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Beihai development zones in full swing

By Mao Lijun (China Daily)
Updated: 2008-09-22 10:41

Construction sites are bustling, new factories abound and Beihai's development zones are in full swing.

The city's residents say that just a few years ago they would not have thought such vitality possible. But now the city is on its way to becoming one of Beibu Gulf's big economies, as more manufacturers migrate there from the eastern part of the country.

The industry shift from the Yangtze and Pearl river deltas has brought an enormous development opportunity to Beihai, a coastal city in the Guangxi Zhuang autonomous region.

Beihai lured 35 projects from the eastern region in the first half this year, with total investment of 17.667 billion yuan ($2.59 billion), according to the Guangxi statistics bureau. Actual capital used in that period was 2.61 billion yuan, accounting for 58.2 percent of that for the whole autonomous region.

"Beihai has made a great breakthrough in getting industries from the eastern region, thanks to its rich harbor, ocean and land resources. The development trend is good," Lian Nongyou, the mayor of Beihai, says.

But Beihai is not the only city in Guangxi to benefit from the industry migration. Companies are being won over by lower costs in the Beibu Gulf for labor, land, water, electricity, raw materials and logistics, as well as new development zones.

Manufacturers began shifting to the Beibu Gulf after the area's development plan was approved.

The Pan-Beibu Gulf Sub-regional Economic Region was launched in 2006 by Guangdong, Yunnan and Guangxi, along with six Southeast Asian countries - Vietnam, Singapore, Malaysia, Indonesia, the Philippines and Brunei.

The State Council in January upgraded the status of the Guangxi Beibu Gulf Economy Area to a national development plan.

With a population of 12.55 million and a land area of 42,500 sq km, the Guangxi Beibu Gulf Economy Area is the biggest multi-regional cooperation area in the country, covering the administrative areas of four major cities - Nanning, capital of Guangxi, Beihai, Qinzhou and Fangchenggang - which together are known as "NanBeiQinFang".

The area's development plan is already bringing industry and investment to NanBeiQinFang, and Beihai is leading the way.

"Establishing Beihai as central to the Beibu Gulf Economy Development Area is of great significance for realizing the development strategy," Wang Ronghua, president of the Shanghai Academy of Social Sciences, says.

Bringing the phoenixes

"Bringing industries from the Yangtze River Delta and the Pearl River Delta to encourage cooperation in key fields is a must for the development of Beihai," Wang says.

Beihai is trying to draw companies from the delta areas by "building nests to attract phoenixes" and "attracting phoenixes to build nests". The city is being redeveloped to bring the investment it needs in order to grow.

Beihai's fixed-asset investment from January to July was 13.391 billion yuan, according to the Guangxi statistics bureau.

"That investment reinforced construction in port, railway, highway, airport, communications, water supply and power facilities," Lian says.

"Beihai's infrastructure construction has resulted in an efficient transport network within the city," he says. The Chengdu-Beihai highway is already open. The railway has been extended so that it runs to the terminal at Beihai Port. There are now more than 20 daily round-trip flights linking Beihai with cities such as Beijing, Shanghai, Guangzhou and Shenzhen.

Beihai Port has shipping and trade exchanges with 218 harbors in 98 countries and regions across the world. It is the only city in western China with airport, port, railway and highway access.

"Beihai's logistics environment has been greatly improved. And we are enjoying an enlarging market. Beihai is now the most important base in Huike," Lu Jihui, chairman of Beihai Huike Electronic Co Ltd, says.

Lu shifted his company into the Beihai Export Processing Zone in April 2006, but he considered a return to Shenzhen several times because of the high logistics costs.

The new transport network has changed all that.

Huike Electronic is one of Guangxi's top three businesses by import and export value, with production capacity of 60,000 units a year.

"When we were in Shenzhen, we had 20 percent of the market share in the ASEAN region. But since we moved to Beihai, our market share has steadily risen. It's now at 40 percent," Tang Jianming, deputy general manager of the company, says.

"Instead of going back to Shenzhen, we will continue to increase our production capacity here," Liu says.

Beihai's investment environment was the real drawcard for Shanghai Darunfa Co Ltd.

"The sincerity and excellent services from Beihai municipal government was the main reason we decided to invest in Beihai," Dai Jiezhen, head of Beihai Darunfa Supermarket, says.

Wu Zhiyuan, chairman of Fudaxing Electronics Corp, agrees.

"Beihai government is very efficient compared with the eastern area, let alone the west."

It has taken Fudaxing Electronics just two months from the decision to invest to finishing building work on a 2,000-sq-m plant and putting it into operation.

The Beihai government is improving the city's infrastructure and investment environment to attract world-class companies. It wants these companies to ultimately drive the development of local industries and help build the city's infrastructure.

Nearly 80 percent of Beihai's 13.391 billion yuan in fixed-asset investment in the first seven months was made by private investors, according to the Guangxi statistics bureau. Previously, the government was the major investor in infrastructure construction.

But as Beihai prospers, its environment is deteriorating.

The city's climate, beach, port, quartz sand (a mineral consisting of vitreous silica), and kaolin sand (a mineral consisting of aluminum silicate) have brought investors.

"The development of Beihai should be on the premise of protecting its ocean and fishing resources," according to Robert Mundell, winner of the 1999 Nobel Economics Prize and a professor at Columbia University.

James A. Mirrlees, winner of the 1996 Nobel Economics Prize and a professor of Cambridge University, agrees.

"Beihai is a place of fishery. Fishermen can go fishing without paying any money. But the tourism and industrial development have led to extinction of some fish species, including codfish. Beihai should take environment protection into consideration."

Lower labor costs give Beihai an advantage in luring investment, but more emphasis must be placed on improving locals' living standards, Mundell says.

Water service and sewage treatment provider Veolia Water recenty signed a deal with the Beihai government to help it reform the city's water supply system and improve the quality of drinking water.

"To realize sustainable development, Beihai must protect its ecological environment - not only to benefit the local people, but also to bring more investors," Su Pei, chairman of Veolia Water Service South China Co Ltd, says.

In addition to environment protection, the Beibu Gulf Area will try to learn from the experience of the Yangtze and Pearl river deltas, the Shanghai Academy of Social Sciences' Wang says.

"Compared with the Pearl River Delta and the Yangtze River Delta areas, which have enjoyed a long history of manufacturing activities, the Beibu Gulf will take a new development approach. It will set up networks with support and service facilities to really enhance this gathering of technology and professionals," Yang Mo, a senior researcher at the National University of Singapore's East Asian Institute, says.

When Huike Electronic first settled in Beihai, it had to transport materials from Guangdong province, which pushed up its costs.

The company got around the problem by setting up its own projects in Beihai. But smaller producers did not have the resources to solve such problems on their own.

That situation is changing. The local government is helping companies to set up support projects and instead of trying to lure single companies to Beihai, it is trying to bring entire industry chains.

China Great Wall Computer Shenzhen Co Ltd is one example of this strategy. When the manufacturer settled in Beihai Industrial Park, the local government also brought in a batch of companies to support it.

Total investment from these companies, including Shenzhen Kuaixunda Machinery Co Ltd and Shenzhen Guangjutai Plastics Industry Co Ltd, exceeds 120 million yuan.