From being a second-tier economy to ranking No2 among more than 30 provinces and regions in the country in the space of a few decades, Shandong has put into practice the Chinese proverb that latecomers can always surpass old-timers. With double-digit economic growth over the past decade, above the national average, as well as a long coastline with the best ports, well-preserved cultural heritage and some of the country's best-known brands, such as Tsingtao Beer and Haier, Shandong can claim to be one of the most successful regional economies. Last year, its total output was second only to Guangdong, with GDP rising to 2.6 trillion yuan (HK$2.9 trillion), or 10.6 per cent of the national total, behind Guangdong's 3 trillion yuan-plus, but larger than Jiangsu's 2.56 trillion yuan. But economists warn that the region's economy is 'large', without being 'strong'. Shandong lost much of its margin to its peers in terms of per capital GDP, disposable income and other measurements. While its total output and capita income were 2.5 times those in 2002, the province's per capita GDP of more than US$3,866 was little more than the national average of near US$3,000, and far short of the richest provinces and cities. Last year, disposable urban income was 17,699 yuan in Guangdong, 16,368 yuan in Jiangsu and 14,265 yuan in Shandong, while rural disposable income was 5,642 yuan in Guangdong, 6,561 yuan in Jiangsu and 4,985 yuan in Shandong, according to the National Bureau of Statistics. In a report measuring regional development, hi-tech and innovation, and growth sustainability compiled by the Chinese Academy of Sciences, Shandong ranked 16 among 31 provinces and municipalities, a far cry from Guangdong at No4 and Zhejiang at No5. Beijing, Shanghai and Tianjin were the top three. Proximity to Hong Kong is said to have helped turn Guangdong into a key export production centre, and booming private enterprises led the economic boom in Jiangsu and Zhejiang. But Shandong has attributed its fast growth to the revival of its once ailing state-owned industries, which still account for more than half of its economy. Liu Zhiyang , dean of the School of Social Development at Shandong Economic University, said: 'The disproportional ratio of state-owned enterprises, the laggard development of private enterprises and conservative thinking [of officials] are disadvantages in regard to fierce market competition in an increasingly free and open environment.' State-owned enterprises account for about 60 per cent of industrial assets in the province, while the figure for many other coastal regions is only a third or less. The output of private enterprises in Shandong represented only about one-third of the output by the neighbouring Jiangsu. Shandong stood out for its high level of growth in capital expenditure. To transform Shandong from being a 'large' economy to a 'strong' one, the province needs to shift from over-reliance on investment and exports to one that combines domestic consumption, investment and exports, economists say. The province also faces a tough battle to combat a worsening environment as a large proportion of Shandong's industries are energy-intensive and big polluters. Last year, industrial output accounted for 57.1 per cent of the province's GDP.