The city of Yantai in Shandong province is less well known to foreigners and exists in the shadow of nearby coastal cities Qingdao and Dalian, but it offers almost everything the two cities boast including long coastlines, fresh air, golden beaches and a deep port. Photos Provided to China Daily

Coastal Yantai banks on little things that matter to grow

Pascal Triaux lives within five minutes' walk from the beach in Yantai, a coastal city in East China's Shandong province. Almost every weekend, the Frenchman heads for the waves to sail under blue skies. He even won second place in an international sailing competition in Dalian up north last year. But during the day, Triaux is a general manager of a French company in Yantai. He walks slowly around the 5,000-square-meter factory, checking on products and workers.

Triaux is just one of the hundreds of European entrepreneurs living and doing business in the city. His company, Prefabricated Interiors Co, makes handmade bathroom sets for hospitals, hotels and restaurants.

It is a small company. Every year it sells about 2,000 units, each for 8,000 to 10,000 yuan (910 to 1,130 euros), and most of the products go to Asian countries.

"Before I came here to work in 2005, I never heard about Yantai," Triaux says.

"But I was surprised how nice this place is. The sky is clear, the beach is clean, no traffic jam and no pollution - It's almost like living in a village."

Of course, smaller cities are also cheaper in many respects: From labor to apartments, to the cost of land to build the factory.

"The same products produced here are 30 percent cheaper than our French company; besides, it is easier to build close relationships with the local government, which is very important in China," Triaux says.

Recently, he got a big order from Yantai government: 150 units of bathrooms for a local hospital, which means 1.5 million yuan of revenue.

Like Triaux, most foreigners get to know Yantai through businesses. Located in the north of Shandong province, the city sits half way between Dalian and Qingdao, two important port cities in northern China. It is 220 km north of Qingdao, 160 km south of Dalian across the sea and one hour's flight to the Republic of Korea (ROK) and Japan. Yantai is less well known by foreigners and lives in the shadow of these two coastal cities, but it offers almost everything that they boast including long coastlines, golden beaches, fresh air and a deep port.

Most foreign investors to Yantai initially hail from the ROK and Japan because of their proximity. But since 2005, significant numbers of entrepreneurs from Europe and the US have followed suit. Now investors come from more than 90 countries and regions. The city has approved 1,830 projects from Europe and the US, with a total investment of $4.55 billion (3.35 billion euros). Investment from Europe amounts to $1.68 billion and most investors are in the machinery and electronics industries.

Yantai is much bigger than most foreign investors imagine. The greater Yantai area includes four districts, seven county-level cities and one county, as well as three industrial and high-tech zones. The city covers a land area of 13,700 square kilometers and sea area of 2.6 million hectares, with a population of 6.52 million. In 2009, the city's GDP amounted to 372.9 million yuan, ranking second in Shandong, only after Qingdao.

Residents are justifiably proud of the city's environment but Triaux and his investor friends still find some inconveniences. It is harder to find high-quality talent than in big cities and the port does not have as many international routes to export his products.

To address the transportation problem, the Yantai government is investing 30 billion yuan in the next five years to improve transportation infrastructure including a new deepwater port and an international airport, as well as a Delongyan railway connecting major cities in Shandong. The railway is expected to extend the economic hinterland of Yantai port to the whole province and connect western provinces like Shaanxi and Sichuan.

"These programs are supposed to be completed before the end of 2015," says Zhang Xingru, deputy director general of Bureau of Commerce of Yantai,

"We already opened an international cargo flight from 2009, which flies to Chicago, Los Angeles and Amsterdam every week, with every flight able to transport 110 tons at a time. Delicate and high-value products such as electronic devices can be transported to Europe and the US conveniently."

To attract more talent, the government is also working on a series of favorable policies to attract universities, research institutes and overseas returnees to Yantai.

"We are also striving to provide all-around services to foreign investors, especially in company register procedures," Zhang says. Since 2001, foreign investors have been able to obtain all required documents done in the administrative approval and certificate transaction hall, instead of running all over the city for stamps from different bureaus.

Michel Humbert, a retiree from France, has been living in Yantai for 11 years. As the chairman of the Yantai Western Investors Association and a Yantai Honorary Citizen, Humbert is "the business card of Yantai", as Zhang puts it. For years, he has brought dozens of European investors to Yantai.

"Trust me - when foreign investors come to a city, they first check the attitude of the government. If it is supportive, it gives them confidence to do business - And Yantai did a good job."

There are business delegations from Europe, Australia and the US every week to Yantai, and the government will always arrange a meeting or dinner with them, he says.

"We have to let them fall in love with Yantai at first sight, before they consider any other city," he says.

Converteam, a Fortune 500 power conversion company based in France, was among those who fell in love with the city. A few months ago, a 14,400 sq m rotating machine factory was completed here.

Laurent Oudin, managing director of Converteam, says he is astonished at how dynamic the city is. "I took pictures of Shenzhen, Shanghai and Yantai last year and did that again in the same spot recently. It turns out there is barely any change in big cities, but new buildings in Yantai have been coming up like mushrooms."

Last year, the factory purchased a piece of land; now a 14,400 sq m factory is already operating. "It's like a miracle," he says.

"To be honest, Yantai was not our only choice at the very beginning. We also had Tianjin and Dalian in mind, but it seems that Yantai is much more friendly than those big cities, so we finally settled here." The company has invested more than 120 million yuan since 2009.

Now it is spending millions every year to send Chinese staff to France for further training.

"Yantai is small and doesn't have as many opportunities as in Beijing and Shanghai, but that also means our staff is more stable and loyal; so we are willing to spend more on training," Oudin says.

Every two months, the government invites foreign investors in Yantai to a buffet, where they can talk about their business, their families, or even their favorite seafood restaurant. Every time 150 to 200 people show up and the figure is growing. At these get-togethers, people new to the city make new friends, find partners and learn from the earlier settlers.

To reduce foreign investors' concerns on education and healthcare, Yantai established French, Korean and other international schools. The French hospital founded in 1860 by a French missionary has also been developed into a comprehensive hospital called Yantaishan hospital. Until the end of 2010, Yantai had five State-run big hospitals and numerous private ones.

Since 2005, Yantai has also been gradually phasing out polluting industries.

"Agriculture and environment is very important to Yantai, we have to pick the 'greenest' foreign investors. Projects with pollution will be rejected immediately," Zhang says.

During the 12th Five-Year Plan (2011-2015), foreign investments in modern logistics, high-end retail, as well as wine and fruit processing will be encouraged.

"As the only international vine and wine city in Asia, Yantai is vigorously searching European partners, especially from Bordeaux and other famous wine production areas, to develop the wine industry here. Grape planting experts, oak barrel factories and even cork producers are greatly welcomed," Zhang says. In Penglai, a county-level city in Yantai, grape plantation area has already reached about 7,000 hectares Zhang says.

There will also be an "efficiency requirement" for foreign investments in Yantai.

"Although we have relatively sufficient land storage, we won't consider projects with massive land use and low output. For example, we will invite world-renowned shopping malls to Yantai, as well as big brand department stores," Zhang says.

After six years of negotiation, Metro Cash & Carry International from Germany finally decided to enter Yantai a few months ago. Crowne Plaza hotel from the UK has signed an agreement with the government, while Hilton from the US is still talking with the authorities.

"Currently, only 24 percent of the foreign investment in Yantai is from the service industry. The government plans to raise this figure to 45 percent by the end of 2015," Zhang says.