Qingdao worker Cao Xiuzhen knows she is lucky to see her 50-year-old dream finally come true - having her ramshackle house renovated. The 78-year-old retired worker of the city's No2 Printing and Dyeing Factory in Licang district that went bankrupt in 2000 said she was more than satisfied with the government-led renovation project. The four-month project, which was completed in June, not only reinforced and whitewashed her small and shabby house, where she and her 81-year-old husband have lived for 52 years, but also added a kitchen and toilet to the original house, which is about 34 square metres. 'Our house had been too dilapidated and we are too poor to renovate it ourselves, let alone be able to move out,' Ms Cao said. The couple is one of 227 families, all living in four decaying buildings in the factory compound, who have been helped by the nearly 10 million yuan project, part of a government-sponsored pilot scheme aimed at bringing comfort to the needy. While residential flats in the area selling for an average of 4,500 yuan per square metre, Ms Cao paid only 3,000 yuan for the facelift and the government spent more than 40,000 yuan on each family. The authorities have promised to help a further 4,000 families in the district, mostly laid off workers living in 106 buildings classified as 'dangerous', in the next three to five years. But the bill of up to 200 million yuan will almost certainly place tremendous strain on local finances. And Licang is only one of seven districts in the old industrial city once famed for textile, chemical and shipping and manufacturing industries, where retrenchments from large state-owned factories peaked in the 1990s. There is no official figure for the total number of laid-off workers in Qingdao. But at least 212,000 people lost their jobs between 1994 and 1998, local government statistics show. 'About 70 per cent of Qingdao's people live in low-rent houses provided by the government,' Du Shicheng , Communist Party secretary of the 7.4 million-strong city, said proudly. Mr Du has reason to feel proud: Qingdao, which has been viewed as a fine example of China's economic success story, has attractive sea views and the country's most famous beer and other top brands such as Haier and Hisense. It also boasts a 113-year port, which is the mainland's third-largest container terminal, ranking 13th worldwide. Shanghai and Shenzhen are the two largest mainland container ports. It is also the base of the People's Liberation Army North Sea Fleet and nuclear-powered submarines and home for 60 per cent of the country's top marine research institutions and academics. Hong Kong Boulevard, the city's showcase road, fronts the city government building and the Olympic Regatta venue and is lined with banks, luxury goods stores, restaurants and bars. It makes Qingdao look like any other flourishing mega-city in the country. The long colonial history of Germans, Japanese and Americans - which roughly spanned five decades until the end of the second world war - has left a diversified cultural legacy that is now a draw for tourists. Its relatively well-preserved old quarter is full of red-roof European-style buildings, including German-built churches from the time of its 20-year occupation from 1897. There are about 200 exotic villas, built in the 1930s, scattered along the beach and a wealth of flora and fauna in the area of Badaguan, which means Eight Great Passes. But just a few kilometres away in the north, hundreds of people crowd the tumbledown houses with crumbing red tile roofs in the old quarter, a haven from the noisy construction sites and bustle of the city. 'It's a phenomenon in Qingdao that has been described by the public as Europe in the south of the city and Africa in the north,' a city official said. 'Aware of the widening gap between the rich and poor in the city, the government has endeavoured to give more attention to help needy people,' he added, citing the renovation project in Licang. Many local officials are proud of the construction boom, from Olympic venues, hotels, residential and office buildings to industrial parks and highways. They are also complacent about the prospects of their city, which is set to lead the province in the years to come in Shandong's campaign to compete for a leading position in northern China, notably with Tianjin's Binhai district. It is part of a grandiose 15-year provincial development plan aiming at competing with the Yangtze and Pearl river deltas. Shandong's gross domestic product has surpassed Jiangsu and it became the second-largest provincial economy after Guangdong in 2004, largely thanks to billions of dollars injected into heavy industries and infrastructure. The province recorded an average 30 per cent rise in infrastructure investment in the past five years, reaching more than one trillion yuan last year. Qingdao is no exception. A 280km coastal road is about to open next month to link Mount Langyatai and Tianheng Island and encompassing all the satellite cities. A 6km cross-sea tunnel costing at least 3.2 billion yuan and linking the city with Huangdao, where its new industrial base and port is located, has been planned. The biggest project, a 35km cross-sea bridge on which work started last year, will cost 10 billion yuan. The bridge, said to be the start of a national road link to Lanzhou , Gansu province , is expected to be finished ahead of the 2008 Beijing Olympic Games, the city government says. Although Qingdao was officially named Shandong's economic engine for the first time this year after outstripping the capital, Jinan , for years, it has yet to translate that into a convincing edge over other cities in the province. 'Despite a great deal of talks about co-operation, Qingdao has to face fierce competition from other cities in the province, especially from Jinan and the rising industrial city of Yantai ,' a local economist said. 'While the city's economic success attracts praise, it also has become a target of competition and envy, especially within the province. In this sense, Qingdao, one of five designated cities in the mainland which fall under the control of both the State Council and the provincial government, is always on the verge of being marginalised.' Analysts said people in Qingdao were still obsessed with its past glory as a quasi-municipality for more than two decades before 1949 and as one of the three national textile centres in the mainland until the late 1980s. 'There has been speculation every few years that the city would become the country's next municipality after Chongqing ,' the economist said. 'Qingdao people may feel excited over the rumoured prospect of breaking away from Shandong, but such talk only attracts sour looks from the provincial authorities and other cities and is not good for Shandong's rise as a whole.' Zhao Libo , a professor from the Qingdao party school, said that despite the city's rapid rise, it lagged behind some southern cities in Jiangsu and Zhejiang , such as Suzhou . 'By the standard of cities in north China, Qingdao has made remarkable progress. But actually, the gap between Qingdao and leading cities in Jingsu and Zhejiang has been widening,' he said. Although the city boasted some of the country's best-known brands, local enterprises were largely old and state-owned, while their southern competitors, mostly private companies, injected vigour in economic development. Apart from outside competition, the city also has a dilemma: in its aspirations to become a national hub for petrochemical and manufacturing, pollution hazards risk damaging the fragile aquatic environment that is key to its goal of making tourism a pillar industry. But local officials dismiss such concerns. 'In the light of the pollution problems, the government has decided to move the industries to rather remote areas, which are scarcely populated and relatively far from tourist sites,' said Wang Wei , the propaganda chief. He also rejected criticism over Qingdao's soaring property prices, which many locals said had put home ownership out of reach. 'Compared with other cities, such as Shanghai and Hangzhou , the property market in the city, which boasts clean air and beautiful sea views, should have room for affordable prices,' Mr Wang said.