BEIJING - Violence and unrest instigated by separatists agitating for an independent Xinjiang have hit economic development hard in the far western Chinese region, a government policy paper said on Monday.

Energy-rich Xinjiang, homeland to the Muslim Uighur people and strategically located in central Asia, has been struck in recent years by bombings, attacks and riots blamed by Beijing on Uighur separatists demanding an independent East Turkistan.

On July 5, 197 people, mostly members of China's Han Chinese ethnic majority, died when Uighurs rioted in the regional capital Urumqi.

Tensions in Urumqi have not eased since. Han Chinese residents demonstrated earlier this month, demanding the resignation of the regional party secretary after police claims of syringe attacks panicked the city.

The 'East Turkistan' forces have seriously interrupted the economic development of Xinjiang, the government said in a white paper. They have seriously undermined the environment for investment, as evidenced by the drastic reduction in investment from other parts of the country.

Critics of China's policies in Xinjiang say too little of the investment there flows to Uighurs in the first place, and such inequalities have stoked ethnic enmities.

The average income last year for a rural family in Xinjiang -- most Uighurs live in the countryside -- was 3,503 yuan ($513), compared with the national average of 4,761, and 11,440 yuan in the booming financial hub of Shanghai.

While the government has invested billions of yuan over the last few decades in roads, railways, schools, hospitals and other infrastructure, the paper intimated that spending on security diverted precious resources.

Plenty of human, material and financial resources have had to be put on guard against and combat crimes of terror and violence in order to safeguard the security of the country and social stability, it said.

Many Uighurs resent government restrictions on their religion and culture and a massive influx of Han Chinese settlers which have in some areas reduced them to a minority in their own land.

Rights groups and Uighur activists also say Beijing grossly exaggerates the threat from militants to justify harsh controls.

The paper repeated Chinese accusations that the militants have links to overseas groups and pose a threat to broader regional security.

It defended the government's role in what it said was the protection of Xinjiang's religion and culture, pointing to renovation projects for mosques and other buildings, as well as the promotion of minority languages.

The region's ethnic groups were also becoming better integrated, it said, and pointed out that far from being recent immigrants, Han Chinese had been coming to what is today's Xinjiang since the days of the Han Dynasty around 200 BC.

The diverse peoples of Xinjiang have formed deep friendships while living together for generations, it added.

China