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SCMP Reporter

CHINA'S official push to get foreign investors interested in the inland provinces has produced uneven results.

  Official figures showed that while some foreign investors were being lured gradually to the central region, western provinces were still largely ignored.

   Last year, the eight poorest provinces only managed to receive 14 per cent of Shanghai's growth in foreign direct investment.

   The provinces of Gansu, Yunnan, Guizhou, Xinjiang, Inner Mongolia, Shanxi, Ningxia and Qinghai attracted US$346 million in foreign investment - a mere one per cent of the $35 billion which flowed into China last year.

   Shanghai, on the other hand, was a hot-spot for such investment.

   Foreign investors put $2.5 billion into Shanghai, representing seven per cent of the country's total investment.

   'We can see that foreign investors are beginning to move to some second-line cities along the Yangtze River and the Yellow River region, where transport is more developed,' said Ju Youzhang, head of the State Planning Commission's foreign capital utilisation department.

  He said cities like Wuhan, Xian, Chongqing, Maanshan, Angqing, Jiujiang and Luoyang in the central provinces were becoming more popular with foreign investors because some of them could not afford the cost of doing business in coastal cities.

   Slowly but surely, foreign investors were moving into inland provinces including Sichuan, Guangxi, Hubei, Hebei, Anhui, Hunan, and Jiangxi.

   Last year, those seven inland provinces attracted $3.85 billion in foreign investment.

   Mr Ju said it would take some time before foreign investors were willing to move in droves to impoverished provinces such as Gansu, Xinjiang, Inner Mongolia and Qinghai because of their low income and antiquated infrastructure.

   'Although we hope to see a noticeable rise in foreign investment in these places in three to five years, it will take some time,' he said.

    Analysts said despite the western region's low wages and rich natural resources, few investors wanted to set up business because of the difficulties in transporting goods.

  One business consultant said: 'If you add the high cost of transportation to the cheap labour cost in these provinces, it works out to more or less the same as what you would pay in the coastal cities.'   This was why the bulk of last year's foreign investments continued to flow to coastal provinces like Guangdong, Jiangsu, Fujian, Shandong and Zhejiang.

   The consultant said although labour costs were soaring in the coastal cities, better developed transport systems helped to lower overall business costs.

   China's latest policy move to lure foreign investors has been to grant preferential tax advantages.

  Mr Ju said under China's planned tax system due out next year, vast sums of money from the richer provinces would be channelled to the poorer regions. That in turn would improve the investment climate by helping to finance the construction of roads, airports and a telecommunications system.

   'When these are ready, more foreign investors would be tempted to come in,' he said.



Western provinces lag behind in race for foreign investment