HK capital, expertise helping fuel growth

Coastal city opens arms to advice and investment

Private investment, first of all from Hong Kong, will be treated as an important social asset in the next stage of economic development in the city of Zhanjiang, Guangdong province.

All efforts will be made to provide the city's future investment and trade partners with a much better business environment, said Liu Xiaohua, leader of the Communist Party's local committee in the seaside city in western Guangdong.

Hong Kong's capital and expertise in running modern service industries are of particular value in the city's attempt to build its modern urban economy.

In addition to all the available national and provincial policies, Zhanjiang is ready to concede more favorable terms to Hong Kong investors in the service sector, Liu said in an interview with China Daily immediately following the provincial authorities' decision to speed up the development in the eastern, western and northern corners of the largest Chinese province in economic power.

Zhanjiang is located at the southwestern tip of Guangdong. The city boasts not only unique potential for modern industry and services, but has also been "a fertile land to nurture private entrepreneurship", Liu noted, although many of Zhanjiang's private entrepreneurs are operating elsewhere due to historical limitations.

Hong Kong has a community of almost 10,000 migrants from Zhanjiang including a number of successful businesspeople who the local folks can name.

But agriculture long remained a main business in Zhanjiang as the Pearl River Delta, or the central part of Guangdong, was quickly transformed into a new industrial area in the 1990s.

The local market was small, and in many aspects cut off from the global network, and has up to now benefited only in a limited way from overseas investment.

But all this is soon to be a thing of the past, said Liu.

The city is going to embark on a number of major development projects to become a new powerhouse in Guangdong's economy - from public infrastructure to a French-style shopping arcade in the waterfront of the former French concession.

As local leaders were busy preparing for a road show of their projects for the business communities in Hong Kong, Liu welcomed private entrepreneurs originally from Zhanjiang to participate in their hometown's economic takeoff.

"Conditions have changed. Potential returns are easy to see. And there are already promising examples," said Liu, the 53-year-old chief official of Zhanjiang.

Fresh opportunities

"Private investors are discovering fresh opportunities. They can tell that the local government has now become competent in delivering public services," he said. "And even the streets are cleaner than before. There is no reason to not trust one's own eyes."

Today the non-State sector, including companies funded by overseas and domestic private capital, makes up 58 percent of all businesses in Zhanjiang and generate 53 percent of the city's total business sales. Private capital's contribution to the local economy is "indisputable", Liu said, hastening to add that Zhanjiang wants still more, much more.

He said the next thing to come is an integrated "industrial platform" to encourage more private investment, improve the city's investment environment and channel new capital toward larger and technologically more sophisticated projects.

Hong Kong is already the largest source of finance for Zhanjiang. From 1980 to 2012, the city received a total of $2.4 billion in foreign direct investment, in which Hong Kong's share was 70 percent.

The city has some 150 locally registered companies owned by Hong Kong investors and receives about 70,000 visits by tourists from Hong Kong annually.

In trade, Hong Kong remains its second-largest partner. In 2012, when exporters around China were complaining about dwindling orders and rising costs, Zhanjiang still managed 19 percent growth in its exports to Hong Kong, which totaled $163 million.

Traditional ties

Hong Kong is also the nearest global shipping and logistics service center. Last year it handled 140,000 containers from Zhanjiang.

Zhanjiang's ties with Hong Kong are traditionally close, although as seen by local officials, still not strong.

Indeed, Liu said, the city's existing ties with Hong Kong are far from enough to help the city fully utilize its natural endowments and realize its ambition for faster economic transformation than ever before.

Geography alone contributes considerably to the city's development potential.

The city is actually a national support center for offshore oilfield development, especially the pumping of oil and gas from the South China Sea.

But few people likely know that Zhanjiang actually has one of the best of the few deep-water harbors in China.

The Zhanjiang port provides to China's vast southwestern interior regions ready access to the global market and can still be used for the import and export of much larger quantities of energy and mineral resources.

Its geographic location also makes it the closest seaborne trade hub between China and Southeast Asia.

In its near-term development program, Zhanjiang aims to build a 400 billion yuan economy in 2016, Liu said. For a city with a population of more than 8 million, that translates into 48,000 yuan (about $8,000) in per capita GDP.

The plans call for Zhanjiang's shipping facilities to have a throughput of 300 million tons, to rank among the 10 largest commercial ports in China by that time.

Future cooperation

In the changes that Zhanjiang expects in the next three to five years, the mutually complimentary feature between the city and Hong Kong will grow even more and its capital and expertise will play a much stronger role in Zhanjiang's transformation, Liu said.

Ties with Hong Kong will expand substantially to encompass trade, investment and financial services, shipping and logistics, tourism, and also social development and the humanities.

In broad terms, Hong Kong's capital and expertise can help Zhanjiang build a more desirable structure of its industries, Liu said, by rebalancing the relative weight of agriculture, manufacturing and services.

Agriculture, including production of fruit and aquatic foods, is Zhanjiang's traditional advantage. It still accounts for nearly 20 percent of its whole economy.

Manufacturing makes up almost 42 percent. Though still weak in absolute terms, the sector already has a few major national-level projects in the pipeline, in metallurgical and petrochemical industries.

By comparison, a myriad of details are still to be worked out to answer questions like how to make the new industries serve the local society, and how to at least prevent them from polluting Zhanjiang's precious resources for tourism. An equally strong service sector is needed to help the city find its solutions.

For example, even though Zhanjiang is an old port city, its annual cargo throughput is no more than 400,000 containers. There is much room for port upgrading and the development of various financial services that a modern container power requires.

Right now the service sector contributes only 37 percent of the local economy. In contrast Hong Kong's various services account for more than 90 percent of its GDP. Liu was candid enough to point out that Zhanjiang "has a lack of bright spots" in its service sector and has an "urgent need" for importing new capital and management expertise from Hong Kong.

There is almost "unlimited potential" in Zhanjiang's future economic cooperation with Hong Kong, Liu said.

edzhang@chinadaily.com.cn