XIAN, once one of the top trade centres of the world, is actively striving to regain its past splendour. Also named Changan in ancient China, Xian is the cradle of Chinese civilisation and was once the centre of economy, politics and culture. It experienced the rise and fall of 13 dynasties. It was also the starting point of the Silk Road trade route. Due to its strategic location, it made significant contributions to the development of economic and cultural exchanges between the East and West. Now, in the eyes of foreigners, Xian epitomises terracotta warriors, ancient tombs and a well preserved city wall. But for Xian people, despite a respect for such rich cultural relics, these things are all history, and the immediate task is to ''re-open the Silk Road and regain its faded glory''. Behind the slogan used for the latest modernisation drive lies Xian people's deeper craving for progress and a more pivotal role in the economy of western China. The local population now amounts to 6.17 million, with 2.87 million living in the city proper, which covers an area of 861 square kilometres. However, to place the city on the track of economic reform needs more than a sense of attachment to old glory. ''As an inland city, Xian lacks entrepreneurial spirit, and is not used to the level of competition with the outside world enjoyed by the coastal cities since China's economic reform,'' said mayor Cui Lintao. ''However, it should be remembered that Xian previously had long been open to the outside world; the closed-door culture developed only after the fall of the prime Tang Dynasty.'' Mr Cui admitted that Xian had a long way to go before catching up with the coastal cities in developing its economy with the help of foreign investment. He believed the present problem was how to convert Xian's potential into an economic reality. The city stepped up its drive for foreign investment over the last two years by promoting three advantages it offered: First, the State Council's policy to open up the central and western part of China to outside investment has been made very clear, and the preferential treatment for foreign investors is comparable with that for the coastal cities. Second, Xian possesses advantages which other localities lack. In terms of production costs, for instance, workers in Shenzhen and Guangzhou are getting 600 yuan (HK$800) per month, while their counterparts in Xian would live on 300 yuan per month. Third, the city enjoys a well-educated workforce. About 20 per cent of its workforce possesses technical skills of one kind or another. Its ability in scientific research is second only to Beijing and Shanghai. Xian's strategic location is also an attraction for foreign investors, who tend to put the city alongside Wuhan as pivotal cities in the western and central part of China. Since China launched its economic reform programme in the early 1980s, overseas investors have concentrated on the hotel and tourism industries, and only recently has the focus shifted to industrial development. ''The last two years saw the fastest growth in investment. It is also more more diversified than before,'' said Mr Cui. Real-estate has also become a major focus for foreign investment since last year. Overseas interest, from Hong Kong in particular, is concentrated in urban renewal and infrastructural projects. ''After a short hiatus after macro-economic controls were imposed, foreign investment has been on the rise again, with a renewed interest in property development,'' said Mr Cui. Up to the end of August 1993, accumulated foreign joint ventures numbered 855, with total investment at about US$2.7 billion (HK$21 billion). In the year to the same period, about 400 foreign joint ventures had been signed, with total investment at US$1 billion. Xian has become a leading city in China's materials processing industry. It is also an important base for aeronautics, transferential equipment, meters and instruments, electronics, textiles, watches and sewing machines. Mr Cui admitted that a higher transport cost and a lack of communications facilities were major stumbling blocks for industrial investment. However, with the improvement of the road and rail systems and the telecommunication network, a much better investment environment will gradually be in place, he said. Xian's new international airport, the first phase of which has been completed, has a transport capacity of 2.3 million passengers a year, and has connected the city with all major Chinese cities, Hong Kong and Nagoya in Japan. As for land transportation, the Longhai Railway has been rebuilt, and has doubled the original freight volume. Also, the expressway to the northeast has been opened to traffic, and one to the southwest and south is now under construction. On the financial front, Xian is endeavouring to shape its economic enterprises under the framework of a market economy. According to Shaanxi provincial vice-governor Liu Chunmao, the Xian government hoped to get approval from Beijing by the end of the year to list two Xian companies either on the Shanghai or Shenzhen market. One is a refrigerator manufacturing company, while the other is Shaanxi International Trust and Investment Corporation, a conglomerate with a diversified business base. As to the effect of Beijing's macro-economic control on Shaanxi's economy, Mr Liu said the measures had benefitted the province by putting a stop to the flight of capital from the inland province to the coastal cities. The capital flight, mostly speculation-driven, was facilitated by interbank lending. Mr Liu said the measures had not only tightened lending by mainland banks, but Shaanxi had also seen a softening in capital flight.