The city and Guizhou province are planning to build more infrastructure, and big international companies are seeing the benefits

These days it is the kind of growth target that most countries, including China, would think of as impossibly ambitious - 14 percent. But that is what Guizhou province, in Southwest China, is projecting for its GDP growth this year, the highest in the country. Lest anyone think the aim is outlandish, the province can happily report that its GDP grew 12.5 percent in the first half of the year, 4.9 percentage points higher than the national average for the period.

Those figures speak eloquently of Guizhou's success, and they partly explain another spectacular figure: 30,000 - the number of people working in a national high-tech development zone in the provincial capital, Guiyang, a zone in which 3,000 companies, international and domestic, have set up shop.

What has drawn many of those workers and the companies to the province, and to Guiyang in particular, is its singular success in the field of technological innovation. Indeed, so certain is Guiyang that it is on to a sure thing that it has hitched itself to Zhongguancun, known popularly as China's Silicon Valley, about 2,000 kilometers away on the outskirts of Beijing. More than 50 companies in Zhongguancun say they plan to set up operations in Guiyang this year, with investment in IT, biotechnology and electronic manufacturing.

"After years of development, companies are coming to settle down here, attracted by the local natural resources and economic development," says Liu Qinghe, a researcher with the Guizhou Academy of Social Sciences.

"Some have followed in the footsteps of big international players and large state-owned enterprises and have come to Guiyang under the nation's western development strategy."

The main elements of that strategy, adopted 13 years ago, include building infrastructure, attracting foreign investment, improving environmental protection, promoting education and keeping local talent.

Just as there are several strands to that program, Guiyang, while becoming a hothouse for foreign investment as it has sped up the pace of economic expansion through technological innovation, is showing that it is far from being a one-trick pony.

The capital of the mountainous, multi-ethnic province has hosted several big international events in recent years, including the China International Alcoholic Beverages Expo, the China Guiyang Fair for Investment and Trade and the Eco-Forum Global Annual Conference. Such fairs and other forums are proving to be a powerful catalyst for the province's economic boom.

During the second session of the alcoholic beverages expo a year ago, deals worth more than 10.7 billion yuan ($1.75 billion; 1.3 billion euros) were signed, the organizing committee says.

Chen Gang, Party chief of Guiyang, has been a keen promoter of the partnership between Guiyang and Zhongguancun, but he does not seem to be dazzled by the prospect of financial success that it is likely to bring to the city. There are other serious concerns to be taken care of, he says.

"We really do need to ensure the environment is protected. Innovation-driven development and environmental protection go hand in hand."

One big international company that has been drawn to Guizhou is the German industrial technology giant Siemens, which set up an office in Guiyang last year.

Two of the projects that have brought Siemens to the city are a subway line and a vocational education center, says Xiong Wei, vice-president of Siemens Ltd China.

Construction of the subway line, covering 13 km, is expected to begin this year, and 2 billion yuan has been invested. Guizhou Vocational City, comprising 42 rebuilt schools and 30 new occupational schools, and with an investment of 2.6 billion yuan, is expected to be completed before the end of 2015.

Guizhou has great potential as a beneficiary of the western development campaign and is a key market for Siemens in China, Xiong says.

"A strong plan and central and local government support for western development has undoubtedly been part of the reason for Guiyang's success."

Under the western development campaign, tax breaks are offered to firms that set up in the region, and last year the central government outlined policies designed specifically to promote Guizhou's growth.

As with the Party chief Chen, Siemens says the environment has played a key role in its thinking relating to business in the capital.

"One of the reasons for us choosing Guiyang was that the city has an environment unlike many others, one that makes it very easy to settle down here," Xiong says. "It's important because a nice green place to live is something many young professionals are looking for."

From 2007 to 2012 the city's energy consumption fell 26.8 percent. Forests accounted for 42.4 percent of its area, all of its sources for drinking water met state quality requirements and it reported bad air on only about 20 days a year.

In addition, Guiyang is one of the most important communication, cultural, economic, political and tourism centers in Southwest China, and one of its most important transport hubs, Xiong says.

