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CONSULTANCY STUDY ON SOCIAL, ECONOMIC AND POLITICAL DEVELOPMENTS

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CONSULTANCY STUDY ON SOCIAL, ECONOMIC AND POLITICAL DEVELOPMENTS Powered By Docstoc
					          CENTRAL POLICY UNIT

HONG KONG SPECIAL ADMINISTRATIVE REGION




      CONSULTANCY STUDY ON

 SOCIAL, ECONOMIC AND POLITICAL

           DEVELOPMENTS

IN THE PAN-PEARL RIVER DELTA (PRD)

               REGION


        NINTH MONTHLY REPORT

 COVERING GUANGXI, YUNNAN, GUIZHOU AND

               SICHUAN




              February 2007
                                              Table of Contents
                                                                                                                             Pages
EXECUTIVE SUMMARY .............................................................................................. 1
1      FOREIGN TRADE PERFORMANCE REVIEW OF THE FOUR
       SOUTHWESTERN PROVINCES/REGION IN 2006 ......................................... 6
       1.1 IMPORT-EXPORT TRADE IN THE FOUR SOUTHWESTERN PROVINCES/REGION .... 8
            1.1.1   Export Conditions in the Four Southwestern Provinces/Region .... 8
            1.1.2   Import Conditions in the Four Southwestern Provinces/Region .. 11
            1.1.3   Foreign Trade Development Between the Four Southwestern
                    Provinces/Region and ASEAN ..................................................... 12
            1.1.4   Import-Export Arrangements in the Four Southwestern
                    Provinces/Region .......................................................................... 15
       1.2 IMPORT-EXPORT CONDITIONS IN SICHUAN ...................................................... 16
       1.4 IMPORT-EXPORT CONDITIONS IN YUNNAN ...................................................... 20
       1.5 IMPORT-EXPORT CONDITIONS IN GUIZHOU ..................................................... 21
       1.6 OVERALL IMPORT-EXPORT CONDITIONS IN CHINA .......................................... 23
       1.7 IMPORT-EXPORT DEVELOPMENT IN THE SOUTHWESTERN PROVINCES/REGION
           AND CHINA, AND THE IMPLICATIONS AND POLICY RECOMMENDATIONS FOR
           HONG KONG .................................................................................................... 27
2      TRENDS AND UPDATES ON THE FOUR SOUTHWESTERN
       PROVINCES/ REGION........................................................................................ 30
       2.1 ECONOMIC PERFORMANCE OF THE FOUR SOUTHWESTERN PROVINCES/REGION
           ......................................................................................................................... 30
       2.2 TRENDS AND UPDATES ON SICHUAN ................................................................ 32
            2.2.1   Economic Performance of Sichuan............................................... 32
            2.2.2   Updates on Sichuan – Chengdu Strives to become China’s Capital
                    for Ladies Shoes............................................................................ 34
       2.3 TRENDS AND UPDATES ON GUANGXI ZHUANG AUTONOMOUS REGION ........... 42
            2.3.1   Economic Performance of Guangxi.............................................. 42
            2.3.2   Updates on Guangxi Zhuang Autonomous Region — New
                    Industrial Developments in Guangxi’s Port Cities ....................... 43
       2.4 TRENDS AND UPDATES ON YUNNAN ................................................................ 56
            2.4.1   Economic Performance of Yunnan............................................... 56
            2.4.2   Updates on Yunnan – Commercial Opportunities in the Cut
                    Flowers Industry ........................................................................... 57
       2.5 TRENDS AND UPDATES ON GUIZHOU ............................................................... 67
            2.5.1   Economic Performance of Guizhou.............................................. 67
            2.5.2   Updates on Guizhou – The 11th Five-Year Plan for the
                    Development of Science and Technology and Hi-tech Industries in
                    Guizhou Province.......................................................................... 68
Social, Economic and Political Developments in the Pan-PRD Region    Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




3      PERSONNEL CHANGES IN THE FOUR PROVINCES/REGION ............... 76
        3.1 SENIOR APPOINTMENTS IN SICHUAN ................................................................ 76
        3.2 SENIOR APPOINTMENTS IN GUANGXI ............................................................... 77
        3.3 SENIOR APPOINTMENTS IN YUNNAN ................................................................ 77
        3.4 SENIOR APPOINTMENTS IN GUIZHOU ............................................................... 78
APPENDIX:.................................................................................................................. 80
        APPENDIX I:STATISTICAL DATA FOR THE PAN-PRD PROVINCES/ REGION............ 80
        APPENDIX II:ENGLISH-CHINESE GLOSSARY ......................................................... 82




