Let's do it

Currently known as a motorcycle and automotive manufacturing hotspot, China's largest provincial level municipality, Chongqing is courting the IT sector in hopes of making it one of its pillar industries over the next five years.    

According to a study recently released by Chongqing Administration of Information Industry, by 2012 revenues generating from the IT industry could grow into 250 billion yuan annually, thanks to the domestic and foreign IT companies moving from China's coastal regions where they have been bogged down by rising labor, energy and land costs.

The 250 billion yuan figure however is in sharp contrast to the reality of Chongqing's current IT situation.

Last year saw a historically high performance by the IT industry in Chongqing with a growth rate of 33.3 percent by revenue on a yearly basis - some 15 percentage points higher than the average level nationwide. But the sales revenue was a small fraction and stood at merely 47.4 billion yuan.

Catching up

Nonetheless the Chonggqing government hopes that by the end the end of 2015 the IT industry will outperform its motorcycle and auto manufacturing sector, which currently dominates the economy, says Mu Huaping, director of Chongqing Administration of Information Industry.

Leading auto and motorbike manufacturers include Lifan Group, Zongshen Motor and some foreign players.

Government officials believe the motorcycle industry is gradually approaching its peak.

In 2007, Chongqing sold 8.64 million motorcycles and 1 million cars. Both sales revenue and volume of motorcycles have topped the market nationwide for seven consecutive years as of 2007.

But Huang Qifan, deputy mayor of Chongqing, says the two and four-wheel business boom will peak in the near future and it will be difficult to maintain a steady growth rate after that.

So "we are shifting our focus to the other sectors including IT; the energy industry, including oil, natural gas and coal; and equipment manufacturing of ships, railways and power stations," Huang says.

"It is true that the IT industry is not our strong point. That is why we must make it better to balance Chongqing's industrial structure," says Huang. "And more importantly, investment in the IT industry usually produces more profits than that from traditional industries".

The transfer of IT companies from the coastal regions including Yangtze River Delta and Pearl River Delta regions, which annually create 80 percent of the IT revenue nationwide, to the inland cities provides Chongqing with the opportunity.

By the end of 2012, Chongqing plans to have industrial transfers worth 100 billion yuan, according to its study.

The municipal government is considering a series of measures to ensure them.

Ten information industrial parks in the city have been appointed to partner with the governments of the cities from the coastal regions, including Shanghai, Suzhou and Shenzhen, in absorbing some of the businesses transferred from the IT industry, including software, chip manufacturing, mobile phones, computers and household appliances. And the two sides could jointly share the tax when agreements are signed, sources say.

Popularity up

Early last September, the Chinese government approved the plan for Chongqing's IT information and promotional program, the first of its kind in the nation.

The campaign hopes to ignite interest from IT firms interested in investing in Chongqing, such as those already committed from Japan, Malaysia, Taiwan and the United States.

In September, NTT DATA, Japan's largest software developer, announced it would build a software research and development center in Chongqing. It will become the largest Japanese software outsourcing center in western China by 2012 with an estimated annual output value of over 100 million yuan.

Two months later, IBM announced it would build a software-outsourcing center in Chongqing to be completed next year. The hub will employ 1,000 personnel within three years. But it's not only software makers who are showing interest, so are hardware and chip providers.

They include two chip manufacturing lines, one funded by Malaysia-based semi-conductor wafer foundry maker SilTerra for a 14.5 billion yuan project, and the other by Japan's largest chipmaker Elpida Memory Inc.

Chongqing has also witnessed three chip deals signed, one with ProMOS Technologies Inc and two with China Electronic Technology Corporation.

Government officials say Taiwan Compal, the world's second largest PC outsourcing manufacturer, will also sign an agreement worth 2 billion yuan for a PC manufacturing base. And the company is said to be planning to inject an investment of 5 billion yuan into the factory whose output volume will be 20 million units of PCs every year.

HP will also strike a 2-billion-yuan contract with the government for a PC manufacturing base that can annually produce 5 to 10 million units.

(China Daily 03/10/2008 page10)