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Special> China International Fair For Investment & Trade> Beijing Review Exclusive> Trade
UPDATED: June 14, 2009 NO. 24 JUNE 18, 2009
Emerging from Obscurity
Central China may accelerate development due to favorable policies

Powerful support from the Ministry of Railways will add more force to the development of the area. In the next two years, China will invest 750 billion yuan ($110.3 billion) in railway construction throughout central China. By 2020, railway line length per 10,000 square km will increase from 175 km to 331 km, more than two times the national average, said Lu Dongfu, Vice Minister of Railways, at Expo Central China 2009.

Strong human resources also help bring a competitive edge to central China. More than 1,158 science and research institutes, 85 universities and 192,700 scientific research personnel call Hubei home, ranking it fifth in the country for local technical expertise.

"Hubei not only possesses the advantages of a less advanced area, namely, rich resources and low labor costs, but also holds the advantages of an advanced area, namely, convenient transportation, strong R&D and an excellent industrial base," said Li Hongzhong, Governor of Hubei Province, at the Expo Central China 2009.

In the last five years, Hubei has obtained more than 4,000 major scientific and technological research achievements, among which one third hit the advanced international level.

Low costs are another factor in attracting investment and accepting transfer of industries.

The general manager of a Guangdong-based clothing factory said he must pay 2,000 yuan ($294) per month to each worker. Meanwhile in Fuyang, Anhui Province, each factory worker make 800 yuan ($118) a month. Land rental costs are also much lower than those in Guangdong.

Transfer and upgrades

Spurred on by lower costs, industry transfer from eastern coastal areas to the central region has become an irresistible trend.

In July 2007, the State Administration of Taxation and the Ministry of Finance put the Measures on Value-Added Taxation Deduction in the Central Area in place. Eight major industries in 26 old industrial cities in the central area will enjoy value-added tax deductions when upgrading production equipment. When eastern enterprises are confronted with the pressure of high production costs, this taxation policy will speed up industry transfer from the east to the central, and will also help accelerate the upgrading of industrial infrastructure, said Wang Li, Vice Director of the State Administration of Taxation.

In the first quarter of the year, central China's textile industry witnessed a significant increase in investment in fixed assets; the resulting textile output increased by 30 percent year on year.

Yiyang of Hunan, China's main growing area for the fiber crop ramie, is committed to strengthening its ramie processing industry in the midst of accepting industry transfer.

The city will seize the industry transfer opportunity to attract strong enterprises from the east that are looking to invest in ramie processing and to learn from the region's experience in the industry.

Although central China desires the boon that comes with hi-tech industry transfer, the region is being careful to avoid blind low-level transfers.

Industry transfer does not mean moving high-pollution enterprises to the central, and it must be conducted under the precondition of requiring technological upgrades, saving energy and protecting the environment, said Hubei Provincial Governor Li.

In July 2008, Guangdong Dongpeng Ceramic Co. Ltd., one of the biggest ceramics producers in China, invested 2.5 billion yuan ($367.6 million) to establish its headquarters in Changde, Hunan Province. The project did not simply move the production and R&D base from Foshan to Changde, but upgraded equipment and production, said He Ming, President of Guangdong Dongpeng Ceramic Co. Ltd.

In April, the Ministry of Commerce released seven policies to promote central China's development.

Support the establishment of industry transfer demonstration parks in central provinces.

Promote the transfer of the processing trade from east to central China.

Support the establishment of state-level economic and technology development zones in central China.

Support central China's efforts to optimize its export structure.

Enhance service trade development in central China.

Encourage enterprises in central China to expand overseas.

Promote investment and industry transfer in central China.

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