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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




                                          Executive Summary

1              Foreign Trade Performance Review of the Four Southwestern
               Provinces/Region in 2006


1.1            In 2006, as a result of more intense regional economic cooperation
               between China and ASEAN, as well as westward industrial transference,
               foreign trade volumes in the four southwestern provinces/region
               continued to surge ahead, and growth rates in Sichuan, Guangxi and
               Yunnan were even higher than the national average. Foreign trade in the
               four provinces/region largely consisted of ordinary trade, although some
               processing trade was conducted. Border trade accounted for a higher
               share of foreign trade in Guangxi and Yunnan due to their proximity to
               ASEAN countries. Exports from foreign investment enterprises were
               insignificant in the four southwestern provinces/region.


1.2            In Sichuan, civilian-run enterprises were the largest exporters compared
               with all the other types of enterprises. Exports of mechanical and
               electrical products as well as hi-tech products saw spectacular growth.


1.3            Private enterprises became the biggest driving force behind trade in
               Guangxi, and ASEAN continued to be Guangxi’s largest trading partner.
               Many Chinese regions conducted foreign trade with the ASEAN market
               through Guangxi’s customs, further strengthening Guangxi’s role as the
               southwestern sea route.


1.4            State-owned enterprises contributed the most to trade in Yunnan. Due to
               China’s restrictions on resource-oriented exports, Yunnan’s export
               structure underwent noticeable changes. Southeast Asia remained a key
               trading market for Yunnan.


1.5            State-owned enterprises were also the biggest driving force behind trade
               in Guizhou. Guizhou’s processing trade export volumes dwindled
               significantly as a result of revisions to the export tax rebate policy in
               China.



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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




1.6            Since 2005, China’s trade growth has been predominantly driven by
               integrated competence and competitiveness. China introduced a strategy
               of “adjusting investment, encouraging consumption and reducing
               surpluses” in order to deal with various problems caused by its growing
               trade surplus. This was proposed during the Central Economic Work
               Conference convened at the end of 2006, which was held to redress the
               balance of international payments.


1.7            The development trend for imports and exports in the four
               provinces/region is based on ordinary trade and domestic resources,
               which differs greatly from the processing trade of Hong Kong
               enterprises, and this poses challenges for their transformation. Pressure
               from the Mainland to reduce surpluses may affect Hong Kong’s
               entrepot trade in Chinese exports, and this would seriously threaten
               Hong Kong’s status as a major shipping centre.


2              Trends and Updates on the Four Provinces/Region


2.1            Sichuan Province—Chengdu Strives to Become “China’s Capital
               for Ladies Shoes”


2.1.1          With its abundant supply of cheap labour and proximity to leather
               production facilities, Chengdu is taking advantage of the westward
               transference of footwear manufacturing and is attempting to establish
               itself as “China’s Capital for Ladies Shoes”. Thus far, Chengdu has
               become part of the so-called “Three Zhous, One Du” area (referring to
               Guangzhou, Quanzhou, Wenzhou and Chengdu), which forms the core
               of the Mainland shoe manufacturing industry. Chengdu has also formed
               a distinctive shoe manufacturing cluster, attracting investment from
               renowned European and Japanese firms and further optimising its
               industrial layout.


2.1.2          Shoe-making firms owned by Hong Kong entrepreneurs and located in
               the Pearl River Delta region could be moved to Sichuan. At the same
               time, they should change their previous trade patterns and OEM
               (Original Equipment Manufacturing) production modes to concentrate
               on brand management, business consulting, and ODM (Original Design
               Manufacturing). Hong Kong entrepreneurs could play a role in the


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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




               integration of the industrial chain to create synergy effects among
               industry players, and they could also cooperate with enterprises from the
               Mainland so as to increase their access to the Mainland market.


2.2            Guangxi   Zhuang     Autonomous       Region—New                                            Industrial
               Developments in Guangxi’s Port Cities


2.2.1          Industrial development in Guangxi’s three major port cities, Beihai,
               Qinzhou and Fangchenggang, has long lagged behind. However, driven
               by the Pan-Beibu Gulf Rim economic cooperation and the “M Strategy”,
               these three cities have now witnessed significant progress in industrial
               development.


