Yunnan and Guizhou GDP surges by 12.6 percent year-on-year in Q1, the highest among all regions[Hong Kong company registration]

Two provinces in western China have taken a leading position in driving the country's economic growth in the first quarter.

Experts said western regions will continue to be a pillar of recovery, but issues of imbalance and environmental protection should receive more awareness.

Data from Yunnan province showed its GDP rose 12.6 percent year-on-year in the first quarter, the highest among all regions. Guizhou province enjoyed an equal growth rate during the same period.[Set Up Company Hong Kong]

The country last week reported GDP growth of 7.7 percent year-on-year during the first quarter, down from 7.9 percent in the final quarter of 2012, below economists' forecasts.

"The western regions will surely be a significant driver for the economic recovery and a magnet for investment," said Gao Guoli, deputy director of Land Development and the Regional Economy Research Institute under the National Development and Reform Commission.

The central government has pumped a large amount of funds into western regions over the past decade, which has improved local infrastructure.

The most significant driver of economic growth in western regions remains fixed-asset investment, Gao said.

Urban fixed-asset investment in these regions rose 24.2 percent in the first quarter, about 0.9 percentage points faster than the two preceding months, while the growth rate of investment in eastern regions was 0.7 percentage point lower than the first two months, according to the National Bureau of Statistics.

As growth picks up, a challenge facing the region is to reduce its high reliance on government investment, Gao said.

Relatively lower land and labor costs as well as vast natural resources are presenting more advantages, as costs in coastal areas continue to grow.

Foreign direct investment in the western regions surged by 18.29 percent in the first quarter, in sharp contrast to the growth rate in other regions - 0.17 percent in eastern regions and 0.69 percent in central regions, according to the Ministry of Commerce.

Fixed-asset investment in the western regions from the private sector rose 28.8 percent in the first quarter.

But environmental protection must be highlighted as ecological conditions in western areas are more fragile than the eastern regions, said Ma Zhong, dean of Renmin University's school of environment and natural resources.

[Hong Kong Company Formation]A recent joint study by China National Textile and Apparel Council and the Swedish Embassy in Beijing showed that textile companies are shifting their factories from eastern regions to central and western parts of China.

About 80 percent of enterprises in the western and central regions have put the required environmental management system into place, but only 16 percent of the employees are familiar with related skills, it said.