China Tells

(China Today) THE onset of the global financial crisis has made cooperation among PPRD members an imperative,” asserted Li Jinzao, vice chairman of Guangxi Zhuang Autonomous Region. Nanning, Guangxi’s capital, hosted the fifth PPRD Regional Cooperation and Development Forum in June, 2009. Mounting a united front to tackle the financial crisis was the primary focus.

Sichuan Province came with 546 projects worth RMB 418 billion, many related to post-earthquake construction. “Sichuan needs investment of about RMB 1.7 trillion for its recovery from the earthquake, to provide a real spur to the market,” said provincial governor Jiang Jufeng. In the first quarter of 2009, Sichuan’s GDP growth ranked seventh in the country, and the total volume of foreign trade was the nation’s second highest. The projects brought to the forum cover an array of sectors like high-tech, energy, manufacturing, agriculture, services, tourism and infrastructure. Cai Jing, deputy secretary-general of Sichuan, said the 63 preferential policies related to post-quake reconstruction provide a key advantage for the province.

Hong Kong and Macao carry special weight in the area not only for their geographic location, but also for their technological superiority and vast supply of capital. However, Hong Kong SAR chief executive Donald Tsang admitted that it was the close relationship to the mainland that enabled Hong Kong to maintain economic stability amidst the global meltdown, leaving them in a better state than other Asian export economies like Japan, ROK, Taiwan and Singapore.

By the end of April, the value of tariff-free products imported from Hong Kong and Macao to the mainland hit US $2 billion, representing tax exemptions of over RMB 1.3 billion. About 2,500 Hong Kong and Macao-based companies enjoyed CEPA (Closer Economic Partnership Arrangements) preferential policies, when they applied to invest in the mainland. Tsang believed “the PPRD is an important staging ground for further cooperation between Hong Kong and the mainland.” Three decades ago, it was in the PRD that HK enterprises started their mainland adventures. By 2008, HK investment had climbed to US $349.5 billion, accounting for about 40 percent of the total overseas investment in the mainland. “Hong Kong is able to provide mature financial and legal services, which are essential for mainland enterprises planning to explore foreign markets,” said Tsang.

Integration with ASEAN

“Guangxi should keep close ties with its neighbors in the east, west and south,” said Zhong Qiquan, a research fellow with the Guangxi Academy of Social Sciences. To the east lie Guangdong, Hong Kong, Macao and other industrialized regions. Western provinces like Guizhou and Yunnan have been listed in China’s Western Development project. To the south lies the ASEAN countries, a grouping of primary importance to Guangxi.

Even in the midst of the global financial crisis, bilateral trade between China and ASEAN surpassed US $200 billion in 2008, and mutual investment approached US $60 billion by the end of that year. The Sino-ASEAN Free Trade Area, expected to be established in 2010, will be the most populous free trade zone in the world, comprising 1.9 billion people. In terms of economic scale it will be the world’s third largest block, with a GDP of about US $6 trillion.

Therefore, Guangxi, Yunnan and other provinces adjoining ASEAN have become a focus for many eastern companies. Guangxi’s trade volume with ASEAN tripled from 2004 to 2008, with an annual increase of 37 percent. The ASEAN’s real investment increased four-fold, while Guangxi’s contracted investment in ASEAN grew 26 times.

Fangcheng Port in Guangxi has an annual handling capacity of over 45 million tons. Vice General Manager Zhou Yingxin claims that the throughput was about 17 million tons in the first five months this year, 11.2 percent higher than the corresponding period last year. As exports have decreased, the rise was mainly driven by imports of commodities such as coal, starch and other raw materials.

The shortest road from Guangxi’s Dongxing to Vietnam is about 50 km, while the sea route from Fangcheng Port to Vietnam is only 100 nautical miles. This geographic advantage has brought development money to Guangxi. According to Suo Yaozong, vice general manager of China Electronics Beihai Industrial Park, all 10 electronic companies in the complex are from other provinces, but target the ASEAN market.

The current average duty on imports from ASEAN countries is only 2.4 percent, and once the free trade zone is established in 2010, 90 percent of products will be exempt from tariffs altogether.

