JI'AN, Jiangxi - Mao Zedong and the Red Army once had a major base in the mountains not far from here, but the mission Lin Yebiao and Zhuang Binguang are on has a decidedly capitalist objective.

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Lin and Zhuang are here to flee the cut-throat competition in Guangdong province, the economic powerhouse on the southern Chinese coast.

They and two other business partners used to run a small factory in the boom town of Shenzhen making shirts and other clothing, but with costs there rising, they just couldn't expand their business enough to stay in the game.

So they have come to scout out Ji'an, a small city in the province of Jiangxi, just inland from Guangdong.

"Guangdong is pretty complicated. There are lots of big companies. If you're not big enough, the big ones will eat you up," said Lin, 22, walking along a deserted road in an industrial park in the north of town, as workers in the neighbouring factories laboured over everything from cables to electric bikes.

"If we stayed there, we could probably only work for someone else," he said.

It's hardly just scrappy entrepreneurs like Lin and Zhuang who are looking to Ji'an and places like it as a refuge from the crowded conditions and higher costs on the coast.

NO MORE BROWNOUTS

In a new industrial park on the other side of town, Hong Kong electronics firm Red Board Ltd. is digging into the red earth to build a plant that will be capable of churning out about $130 million worth of printed circuit boards a year by 2009.

Red Board isn't fleeing Guangdong -- it will keep its factory in the manufacturing hub of Dongguan, making the innards of everything from mobile phones to digital cameras.

But when it came time to expand, the company knew it had to look elsewhere, said Maurice Yip, the firm's chief executive.

For one, the local government was increasingly frowning upon polluting industries like theirs, Yip said.

"The electricity and water supply is also very tight. We've been suffering a lot. Still today, we have to pay a premium for a guaranteed electricity supply," he said.

Yip and his colleagues searched far and wide for a suitable location and settled on Ji'an, which falls about halfway between Guangdong and Shanghai, because it offered the right combination of low costs, convenient location and good transport links.

"The infrastructure that we are being provided is among the best that we saw. Things are ready. They need companies to come and use it," Yip said.

He estimated that both power and water, which a factory like his consumes in vast amounts, cost about a fifth less in Ji'an than Dongguan -- and the local government could promise an uninterrupted supply.

Cheap labour attracted Japanese electronics maker Uniden Corp., which in 2002 was one of the first foreign firms to set up shop in Ji'an, said Jun Sakamaki, head of its Jiangxi operations.

Sakamaki estimated that the gap in labour costs between Ji'an and Shenzhen, where Uniden has a big plant making cordless phones, had halved since then to about 25 percent.

BETTER ROADS

Still, Uniden is giving Ji'an its vote of confidence by moving circuit board production into a new, bigger plant nearby.

The arrival of other high-tech companies brings promise of a broader supplier base, Sakamaki said, and the highways that now criss-cross Jiangxi have made shipping much easier.

"Before we had the expressway, it could take two or three days to go one way to Shenzhen during the rainy season," he said. "We don't have this kind of problem any more."

That ever-expanding road network, along with low costs, is one of the advantages that Meng Jianzhu, Jiangxi's top official, touts to lure investment to his province.

"We want to turn Jiangxi into a place that is a lowland in terms of business costs, a highland in terms of government services, and a happy land in terms of returns on investment," Meng told reporters during the recent session of parliament.

Avinash Datta, president of Mahindra (China) Tractor Co., a joint venture between India's Mahindra & Mahindra and a local industrial group in the provincial capital, Nanchang, said the local government actively sought feedback from investors.

One problem is that, even in the bigger city, it can be difficult to find skilled managerial staff, Datta said.

"You can't ask a Shanghai guy to come -- he won't necessarily agree to come to live in Jiangxi, because clearly for him the opportunities are different in other places," Datta said.

Back in Ji'an, the dark side of the boom was evident.

One factory in an outlying district dumped black, untreated waste water into a local river that gave off a smell somewhere between burnt plastic and burning brake pads. That stream feeds into the Gan River, which in turn is a tributary of the Yangtze.

"Five years ago you could swim in the river without any problem," said one local man. "The local government doesn't do anything about it because they're only interested in tax money."