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SCMP Reporter

SHIJIAZHUANG never has been a glamorous city, compared with its rich neighbours, Beijing and Tianjin, which capture a substantial amount of foreign investment.

  The small capital of Hebei province is like a humble brother longing for a glance from foreign investors who might have found the atmosphere in Beijing and Tianjin too competitive and expensive.

  Shijiazhuang (pronounced SURE-geeah Jwong) is a slow-starter because Beijing only granted it the preferential polices enjoyed by coastal cities in 1992.

  From 1978 to the end of last year, it accumulated contracted foreign investment worth just US$520 million.

  About 40 per cent of the amount only came after patriarch Deng Xiaoping's tour of the south, in 1992, which expedited growth across the nation.

  Nevertheless, Shijiazhuang nurses ambitions of becoming a leading Chinese metropolis by 2000, with the most open and developed market in Hebei.

  Achieving that is bound to be an uphill task for this city of 8.36 million people who have yet to be mentally prepared for an economy opening to the world and to market economy.

  Vice-mayor Li Hongying said the people of coastal cities such as Guangdong and Shanghai had grown accustomed to a liberal economy far earlier than those of Shijiazhuang.

   Old-fashioned, socialist ideas about planned economies have proved a hindrance in the city's march towards fast economic growth.

  Wang Ziqian, deputy director of the city's Foreign Investment Administrative Bureau, said Shijiazhuang's people hailed the sale of loss-making state enterprises, but they could not understand why the government had to sell profitable ones.

  A third of the state sector is in the red, a third is profitable and a third of manages to break even. When Best Wide Group bought a 50 per cent stake in Shijiazhuang Mianer Textile Co in late 1993, the Hong Kong firm spent months trying to convince its Chinese counterpart to change the factory's management system.

  Lee Yue-lung, the Best Wide Group chairman and an investor in Hebei since 1988, said the Shijiazhuang government was concerned about Sino-foreign joint ventures. It had a hard time accepting some of his recommendations, but he added the city it was generally 'quite fair'.

   The backwardness could sometimes work to its advantage, however. 'The city is more pragmatic,' said Mr Lee. 'It does what it can do. If it cannot do it, it will do it slowly.'   Shijiazhuang has 982 foreign-funded enterprises and Hong Kong heads the list of investors, accounting for more than 57 per cent of the enterprises.

  Owing to the stiff competition for foreign capital, Shijiazhuang officials make periodic trips to Hong Kong and western countries to promote the city. However, China's austerity programme has hampered its drive to attract foreign investment.

  Last year, only 300 foreign-invested projects were approved, with contracted foreign investment of $332 million, down 33 per cent in terms of approvals and 60 per cent in terms of contracted investment over those in 1993.

  But municipal government officials were heartened by the increasing size of foreign investment per project, indicating greater commitment by foreigners to the city.

  On average, foreign investors accounted for 53 per cent of registered capital in the first quarter of this year, compared with last year's 44 per cent last year.

  In attracting foreign capital, Shijiazhuang is certainly not comparable with Beijing and Tianjin in terms of status because both Beijing and Tianjin are directly under central government administration.

  'Our development strategy is to utilise our strength, but avoid what will be our weakness,' said Mr Li.

  Its strengths include a well-established industrial base, efficient transport network, strong back-up of professionals and low cost of land and labour.

  To become competitive, Mr Li said the city would make adjustments to its industrial structure, strengthen the establishment of its basic facilities, improve economic efficiency and enhance people's living and cultural standards.

  Underscoring its industrial strength, Shijiazhuang's industrial production accounts for a sixth of the province's total output. Industries such as textiles, pharmaceuticals, electronics, machinery, chemical and building material constitute its industrial backbone.

  The city is planning to make more value-added products for the international markets instead of exporting low-priced products with a view to enhancing its earnings.

  Shijiazhuang also is making efforts to improve its infrastructure. In December last year, the section of the highway between Beijing and Shijiazhuang, part of the ambitious Jianshen expressway between Beijing and Shenzhen, went into operation, cutting by half the travelling time between the two cities, to 21/2 hours.

  The section running from Shijiazhuang to Anyang is under construction, aided by loans from the World Bank.

  In February, the Zhengding International Airport went operational with 28 domestic flights using it. The airport is expected to be used for international flights next year.

  With the city's proximity to Beijing and Tianjin, Shijiazhuang hopes to be able to benefit from information, technology development, professionals and even foreign investors in the two cities.

  Since many multinational companies have representative offices in Beijing and Tianjin, Shijiazhuang municipal officials can visit them or invite them to the city without having to travel overseas.

  Finished goods also can be exported through the Tianjin port, reducing costs.

  But a dubious supply of water threatens Shijiazhuang's development.

  Shijiazhuang No.1 Pharmaceutical Factory's Yang Gengshui said the plant was forced to recycle water because of a shortage of underground water from the Taihang Mountain.

  To improve supply, the city plans to spend 500 million yuan (about HK$466 million) on a water plant to divert underground water from the mountain to the city.

  Other infrastructural facilities in the pipeline include construction of the second ring-road around the city, a gas supply plant, and an expansion of four other heating factories and second phase development of two power plants.

  Foreign investors' confidence in booming Beijing and Tianjin areas is certain to rub off on Shijiazhuang.

  However, the city's dream of becoming an industrial metropolis may take a while to realise amid the fierce competition for foreign investment by other Chinese cities.



Shijiazhuang to lure investors