracted from the resource-rich region. While the details haven’t been revealed, it’s expected that the resource-tax reform will leave more money in the hands of Xinjiang authorities. Businesses will be eligible for tax breaks, and commercial banks will be encouraged to expand in the region.

Kashgar, a predominantly Uighur city in southwestern Xinjiang that is undergoing a massive and controversial redevelopment of its old city, will become an economic-development zone, a scaled-down version of the special economic zones created on China’s coast in the early 1980s. Their more liberal investment regulations helped drive the country’s export engine, and China’s economic planners hope to recreate some of that success in Kashgar.

At the same time the central government will boost aid through a pairing-assistance program that requires 19 prosperous coastal provinces and cities to divert a small portion of their revenues to impoverished parts of Xinjiang. A similar program was used to help rebuild the earthquake-stricken areas of Sichuan after the 2008 earthquake. The Xinjiang funding will prioritize the less developed southern half of the region, the state-run Xinhua news service reported. Beijing, for instance, is expected to contribute more than $1 billion to the southern town of Khotan and surrounding counties over the next five years, according to Chinese press reports.

Still, some question whether Uighurs will benefit from any subsequent economic boom in Xinjiang. “In respect of Uighur-Han relations, the main issue is discrimination. That cuts across every social class,” says Nicholas Bequelin, a Hong Kong–based researcher for Human Rights Watch. “It’s very clear that Uighurs did not have a say in the design of these polices, so it unlikely they will benefit from the outcome.”

Many Uighurs say they feel that prejudice most strongly when looking for work. Often Han Chinese business owners with roots outside of Xinjiang prefer to hire people from their home provinces, leaving Uighurs at a disadvantage. And the sanctuary that minority workers once found in the hiring quotas of state-owned enterprises has deteriorated as the Chinese economy has privatized. Han Chinese dominate the bingtuan, which comprise about 15% of Xinjiang’s economic output, providing scant opportunity for minorities.

Tohti estimates that as little as 20% of Uighur college graduates are employed, and lists several examples from his own family. “Don’t talk about how big China’s GDP is,” he says. “Even if it becomes the world’s largest, who gets to enjoys it? The cities are more and more beautiful, but even if it is all as beautiful as the Forbidden City, when we see those buildings, we just feel uncomfortable. This is not merely an economic problem. When it comes to looking for work, we face discrimination. But it’s not acknowledged.” Without a clear aim of ending such an imbalance, the central government’s development plan could still leave Uighurs behind.

http://www.time.com/time/world/article/0,8599,2001311,00.html?xid=rss-topstories