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Western Region Development: A Cynosure for Foreign Investors
2004/03/09
The implementation of the western region development strategy brings with it
bounteous commercial opportunities. This lures foreign investors as well.
Lai Bingrong, Vice-President of Motorola, comments that transnational companies
will not ignore the western regional market and its lucrative investment
returns.

Motorola's investment in Sichuan Province alone has exceeded U.S.$300 million.
Recently, the company established a Motorola Town in Chengdu, the provincial
capital. This is another major headway made by the company after its
establishment of the 100 million yuan network research and development center in
Chengdu.

Some adverse factors still remain in attracting foreign funds in the western
region, such as the inferior investment environment, underdeveloped
communications, lack of managerial talents and poorly-educated labor forces.
However, the fast-growing economic globalization and trade liberalization have
fostered bounteous investment and cooperation opportunities.
CPPCC Member Luo Kangrui is of the opinion that the western region possesses a
unique charisma which attracts foreign businesses. First, the under developed
region, with comparatively less market competition, enjoys great potential of
development. Second, the regions are endowed with opulent land, energy, and
mineral and biological resources. Third, the labor costs are comparatively low.
Fourth, the State has offered preferential policies to investments in the
region. Last, the key cities in the region like Chongqing and Xi'an have fairly
strong scientific research forces, which is desirable for the development of
high-tech products and products with a high added value.
Now China has opened more than 10 sections in the western regions to foreign
investment, including banking, insurance and telecommunications. The conditions
under which foreign enterprises restrictions on are allowed to establish
enterprises and restrictions on the share-holding ratio have also been relaxed.
China welcomes foreign banks to set up representative offices and branches in
the area and encourages foreign businesses to invest in agriculture, water
conservancy, transportation, energy, raw materials, environmental protection and
other projects in the western regions.

During the Third Session of the Ninth National People's Congress, Shi
Guangsheng, Minister of Foreign Trade and Economic Cooperation, noted that in
implementing the strategy of western region development, the State will adopt a
series of preferential policies to encourage foreign businesses to invest in
central and western regions.

These policies are: To select advantageous sectors and projects in the western
regions and make a specific catalog serving as a guide to foreign investments.
The items included in the catalog will be entitled to preferential policies as
stipulated in the Industrial Catalog Guiding Foreign Investment. As of January
1, 2000, foreign-funded enterprises in the western region that fall into the
category encouraged by the State will enjoy a reducted 15-percent enterprise
income tax for three years after the expiration of extant preferential tax
policies. Foreign-funded reinvestments are entitled to preferential policies
granted to foreign-invested enterprises on condition that foreign fund exceeds
25 percent of the total. All the opening areas and pilot projects allowed in the
eastern region may be carried out in the central and western regions
simultaneously. Foreign-invested enterprises in the eastern region are allowed
to contract, operate and manage foreign and domestic-funded enterprises in the
western region. The economic and technological development zones in the capital
cities in the region may be upgraded to State-level development zones upon State
approval.

Shi added that the State will work out more policies and measures to encourage
foreign investment in the western region in accordance with the changing
situation. All this is aimed at speeding up the development of the local
economy.

To foreign investors, these policies and measures are of tangible benefits. To
date, both the subjective and objective conditions in developing the western
region are different from those for the development of the east region two
decades ago. By the end of 1999, China's exchange reserves had reached US$155
billion, which was inconceivable 20 years ago. Moreover 20 years of explorations
in China, foreign investors are more confident and experienced in participating
in China's development. This, plus the growing possibility of China's accession
to the WTO, will provide new impetus to attracting foreign investors.
In fact, the western provinces have been seeking international cooperation to
develop the local economy for years. Nearly 40 transnational companies have
established businesses in Sichuan Province there, including Motorola, P&G,
Siemens and Toyota. The number of foreign-invested enterprises in the province
has succeeded 5,000.

Yunnan Province now boasts more than 320 projects funded by Taiwan enterprises
with combined investment surpassing US$177 million. Most of them are in the
catering, timber processing and real estate sectors.

In Chongqing Municipality, Siemens has been expanding its range of business in
industry, energy, information, transportation, medical apparatus, household
electrical appliances and many other fields. It is also planning to cooperate
with Chongqing in many areas. Some key infrastructure projects, such as sewage
works, light-rail transportation and the gas supply network. The company
declares that by actively participating in the development of the western
region, it aims to lay a foundation for its business expansion in China's
central and west regions.

Up to now, the western region has registered more than 15,000 foreign-funded
enterprises, boasting a total investment of U.S.$70 billion.
Some related personage believes that so long as the investors can make full use
of the western region's advantages and grasp the pulse of the market, they will
be rewarded with handsome economic returns.


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