Since it was designated as one of China's first four special economic zones in 1980, Xiamen, a coastal city in southeast China's Fujian Province, has seen quite rapid changes.

The China International Fair for Investment and Trade held every year in Xiamen has further enhanced the city's attraction. But the city suffered a slowdown in the past few years. The local government plans to reorient the city as an air transport, logistics, finance, trade and tourism hub in southeast China.

The city also seeks to become a regional center of service industry and culture, and a base for exchanges and cooperation across the Taiwan Straits.

Will this program become Xiamen's new economic engine? Beijing Review reporter Lan Xinzhen recently interviewed Zheng Lizhong, Secretary of the Xiamen Municipal Committee of the Communist Party of China, to find out more.

Beijing Review: What is Xiamen's current economic situation?

Zheng Lizhong: Currently, Xiamen's economy performing soundly, with fast and sound economic growth. The city's GDP increases by 18.4 percent annually, ranking first in China's large and medium-sized cities with respect to long-term growth rates. In 2002, its per-capita GDP exceeded $5,800. Between January and July this year, the city's import and export volume reached $10.41 billion, up 29.3 percent over the same period last year. Of this total, exports made up $5.88 billion and imports $4.53 billion, up 25.9 percent and 29.6 percent respectively. The urbanization level of the city reached 52 percent.

How does the foreign investment situation look?

By June 2003, foreign businesses from 51 countries and regions had invested in Xiamen, including 32 of the world top 500 companies. To date, the city has approved 5,890 foreign-funded projects, with contracted investment of $20.4 billion.

The contribution of foreign-funded businesses to Xiamen's economic development is quite large. In 2002, they accounted for 66 percent of the city's 64.84 billion yuan ($7.83 billion) GDP. They also yielded 84.5 percent, or $86.7 billion, of the city's gross industrial output value, and 65.4 percent, or $9.94 billion, of the city's total export and import volume of that year. In other words, over 50 percent of the city's economic growth should be attributed to overseas investment.

Over the past a few years, the Pearl River Delta, the Yangtze River Delta and Bohai rim areas witnessed rapid economic development. Compared with these places, Xiamen's economic growth seemed slower and many foreign investors have started looking at China's northern areas as attractive places to invest. What's your opinion on this phenomenon?

It is inevitable that foreign investors will begin to choose northern areas as investment sites because economic zones no longer enjoy preferential policies they once did. In the meantime, it also shows Xiamen's defects.

What defects?

First, Xiamen's economic aggregate is still small. In 2002, its GDP was only 64.84 billion yuan ($7.83 billion), far behind Beijing, Shanghai, Guangzhou and Shenzhen.

Second, its economic structure is uneven. For instance, foreign-funded enterprises make up 83.8 percent of the city's industrial assets, while state-owned and the private businesses only account for 5.5 percent and 1 percent respectively.

Third, economic development in different regions is unbalanced. Xiamen Island, which only occupies one-third of Xiamen's total area, produces 80 percent of the city's GDP.

Fourth, the city's administrative efficiency lags behind that in the Yangtze River and the Pearl River delta areas. Xiamen must remarkably improves itself in this regard.

What measures will Xiamen take to cope with these problems?

We have mapped out a short-term program, which covers the following areas:

We will complete the city's industry chains. To date, IT, machinery and electronic industries have taken shape in the city. To provide better services to them, we will speed up development of upstream and downstream industries.

We will absorb R&D institutions dedicated to bioengineering, chemical, optical and electronic projects with a view to attracting foreign businesses in relevant industries.

We will offer better investment attraction activities, including news briefings and business talks to strengthen contact with foreign business people.

And finally we plan to improve administrative efficiency. All administrative departments must solve problems raised by foreign-funded enterprises within 10 days. Those who fail to do so will bear related responsibilities.

In addition, we also devised a long-term program for development-to make Xiamen a coastal trade hub.

How do you define tomorrow's Xiamen as a coastal trade hub?

It should serve as a center in southeast China in air transport, finance, trade, tourism, exhibition, convention, culture, education and R&D sectors. It will also serve as a base for exchanges and cooperation between the two sides of the Taiwan Straits.

What is the point of making Xiamen into what you call a coastal trade hub?

The focus of building a coastal trade hub is to use the Xiamen Port and gulf resources to their full potential. Efforts will center on expanding the city's development space, increasing its economic aggregate, enlarging its economic ties with other areas in the region, and optimizing its economic structures and urban layout to enhance overall competitive edge.

Do you think the program will bring new business opportunities to the city?

Certainly. According to the program, Xiamen's area will expand from today's 560 square km to 1,565 square km. and its population will increase from 1.37 million to 3-3.5 million. This will provide huge room for industrial and business development and the construction of large projects. It will also lay a solid foundation for the city to increase its GDP and expand its markets. It is estimated that the investment for building the infrastructures necessary to make a trade hub will exceed 180 billion yuan (around $21.74 billion). When these projects are completed and put into use, they will bring stable returns from investors and create conditions for introduction of multiple operational models. These, in turn, will provide more opportunities to foreign investment.

We will give priority to air transportation, finance, commerce, trade, tourism, exhibition and convention, trade services and hi-tech sectors including IT and biotechnology.

Located between the Yangtze River and the Pearl River Delta areas, Xiamen is at the juncture of mainland coastal city belt and Taiwan. Taking advantage of this favorable location, we will strengthen the links with neighboring areas. Xiamen will play the role of a powerhouse in economic development of Jinmen in Taiwan, nearby Zhangzhou and Quanzhou cities, as well as in north Fujian Province, southeast Jiangxi Province, south Hunan Province and southeast Guangdong Province. This will provide room for cross-straits economic and trade cooperation and business opportunities for investors at home and abroad.

What special measures will you take?

We will take the following steps:

First, we will build a seaport, an airport and an information platform.

Second, we will develop hi-tech industries, speed up industrial upgrading and intensify cooperation with surrounding areas.

Third, Xiamen will strengthen investment attraction efforts by giving full play to the role of the CIFIT.

Fourth, we plan to build several logistics and commodity distribution centers in order to help big multinationals set up sale outlets in the city.

How is the construction process going?

Earlier this year, we redesigned the urban layout and reformed the city's personnel system. We have selected 79 main development projects. Some of them are now under way, including the urban train lines and a thermal plant.

What advantages does Xiamen have in terms of economic development?

After more than 20 years of development, the city now boasts a competitive edge, a solid foundation for further growth and a strong economic structure with the industrial sector as its backbone. The manufacturing industry makes up 76.2 percent of the city's GDP. In addition, hi-tech industries develop rapidly in the city. The city's 165 hi-tech enterprises engaged in computer manufacturing, visual and audio products and sensitive materials include famous brands like Xoceco, Dell, EUPA, and Amoi, which have big shares in domestic and international markets.