The city's location, port facilities and transport network are all factors in its favour, although much needs to be done to raise its profile with foreign investors.

It is the eastern terminal of the second Asia-Europe Continental Railway, which became operational in 1992.

Beijing sees Lianyungang as the eastern 'dragon head' which will enable the development of its vast hinterland.

Few foreigners know about the investment opportunities in Lianyungang but without their help a take-off remains difficult if not impossible.

Chairman of the Korean Chamber of Commerce in Hong Kong, Paek Chong-hyon, said: 'Lianyungang is only known to the Koreans as an industrial port; its other advantages are not yet known or well publicised.' Cargo flow through the port and railway has been disappointing, considering its closeness to Japan and Korea.

Li Xuecai, president and general manager of Lianli Water Meter Company, said Lianyungang's late start was due to its weak industrial base, the legacy of its former status as a military port.

'It's a good port but isn't fully utilised as the country has not put in enough money for its development,' Mr Li said.

'Not much talent comes here - they usually flock to developed coastal cities.' People were conservative and their thinking had yet to adapt to a market economy, he said.

'It is better now but still has some way to go compared with other cities,' Mr Li said.

Deputy mayor Cheng Zhipei disagreed that Lianyungang had lagged other open coastal cities in economic development.

'The pace of development since 1984 has been okay - not too fast and not too slow.

'The economic development of the city has been very rapid in the last two years,' he said.

'The growth of gross domestic product, which doubled in the past two years, has been the quickest among all cities.' Mr Cheng said the city would benefit from the fact that the central government had decided the development of the second Asia-Europe Continental Railway would be one of its focuses in the coming years.

This was in line with the central government's policy of narrowing the wealth gap between the coastal and inland areas.

The hinterland along the Lianyungang-Lanzhou-Xinjiang Railway includes Jiangsu, Shandong, Henan, Anhui, Shaanxi, Gansu, Shanxi, Sichuan, Qinghai, Xinjiang and Ningxia autonomous regions.

The 11 provinces and districts that the railway goes through have a population of 240 million.

The city would also benefit from the provincial government's policy of helping the development of northern Jiangsu, also in an attempt to reduce wealth discrepancies between the north and south.

It would be given another shot in the arm if a planned pipeline to carry gas from Turkmenistan in central Asia to Japan went through the city.

This would not only bring in more investment in the construction of facilities but also lead to greater freight flow.

Lianyungang Planning Commission deputy director Feng Qixiang said the city had already made much progress in luring foreign investors.

There had been about a 30 per cent annual growth in the amount of foreign investment in recent years with accumulated foreign investment reaching US$267.8 million.

'There has been a higher level of growth these years as the base was small and a little increase would translate into huge growth,' Mr Feng said.

'We expect to maintain this pace of growth during the Ninth Five-Year Plan (1996-2000),' he said.

'Lianyungang will have considerable growth from now on. Why? It is because we have developed our infrastructure according to the requirements of the central government, which created an ideal environment for investment in the future.

'All of these help lay down a good foundation for development during the Ninth Five-Year Plan,' Mr Feng said.

Officials said the city was a good site for investment as it had no problems with water or electricity supply.

Lianyungang's ability to speed up its growth has been hampered by the lack of a direct air link to the outside world.

The other two major ports in China which do not offer international flights are Rizhao and Qinhuangdao in Shandong.

With the transformation of the military airport into a civilian airport, Lianyungang has flights to Beijing, Guangzhou, Shanghai, Shenyang, Shenzhen, Xian and Xiamen.

Municipal officials understand well that any quantum leap in its economic development hinges on a breakthrough in its communications network, which has seen the city applying for more air and sea routes.

Mr Cheng said the city was fighting for a landmark decision in the start-up of international air links, possibly to Macau, Hong Kong, Korea or Japan.

Two of the four state-class highways built during the Eighth Five-Year Plan or to be built during the Ninth Five-Year Plan will go through the city.

One will run from the city to Torrogort in Xinjiang and the other from Tongjiang in Heilongjiang to Sanya in Hainan.

The first-class highway from the city to Jiangsu's provincial capital Nanjing will be completed this year, cutting the travelling time by almost half.

The city has a population of 3.6 million spread over 6,327 square kilometres. Of this, 550,000 live in the city with an area of 830 sq km.

Foreign retailers have yet to invade the city in a big way although income levels and retail sales have grown rapidly in the last few years.

Retail sales jumped 40 per cent to 5.29 billion yuan (about HK$4.86 billion) in 1994 while the first half of 1995 saw a jump to 6.44 billion yuan.

The average annual income for city and town dwellers rose 46 per cent to an estimated 4,150 yuan last year.

During the Eighth Five-Year Plan the city invested about 10 billion yuan in urban construction.

It is estimated that another 10 billion yuan or more is needed for fixed-asset investment during the Ninth Five-Year Plan.

City officials predict growth of 20 per cent in GDP over the next 15 years to reach about 225 billion yuan annually.

Lianyungang is dominated by small and medium-sized enterprises, supported by a plentiful supply of natural and agricultural resources.

Mr Cheng said the main focus would be chemical, electronics, machineries and building materials industries.

The structure of the economy would change as the city moved into higher value-added industries.

By 2010, primary industry would take up nine per cent of GDP, secondary industry 56 per cent and tertiary industry 35 per cent.

This compares with the current figures of 30 per cent for primary industry, 40 per cent for secondary industry and 30 per cent for tertiary industry.