2.2.2          Hong Kong has had few opportunities to participate in the current
               planning work of the three Guangxi port cities as their development
               focuses on moving to heavy industries, ferrous products, and port
               construction. However, Hong Kong could help with training
               management personnel and officials, and lay down the foundation for
               future cooperation.


2.3            Yunnan Province—Extensive Business Opportunities in the Cut
               Flowers Industry


2.3.1          Yunnan’s flower industry has seen some significant achievements in its
               outward development. Together with continuous improvements in
               quality and technology, the cut flowers industry has recorded increases
               in both the total amount of foreign exchange earned and export profit
               margins.


2.3.2          The Mainland’s cut flower market was originally dominated by
               Guangzhou, but since 2002 Yunnan has taken over the market due to the
               high quality and low cost of its cut flowers.


2.3.3          The flower industry is one of the most dynamic industries in the world.
               Developing countries could rely on their favourable climatic conditions
               and low production costs to expand flower growing, in order to meet


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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




               demand from local and foreign markets. The Swire Group has invested
               in Yunnan’s flower industry, which is the largest sole investment
               project in flowers in the province.


2.3.4          Hong Kong could leverage the airfreight infrastructure constructed by
               the Swire Group through Cathay Pacific, to strengthen cooperation
               between the airports of Hong Kong and Zhuhai and the Kunming airport,
               and facilitate the export of Kunming and Guangzhou’s cut flowers. It
               could establish Market Facilitation Centres in Tokyo and Amsterdam so
               as to centralise and coordinate the export of cut flowers to Japan and
               Western Europe. At the same time, it should also help Yunnan address
               the problem of eco-labels, and overcome the non-tariff barriers set by
               the overseas markets.


2.4            Guizhou Province—The 11th Five-Year Plan for the Development of
               Science and Technology and Hi-tech Industries


2.4.1          At the end of October 2006, the Guizhou Provincial Government issued
               The 11th Five-Year Plan for the Development of Science and Technology
               and Hi-tech Industries, in which the overall objective of Guizhou’s
               science and technological development during the 11th Five-Year period
               was outlined. The Plan signified that Guizhou’s policies on science and
               technology have entered the implementation stage. The Plan did not list
               the service industry as one of its key priorities, reflecting the less than
               rash nature of the Guizhou Provincial Government, and it was
               formulated according to the traditional industrialisation model. The Plan
               demonstrates Guizhou’s attempts to catch up with the more advanced
               provinces, but even if Guizhou’s hi-tech industries are able to achieve
               the goals set for 2010 they will still fall behind the national average.


2.4.2          Guizhou is expected to conduct more work on science and technology in
               the coming years, and cooperation between Hong Kong and Guizhou
               may increase due to rising demand for environmental protection. Hong
               Kong should focus its efforts on developing specific technologies in
               order to differentiate itself.


2.4.3          Guizhou’s service industry will remain in its infant stage in the near
               future, which Hong Kong could use to its advantage.


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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




3              Personnel Changes in the Four Provinces/Region


               New governors were elected for Guizhou, Sichuan and Yunnan during
               their respective Provincial People’s Congress, with all the acting
               governors formally inaugurated. Both the Secretaries of the CPC
               Committee for Guangxi and Sichuan serve as the Directors of the
               Standing Committee of the Provincial People’s Congress at the same
               time.




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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




1              Foreign Trade Performance Review of the Four
               Southwestern Provinces/Region in 2006


           In 2006, China’s foreign trade surplus hit another record high, reaching
USD 177.46 billion, an increase of 74% over the previous year’s figure of USD
102 billion. China’s foreign trade surplus began to soar in 2005; it broke through
the surplus figures of USD 20-30 billion between 2000 and 2004, and exceeded
USD 100 billion. During the following two years, the trade surplus continued to
expand. By 2006 China had been a member of the WTO for five years. Compared
to the worrisome and pessimistic feeling of the Mainland Government and
enterprises in 2001, trade development during the last five years has been
unexpectedly good. Total imports and exports have more than doubled and annual
growth rates for imports and exports stand at 26.6% and 29.5% respectively.


