LIANYUNGANG Economic & Technical Development Zone is to offer free space as an incentive to foreign investors in response to the abolition of preferential treatment for foreign-funded companies.
The zone's management committee director, Zhang Lianyun, said: 'The central government is adjusting its policies on foreign-funded enterprises. In light of this, we have been studying ways to ensure we remain attractive to foreign investors.
'These include the offer of free accommodation for investors in our economic and technical development zone as the cost of factory space and wages outside China is high.' The size of space offered would depend on the amount of investment and machinery, he said.
'This policy should be attractive to small and medium-sized companies in Hong Kong and Southeast Asia,' Mr Zhang said.
The rental exemption would last for three years.
Land transfer fees in Lianyungang are about 112 yuan (HK$104) per square foot and rentals about one yuan per sq ft.
Another strategy adopted by the zone is to pay commission to anybody bringing investors into the zone. A reward of 0.5 per cent of the total investment made in the zone will be paid.
The strategy is said to be modelled on international practice but the rate is about 0.2 to 0.3 per cent higher than elsewhere.
Mr Zhang said the zone had been relatively slow to develop because of its previous role as a military base.
'Like Weihai and Xiamen, Lianyungang as a former military port has had a rather weak industrial base,' Mr Zhang said.
Unlike the other two former military ports, Lianyungang's economic development did not accelerate significantly with the opening of the country to the outside world.
The economy of Weihai was buoyed by a lift in passenger and cargo freight after Beijing allowed direct sea links with South Korea.
Xiamen, meanwhile, was boosted by an influx of investment from overseas Chinese originally from the city.
Although Lianyungang had lacked these advantages, Mr Zhang said the city still had its assets.
He said: 'The good port facilities have been our unique asset compared with other economic development zones in the country, which helps draw foreign capital to the zone.' Lying about nine kilometres from the port, the zone grew from its original three square kilometres to 5.4 sq km.
Being the eastern terminal for the second Eurasia continental railway had also brought in many companies from inland regions such as Anhui and Henan to the zone, Mr Zhang said.
Mr Zhang said investors would find labour costs in Lianyungang favourable compared to other coastal cities.
Wages in Shenzhen should be more than twice Lianyungang's, he said.
The average monthly wage in Lianyungang was about US$50 to $60 (HK$387 to $464), with medical, retirement and other benefits a further $40 to $50 a month.
The city's resources are a major asset.
An abundance of water and electricity made the city appealing to investors, said Hu Shibin, director of Lianyungang Planning Management Bureau and deputy director of Lianyungang Urban and Rural Construction Commission.
'The northern part of China has a severe shortage of water while the southern lacks electricity.
'But we neither lack water nor electricity,' he said.
The city provides electricity at about 40 cents a unit compared with 60 cents a unit in Hainan. It consumes half of the output while the rest is supplied to sites outside the city.
In a country where electricity shortages are common, it was one of the few places that could afford to supply electricity to other areas, Mr Hu said.
Mr Zhang said plentiful resources such as vegetables, seaweed and crystal in the area had helped support industrial development in the zone.
The city area possessed 60 per cent of China's crystal with 50 per cent of national production coming from Lianyungang.
Last year the zone collected a record 100 million yuan (about HK$93 million) in tax income compared with 70 million yuan a year earlier.
There were more than 1,200 enterprises in the zone investing a total of 500 million yuan.
A sixth of the enterprises were foreign-funded, including LG Group from South Korea and Chia Tai Group from Thailand.
More than one billion yuan was invested in developing infrastructure, funded partly by government borrowing and partly by foreign investors.