Lanzhou zone to be in­land growth en­gine

China Daily (Hong Kong) - - BUSINESS - By GAO YUAN and XUE CHAOHUA in Lanzhou Pos­i­tive moves

One year af­ter the cen­tral gov­ern­ment des­ig­nated the Lanzhou New Zone as the na­tion’s first in­land na­tional level eco­nomic de­vel­op­ment area, the zone looks pretty much as it did a year ago.

Lo­cal of­fi­cials said it will take at least 10 years to build the zone, which is deep in­side the vast Loess Plateau in Gansu prov­ince, into a fully func­tion­ing in­dus­trial en­gine in western China.

But an eight-lane road con­nect­ing the new zone and a nearby high­way is see­ing more traf­fic than a year ago. The Lanzhou mu­nic­i­pal gov­ern­ment has moved some of its de­part­ments to the area, which is an hour’s drive from down­town Lanzhou, in a bid to fuel the de­vel­op­ment of the 800 square kilo­me­ter in­dus­trial zone.

City au­thor­i­ties also have pledged to move more pub­lic in­fra­struc­tures, such as kinder­gartens, schools and hos­pi­tals, into the new zone by 2015. The move not only will im­prove the liv­ing con­di­tions of cur­rent res­i­dents but also will lure more peo­ple to the area, lo­cal ad­min­is­tra­tors said.

How­ever, a large num­ber of high-rise res­i­den­tial build­ings still re­main empty be­cause ma­jor projects are yet to be fi­nal­ized.

“Build­ing a new zone on this scale re­quires pa­tience and con­stant in­vest­ment,” said Zhang Aisheng, di­rec­tor of the zone’s eco­nomic de­vel­op­ment bureau. “It will be a decade­long strug­gle, and the cur­rent task is to make sure that all the in­fra­struc­ture fa­cil­i­ties are in place.”

Mean­while, lo­cal au­thor­i­ties are sat­is­fied with the short­term achieve­ments and op­ti­mistic about the area’s fu­ture.

The to­tal out­put value of Lanzhou New Zone was 11.56 bil­lion yuan ($2 bil­lion) in the first 10 months of this year, up 27 per­cent year-on-year.

Fixed-as­set in­vest­ment was more than 28 bil­lion yuan from Jan­uary to Oc­to­ber, a jump of nearly 65 per­cent com­pared with a year ago, ac­cord­ing to the Ad­min­is­tra­tive Com­mit­tee of Lanzhou New Zone.

Petro­chem­i­cal and heavy ma­chin­ery man­u­fac­tur­ing com­pa­nies will be the big­gest in­dus­tries op­er­at­ing in the area af­ter con­struc­tion work is com­pleted, said Zhang. But he also ad­mit­ted it will take at least five years to build a large petro­chem­i­cal plant in the zone.

State- owned oil pro­ducer China Na­tional Petroleum Corp has a 10.5 mil­lion ton crude oil re­fin­ery plant in down­town Lanzhou, which will be moved out of the city and into the zone.

In June, the 55-year-old fac­tory will spend 15 bil­lion yuan to build the na­tion’s big­gest petro­chem­i­cal equip­ment man­u­fac­tur­ing plant in the Lanzhou New Zone. Along with 30 fa­cil­i­ties es­ti­mated to have an an­nual out­put of 20 bil­lion yuan, the am­bi­tious project also in­cludes 1.2 mil­lion square me­ters of res­i­den­tial build­ings for work­ers.

The com­pany pledged to put the first fa­cil­ity in use in two years, but it’s fac­ing chal­lenges such as the freez­ing win­ters in North­west China, which make it hard for ce­ment to so­lid­ify. Some parts of the con­struc­tion work have to wait un­til spring be­fore re­sum­ing.

Other projects in the area have to deal with sim­i­lar is­sues.

At the con­struc­tion site for an of­fice build­ing, work­ers from neigh­bor­ing Sichuan and Shaanxi prov­inces were try­ing to make their last monthly salaries be­fore the Spring Fes­ti­val.

Lo­cal real es­tate de­vel­oper Lanzhou Yatai In­dus­trial (Group) Co is in­vest­ing 3 bil­lion yuan to build its head­quar­ters in the center of the new zone. Con­struc­tion work was de­layed be­cause power and wa­ter sup­plies were not sta­ble.

Yatai said it has com­pleted 70 per­cent of the con­struc­tion work and that it will fin­ish the rest in 2014.

Zhang from the eco­nomic de­vel­op­ment bureau said that a 330-kilo­volt power sub­sta­tion is be­ing built to ad­dress sim­i­lar sit­u­a­tions and that ad­min­is­tra­tive de­part­ments are try­ing their best to solve sim­i­lar prob­lems.