Siemens has broad ambitions in the city and province, he says. Apart from helping build infrastructure, for which, it says, it wants to introduce advanced technologies and high-quality products and solutions, it is also involved in the energy and healthcare industries, he says.

Another multinational company with a presence is the Swedish telecom giant Ericsson, which arrived in the city in 2009.

"Among the advantages Guiyang offers over other regions are the environment and labor costs," says Liu Guolai, vice-president of Ericsson (China) Co. "We want to work more closely with people and companies here and invest more in the city."

Another electronics company that has turned to Guiyang to boost its fortunes is Taiwan-based contract manufacturer Foxconn Technology Group, which announced in July that it would set up operations in the city.

Terry Gou, chairman of Foxconn, whose customers include Apple, Hewlett Packard and Sony, says the plants established in inland areas would use the most advanced technology and have minimal impact on the environment.

"Being close to the pool of workers is one of Foxconn's main reasons (for going to Guiyang) says Louis Woo, a spokesman for Foxconn.

"Henan and Sichuan have always been the largest sources of migrant workers. That's why we moved to those provinces to tap their labor pool."

Wages in the two provinces have surged 120 percent in the past six years on the back of economic growth, and companies such as Foxconn will benefit from the huge pool of cheaper labor in Guiyang.

As many companies take the plunge and move to Guizhou, others are considering their options. One such is Goldwind Science & Technology Wind Power Equipment Co Ltd, which can see the advantages but is also well aware of one important drawback.

"We are prepared to invest in Guizhou but are waiting for wind power developers to make a decision because our company largely depends on state-owned enterprises," says Wang Jin, vice-president of Goldwind Science & Technology Wind Power Equipment Co Ltd based in Urumqi, the Xinjiang Uygur autonomous region.

Guizhou's climate gives it great advantages, but it is also a drawback for wind power generation, Wang says.

"Because of the high altitude and air humidity, condensation easily forms that can cause many technical problems for running big equipment. However, we have overcome those problems through years of hard work."

If wind power developers decide to invest in Guizhou as the western development program proceeds, "we will also invest here because our company actually undertakes the equipment supply for those enterprises", he says.

Wang stresses that while preferential government policies can be attractive because "they may help us pay less tax for a time", they can be shortsighted for a company more concerned about its long-term development.

"The market is at the center of things for the company, so we need to focus on the government's development aims instead of trying to save money on taxes. The risk in that is that any relationship we form will not be smooth."

But for all of Guizhou's many attractions to business, it does have some serious drawbacks, experts say. One is that infrastructure in inland areas is 10 to 15 years behind that of coastal regions in some places, and another is a lack of high-tech skills.

Liu Chuanzhi, the founder of Lenovo and chairman of Legend Holdings, says: "More effort is needed to improve infrastructure and lay a solid foundation for development. For some startup companies the government should give more support such as subsidized office space and preferential tax treatment."

One international company that is extremely happy with its lot in Guiyang is Sefran China, a French aerospace and security manufacturing company that set up operations in the city seven years ago, a joint venture mainly for making aircraft engine parts.

Guillaume Mornand, general manager of Sefran China's southwestern region, says Guiyang is an ideal place for foreign companies to seek out business opportunities.

"There are many local companies here willing to work with us."

Sefran China has many branches in China, including in Beijing, Shanghai, Suzhou and Xi'an. Even though Guiyang poses many challenges for foreign companies, there are also many more opportunities because there is less competition in Guiyang than in eastern cities.

"We plan to increase spending on our branch in Guiyang," says Liu Kening, chairman of Sefran China. "The support from the local government is very important for foreign companies, and there's no reason to give Guiyang a miss if yours is a foreign company that wants to expand in China's southwestern region."

Contact the writers through lvchang@chinadaily.com.cn

An expressway network in Guiyang. Local authorities have invested heavily to improve infrastructure in an effort to pave the way for more investment. Provided to China Daily

Farmland terraces cover the hills outside a village near Guiyang. Wu Dongjun / for China Daily

Miao women dressed in traditional ethnic costumes perform at an agricultural expo. Qiao Qiming / for China Daily

( China Daily European Weekly 09/20/2013 page16)