Caofeidian zone faces competition

According to the plan, Caofeidian will become a distribution center for ore, oil, natural gas, coal, grain and timber in North China.

There are, of course, downsides. Currently, the only things of note in the Caofeidian district, besides its ports and administrative buildings, are the iron- and steelworks, part of an industry operating at serious overcapacity.

And the fact remains that there already are plenty of deepwater harbors in Bohai Bay, including Dalian, Qinhuangdao, Yingkou, Tianjin and Yantai.

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The FTZ application plan submitted by Caofeidian does not explain how it will succeed in competing with the other large ports. The petrochemical, power, manufacturing industries and service sectors exist only on paper so far.

Cheap land is Caofeidian's chief selling point. As its application plan stresses, at 210 sq km, its area of industrial land is much larger than that of the other applicants from better-off Guangdong, Zhejiang, Fujian and Shandong provinces.

According to China Business News, by the end of last year, the overall investment in Caofeidian hit 280 billion yuan ($46 billion) for a total of 217 projects, one-third of which is undertaken by the government.

It is estimated that the Caofeidian administration's government owed to the bank nearly 40 billion yuan in loans last year. How much the other investors owe their creditors can only be guessed.

The sparsely populated Caofeidian downtown today poses a stark contrast with the government's ambitious plan to set up an FTZ - which also is the goal of at least 30 other cities.

Analysts warn that local governments should recognize that the central government set up Shanghai FTZ to encourage them to try out reforms in key areas, such as finance, rather than just meting out preferential land and tax policies to secure economic growth.

Zhang Yu contributed to the story.

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