The first com­pleted project in the new zone was the ad­min­is­tra­tion com­plex, home to the lo­cal ad­min­is­tra­tors. The 16-story build­ing looks gi­gan­tic against the va­cant land sur­round­ing it. At night, the il­lu­mi­nated build­ing is vis­i­ble from kilo­me­ters away even on hazy days.

The lo­cal gov­ern­ment said the project is a show­case of its res­o­lu­tion to build Lanzhou New Zone from scratch. To fur­ther make the case, another land­mark of the new zone — a mas­sive ar­ti­fi­cial lake — was added next to the build­ing. Be­fore that, the zone was known to Lanzhou res­i­dents as one of the most arid ar­eas in the city.

In Au­gust 2012, the State Coun­cil, China’s cab­i­net, ap­proved plans to build the coun­try’s fifth State-level de­vel­op­ment zone in Lanzhou.

Pre­vi­ous ap­provals in­cluded Shang­hai’s Pudong New Zone and Tian­jin’s Bin­hai New Zone. Both projects were es­tab­lished in the 1990s.

The gov­ern­ment speeded up the ap­proval of eco­nomic zones amid an eco­nomic slow­down that started in 2008. Less than a month af­ter the ap­proval of the Lanzhou New Zone, the cen­tral gov­ern­ment green­lighted another State-level zone in Guangzhou, the cap­i­tal of af­flu­ent Guang­dong prov­ince.

An­a­lysts said build­ing in­dus­trial zones will boost do­mes­tic con­sump­tion and in­no­va­tion, both crit­i­cal for China’s trans­for­ma­tion of its eco­nomic model.

Mean­while, while ma­jor projects in the Lanzhou New Zone are still un­der con­struc­tion, some smaller sites are al­ready open for busi­ness.

Gansu Joy Agri­cul­ture Tech Co, a sun­flower oil maker, has built a pack­ag­ing and stor­age fac­tory in months and is al­ready pro­duc­ing bot­tled oil for re­tail.

The com­pany opened its first pro­duc­tion line in Septem­ber and is wait­ing for more sun­flower seeds so it can run its two pack­ag­ing lines at full speed. Each line is ca­pa­ble of bot­tling 200 tons of oil per day.

Wei Ming­guang, founder and chief ex­ec­u­tive of­fi­cer of the com­pany, said he plans to build a sun­flower field near the edge of the new zone next year to feed his pro­duc­tion lines.

“Lo­cal farm­ers will be able to lease their land to my com­pany for sun­flower plant­ing and agri­cul­tural tourism. Farm­ers will re­ceive a sta­ble in­come each year, and my com­pany will make sure the land is put into good use,” said the 46-year-old en­tre­pre­neur.

Wei said lo­cal of­fi­cials are “ex­tremely in­ter­ested” in his idea and promised to sup­port his plan.

Yet cook­ing oil re­finer­ies and sight­see­ing busi­nesses may not be the of­fi­cials’ first choices for the new zone.

And whether fu­ture projects such as the petro­chem­i­cal plants, which may cause high pol­lu­tion, will have an im­pact on Wei’s busi­ness is also a pend­ing ques­tion.

Dur­ing the ini­tial plan­ning stage, lo­cal of­fi­cials fo­cused on ma­chin­ery, petro­chem­i­cal, new en­ergy, new ma­te­ri­als and biotech in­dus­tries.

How­ever, be­cause in­vest­ments in those in­dus­tries are more dif­fi­cult and re­quire a longer time, the new zone needs a num­ber of com­pa­nies with shorter in­vest­ment cy­cles.

“The Lanzhou New Zone should fo­cus on in­dus­tries that will play up to its ad­van­tages such as the rich nat­u­ral re­sources and con­ve­nient trans­porta­tion routes from western re­gions to the east­ern parts of China,” said Zhang Shix­ian, a re­searcher at the In­sti­tute of In­dus­trial Eco­nom­ics of the Chi­nese Academy of So­cial Sciences.

The re­searcher added that com­pa­nies in sim­i­lar in­dus­tries should work to­gether to lower risks when ex­plor­ing new mar­kets.

More in­vest­ment and con­tin­u­ous con­struc­tion will be the key words for the new zone next year. And in­vestors seem will­ing to give up short­term prof­its for the long-term re­turns the new zone has promised. Con­tact the writ­ers at gaoyuan@chi­nadaily.com.cn and xuechao­hua@chi­nadaily. com.cn

ZHANG WEI / CHINA DAILY

A sun­flower oil pack­ag­ing plant run by Gansu Joy Agri­cul­ture Tech Co in the Lanzhou New Zone. The zone is the first in­land na­tional level eco­nomic de­vel­op­ment area in the coun­try.

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