By Duan LuoLan
The Eighth China International Fair for Investment and Fair (CIFIT),
only national-level trade and investment event, has pledged to help rejuvenate
three industrial provinces in Northeast China.
Known as China's traditional industry base, the three provinces -- Heilongjiang,
Jilin and Liaoning, are embracing a bright future thanks for the central
government's strategy to boost their development.
The provinces saw remarkable improvement in attracting and using foreign
direct investment (FDI) in the past two years. In 2003, the provinces
used US$7.19 billion foreign investment, more than double that of 2001.
However, experts pointed that to secure sustainable and sound increase
in attracting FDI, the three provinces should make breakthroughs in the
First, maintain advantages in labour resources in the long term.
Factors such as advantages in labour resources, technological level,
market potential and global strategies designed by multinationals are
critical to a country's ability in luring foreign capital.
Different from those in the labour-intensive industries in southern coastal
areas, workers in Northeast China are mostly laid off from State-owned
large-sized enterprises, said Zhang Hong, director in charge of training
department under the bureau of Heilongjiang Labour and Social Security.
These workers are skilled in using machines and they have considerable
experience working in modern industries. In the following five years,
Heilongjiang will see some 800,000 more workers in State-owned enterprises
go on to the market when their current employment contracts expire.
It is the labour resources that will play key role in attracting foreign
investment, said Zhang.
Even so, Zhang said the three provinces should improve professional training
so that they can keep the leading status in the long run.
The provinces should set up a stimulation mechanism to cultivate highly
Second, stick to regional competition and co-operation.
Since the three provinces have similar backgrounds, local governments
competed in attracting foreign investment, resulting in unnecessary loss.
Lacking communication, the three provinces drafted similar schemes in
propelling automobile manufacturing, green agriculture, biological pharmacy
and petrochemical industries.
The three province should co-ordinate in working out their development
Complementariness among the three provinces can increase their competitiveness
as a whole, said Song Donglin, vice-director of the Economy School in
Attracting and using foreign investment should be adjusted by the market
instead of administrative methods so that the local economy can benefit
from introducing dynamic capital, said Song.
Third, paying equal attention to companies of varied sizes:
The three provinces should concentrate on establishing enterprise groups
which can attract better attention from foreign investors, said Song.
However, Song and other experts questioned certain local authorities
who only target bringing the world's top 500 big names.
Small and medium-sized foreign companies have special abilities in reducing
unemployment and increasing taxation. Introduction of foreign funds to
these companies can optimize the economic structure of the three provinces,
The continued flow of foreign investment
into overheating industries will not block the government's effort to
control these areas, but offer a lift, analysts say.
Foreign investors in steel, cement, aluminium and real estate have
not been dissuaded since the government announced these industries were
overheated and acted to curb money flow into them.
In the past few months, Morgan Stanley has entered into co-operation
agreements or established joint ventures with various mainland property
developers, including Goldfield Industries, Shanghai Fudi, Yongye and
ING, one of Europe's largest financial institutions, has gone into
partnership with Beijing Capital Land to establish an investment fund
targeting mainland properties.
BlueScope Steel Limited, Australia's leading steel company, has announced
the construction of a major new flat steel metallic coating and painting
facility in Suzhou Industrial Park in China's Jiangsu Province.
The capital cost will be approximately A$280 million (US$196 million),
and the facility is expected to be mostly completed by 2006.
Central government efforts to cool off these sectors have created a
vacuum for large chunks of investment funds from abroad.
"The government's steps to cool the overheated industries are
mostly financial ones, including raising bank reserve requirements and
curbing loans to these sectors," said Zhao Jinping, an expert from
the Research and Development Centre of the State Council.
"These measures, generating a big impact on domestic companies,
have little effect on foreign investors," Zhao said.
He said the foreign investors would take opportunities to enter overheated
industries, which are often equivalent to fat profits.
He said the government should have an eye on the trend. But he said
that the foreign investment would not pose a threat to government moves
to curb overheated industries, which are targeting overlapping investment
in the low-end of the industries.
Jin Bosheng, an analyst from the Chinese Academy of International Trade
and Economic Co-operation, echoed Zhao, saying that foreign investment
would help upgrade and optimize the structure of overheated industries.
"The government made it clear that they would only curb investment
in overlapping construction, or where there was high energy consumption
or great pollution. They did not ban investment in those industries,"
He said the government still welcomed foreign investors and that foreign
investment in these sectors was at a reasonable level and was not part
of the overheated problem.
The government is also keen to continue attracting foreign investment
as it has become an extremely valuable way of gaining technical and
management expertise that can be used to improve China's domestic firms.
For example, steel projects invested by foreign investment boast technology
10 years in advance of China's.
The Ministry of Commerce has taken a series of macro-control measures,
including more stringent examination and approval of foreign-invested
projects in overheating sectors, straightening out development zones
and curbing blind investment in commercial areas, according to Yu Guangzhou,
vice-minister of commerce.
But Yu said the
ministry will give the green light to those at a high level.
He said foreign investment in China's high-tech sectors increased significantly
Contractual foreign investment in specific equipment, general equipment,
computer and communications equipment, the three major manufacturing
sectors in high-tech industry, increased by 195, 75 and 73 per cent
respectively in the first half of the year.