According to Zhou Yingxin, the key bottleneck in bilateral trade is the lag in railway construction. This situation is expected to improve soon. Vice Minister of Railways Wang Zhiguo states 11,000 km of railways will be constructed in the PPRD, bringing total track mileage to 30,000 km for the region. Some key routes include China-Vietnam, China-Myanmar and China-Laos.

Xu Zhengyou, executive director of the Hong Kong-based China Minerals Group Co., Ltd., signed a contract for a large-scale pulp mill in Beihai, Guangxi. As his company’s mineral investments in Australia have stagnated under the financial crisis, he has turned to Guangxi for sulfuric acid, and plans to dip a toe in new fields like pulp production. “The crisis demands we rise to the occasion,” he said. “We are undergoing a transformation in terms of production safety and technological upgrades.”

Win-win Situations

Ma Biao, chairman of Guangxi, claimed that the autonomous region has definitely benefited from regional cooperation. “We signed off on 8,745 trade and economic projects with other PPRD members from 2004 to 2008, bringing RMB 408 billion to Guangxi. Thus far, half of these capital commitments have been fulfilled.” These projects involved trade, transportation, energy, tourism, technology, information, and environmental protection.

Mr. Chen, a manager with a major real estate company in the eastern province of Jiangsu, carried home three bags full of project brochures collected at the forum, in an effort to find new opportunities. “The real estate industry is experiencing a downturn, so we wish to branch out into other fields.” His company has been negotiating with the Guangxi government on transportation. “Guangxi is a promising market as it is central to the Chinese government’s development plans,” Chen said. Being a member of the PPRD and close to the ASEAN area (the Association of Southeast Asian Nations), Guangxi has been given priority in China’s national development strategies.

For Guangxi, Yunnan and other southwestern provinces, regional cooperation means industry transfer and investment from more industrialized eastern provinces like Guangdong. For their part, these collaborative efforts enable Guangdong to explore a vast market and utilize the rich energy resources of western China. Guangdong enterprises started their “Go west” push in 2005, and 200 members of the Guangdong Federation of Industry and Commerce have brought RMB 29 billion and 40,000 job opportunities to Guangxi since that time. Eighty percent of the 43 companies in Guangxi’s Beihai Export Processing Zone, for example, were formerly in the east. Others came from Hong Kong, Macao and Taiwan.

Deng Zhihong, deputy magistrate of Shuicheng County, Guizhou Province, signed off on a coke project at the PPRD forum with an investor from out of the province. “Compared to our local factories, companies from the eastern coastal areas are generally more technologically advanced and environmentally friendly.” Deng regarded the event as a stage for attracting technology and investment from industrialized areas. He says the advantages of his home province are rich resources and low-cost labor.

Already a popular tourist destination, Hainan Province reached an agreement at the fair to develop a tourist route on the Beibu Gulf Rim in Guangxi. Hainan has also established barrier-free tourism plans with Guangdong, Sichuan, Yunnan and Hunan, sharing resources with these areas to lower the costs. As part of a “multiple destination tours” cooperation project with Hong Kong, Hainan received 120 cruises in 2008, a six-fold increase.

“The GDP of the PPRD reached US $1.59 trillion in 2008, compared to US $630 billion in 2003,” said Fan Hengshan, director of the Regional Economy Department with the National Reform and Development Commission. This means its annual GDP has increased by 13 percent, 2.5 percent higher than the country’s average. Furthermore, the State Council has explicitly brought the PPRD into its general strategy of coordinated regional development, providing even more opportunities to its members.

A Bonanza of Business Opportunities

Three months ago, a special inspection group comprised of 100 farmers from Hainan, Hubei and Guangxi went to Beihai and Guilin. Their mission was to find the right places to plant watermelons in July and August to sell during the October National Holiday. Watermelon farming in Hainan is often interrupted in summer by typhoons and heavy rains. The trip led to a trans-provincial cooperative, in which Hainan farmers supply seeds, fertilizer and know-how, while their counterparts in Guangxi provide land and funds.

This project is one of the many successful cases of PPRD cooperation. The 2009 forum and its trade fair involved more than 10,000 participants from across the PPRD. During the event’s three days, over 600 projects were signed, touching the realms of manufacturing, transportation, logistics, infrastructure, tourism, agriculture and agricultural product processing, in total representing capital of RMB 226.1 billion.