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Web> Backgrounders> Business
UPDATED: December-13-2006 NO.26 JUNE 29, 2006
Five Ways to Revive Liaoning Province
Construction of development zones along the Liaoning Province coastline could be the next big attraction for multinational investors
By LAN XINZHEN

Though the infrastructure is still under construction, Li Wancai, Vice Governor of Liaoning Province, is highly confident about the future of the five key economic development zones along his province's coastline. "The five industrial zones and a string of flourishing cities are expected to be established by 2010," Li said on June 1.

The five key areas of Liaoning Jinzhou Development Zone, Dalian Changxingdao Development Zone, Yingkou Development Zone, Dalian Huayuankou Development Zone and Dandong Development Zone, all large tracts of salt marsh or wasteland, were designated as key development areas last August, with a provincial commitment of 30 billion yuan given for infrastructure.

An integral part of the ambitious plan is building a coastal road to link the five key development areas in order to achieve coordinated development. Liaoning locals, keen to see their stagnating region taking on a new lease of life, compare the five areas and the road to "a string of five pearls."

According to world economic development trends, coastal regions are one of the areas that have the greatest economic potential. Their access to the sea is a main factor in this trend, and it is this that makes these five development zones so attractive to investment--they all enjoy transportation advantages with their closeness to harbors. The province is located between the Bohai Sea and the Yellow Sea in north China.

The long-term plan for the five zones, according to Li, is to develop them into transport hubs for the international industries in Northeast Asia.

The five zones will become a new economic growth region in China after the Pearl River Delta, Yangtze River Delta and Beijing-Tianjin city corridor are fully developed. When the five zones mature, they can influence northeast Asia, said Li.

Development advantages

Bulldozers and trucks shuttling to and fro on vast areas of open space is the sight that greets visitors to the five zones and this is reminiscent of Shenzhen's development. However, after 20 years of development, Shenzhen and other coastal regions have all met with the same problem--they ran out of space in which to grow.

"That won't happen here," said a confident Li who boasts that the land resource is the biggest factor in the province's favor when it comes to the "opening-up process," citing the almost endless availability of beaches and brine pans along the coastline, all potential industrial land.

The overall area allocated to the five zones is 374.33 square km, of which 140 square km is for the preliminary development area.

With bottlenecks being created in other regions because of limited land resources, the space along the Liaoning coastline is attracting a number of investors, both local and foreign. In some instances the zones are even offering investors free land to develop.

Energy and labor resources are other distinct advantages of Liaoning. The province is rich in oil, coal and electricity supply. Seven out of the nation's top 10 refineries are based in the province, which has yet to experience the energy shortages that often plague the rest of the country.

Li said that as the country's former heavy industrial base, the unsuccessful transformation of some state-owned enterprises has resulted in a population of laid-off workers reaching 1.78 million, ample for any depth of development.

Liu Zhiqiang, Mayor of Liaoning's Jinzhou City, a designated development zone, supported the vice governor's optimism, adding that there are ample colleges and universities, together with vocational training facilities, which can supply investors with tailored talents.

Getting in and out of the development area is one aspect that has been given a lot of attention. Highways connect the five development zones, with each having its own harbor, and the five regions are also linked to the northwest of Asia by rail. Air transportation is ample with several airports in Shenyang, Dalian, Jinzhou and Dandong.

Being selective about investment

The opening-up of Liaoning is set against a backdrop of a move in 2005, in which foreign investment in China has been moving both toward the west of the country and toward the Bohai Sea region in north China. This is due to the saturation of development in east China's coastal areas. Liaoning's five key development zones have taken advantage of this trend.

In early April this year a trade delegation headed by Li Wancai toured Japan and South Korea to promote the blueprint of the five economic development zones. The three promotion conferences held in Tokyo, Osaka and Seoul drew a favorable response from the business world.

Twelve preferential policies, including tax cuts, tax rebates, loan discounts and financial aids are being made available by the provincial government to help attract investors. To date, inspection tour groups from international companies from the United States, Japan, South Korea and Singapore have visited the zones with 14 projects, each exceeding 100 million yuan in investment, in the pipeline. Among the 14 projects, three are under construction with a gross investment reaching 1.75 billion yuan; six projects have been signed with gross investment standing at 4 billion yuan; and five are still under discussion with a total investment of 13.7 billion yuan.

Each development zone has its own focal point of investment to avoid overlapping investment and possible competition, despite this being an issue, and to avoid any damage to the environment, manufacturers of industries with either high pollution levels or high levels of energy consumption have been denied access to the development zones.

"Our aim is to lure the hi-tech enterprises in the fields of biological engineering, new technologies and micro-electronics," noted Yi Qingtao, Director of the Collegium of the Dalian Changxingdao Development Zone. He admitted that during the initial phase of investment, industries with unacceptable pollution emissions and high energy consumers were being attracted to the region. They are being turned down, he added. "We have to endure this period of investment and we will insist on being extremely selective about our investors," said Yi.

The strategy of being selective about investors has won much praise. "We set high standards for ourselves from the very beginning. What we are about to build is a green economic zone with sustainable and scientific development," said Dong Chengfa, Mayor of Zhuanghe City.

Concerns do exist

Despite assurances from each of the development zones that they are all different in their facilities, each zone is developing a harbor with throughput exceeding 100 million tons. This has aroused concern from experts. After all, the annual port traffic of the province is merely 302 million tons. So do these zones have their sights set too high? In the Jinzhou zone, there are two ports less than 100 km from each other, raising the question: Is it an overlapping of facilities?

With the industrial structure, investment attraction policies and development environments of the five zones being quite similar, on the surface it seems that an element of competition is inevitable.

If one looks back at the 1980s, when China was undergoing reform and opening up, the development of the coastal areas in Liaoning followed the economic pattern of inland cities. Now that pattern has changed, so can local government make the adjustments to keep up with the change?

Li said they have already taken all these concerns into account. The government's organization, coordination work and guidance toward locating investors will be able to deal with these issues, he said.

"We are very confident about the future of the five development zones, although there are many difficulties ahead," said Li.



 
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