          Outstanding trade performance pushed forward economic development
throughout all parts of China, and GDP and trade performance in all provinces and
municipalities showed remarkable progress. Although the southwestern provinces
are not in the core area of industrial development, their foreign trade still
accelerated. In 2006, the southwestern provinces benefited from China-ASEAN
regional economic cooperation and the westward transference of industries.
Sichuan, Guangxi and Yunnan witnessed growth in foreign trade faster than the
national figure. Sichuan performed the best of the four provinces/region, and
growth in exports and imports reached 37-41% (see Table 1-1). Guizhou was the
slowest of the four provinces/region, but the export growth rate still reached
20.9%. The difference between the two provinces reflects their economic
competitiveness and scale of production. Overall, foreign trade in the four
provinces/region amounted to merely 1.5% of the national total, and was
obviously very small compared with the giant province in foreign trade,
Guangdong, whose trade volume was nearly 30% of the national total.




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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




Table 1-1:Total Value of Imports and Exports of the Four Southwestern
Provinces/Region and Guangdong in 2006 (By Location of China’s Foreign
Trade Managing Units)
         Region                      Nationwide Sichuan               Guangxi        Yunnan         Guizhou Guangdong
Total Value of Imports
and Exports                               17,606.9           110.2           66.7           62.3           16.2         5,272.2
 (USD 100 million)
Exports                                    9,690.7             66.2          35.9           33.9           10.4         3,019.5
Imports                                    7,916.1             44.0          30.7           28.4            5.8         2,252.6
Balance of Trade                           1,774.6             22.3           5.2            5.5            4.6           766.9

Increase     Imports and
                                             23.8%          39.5%         28.7%          31.4%          15.2%             23.2%
over         Exports
previous     Exports                         27.2%          40.9%         24.9%          28.4%          20.9%             26.8%
year (%)     Imports                         20.0%          37.4%         33.3%          35.1%           6.2%             18.7%

Share of Total Value of
                                             100%           0.63%         0.38%          0.35%          0.09%           29.94%
Imports and Exports
Share of Total Value of
                                             100%           0.68%         0.37%          0.35%          0.11%           31.16%
Exports
Share of Total Value of
                                             100%           0.56%         0.39%          0.36%          0.07%           28.46%
Imports
Share of Total Balance of
                                             100%           1.26%         0.29%          0.31%          0.26%           43.22%
Trade
Source: Raw data is taken from the Ministry of Commerce Website, China. Percentages have
been calculated.



           The export-import structures of the four southwestern provinces/region
are very different from that of Guangdong. The economies of the four
provinces/region feature inward economic models and relatively low levels of
industrialisation; whilst natural resources and agriculture dominate their
economies. The following paragraphs will analyse the export-import structure of
the four provinces/region, and will attempt to investigate trade development with
the neighbouring ASEAN region, appropriate trading products for both regions,
and a possible path for foreign trade cooperation. Lastly, this report will look at
China’s trade in the context of macro development trends, and present the future
trade cooperation opportunities and challenges of Hong Kong in relation to the
four southwestern provinces/region, and to the whole Mainland.




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Social, Economic and Political Developments in the Pan-PRD Region                           Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




1.1                                                       Import-Export Trade in the Four Southwestern Provinces/Region


          Foreign trade in the four provinces is not only lower than that of
Guangdong; it is below the national average. In the period 2000-2005, the foreign
trade dependency ratio of the nation rose from 39.57% to 63.89%, and Guangdong
was in the range of 135-175%. Up to 2005, the figure for the four provinces/region
was only 5.5-11.5% (see Diagram 1-1), featuring small scale and low echelon
products.


Diagram 1-1:Foreign Trade Dependency Ratio, 2000-2005
                                                   180%
                                                   170%
    Foreign Trade Dependency Ratio (Trade / GDP)




                                                   160%
                                                   150%                                        2000        2001       2002
                                                   140%                                        2003        2004       2005
                                                   130%
                                                   120%
                                                   110%
                                                   100%
                                                    90%
                                                    80%
                                                    70%
                                                    60%
                                                    50%
                                                    40%
                                                    30%
                                                    20%
                                                    10%
                                                     0%
                                                            China   Guangdong   Guangxi   Guizhou       Sichun         Yunnan


Source: Raw data taken from the website of the National Bureau of Statistics of China, 2000-
2005, the National and Provincial Statistical Report, and the China Statistical Abstract 2006.
Ratios are calculated for the purpose of this report.



1.1.1                                                     Export Conditions in the Four Southwestern Provinces/Region


            Overall, foreign trade in the four provinces/region is conducted on a
very small scale, and is quite insignificant to the local economy. Foreign trade
statistics are definitely not comparable to Guangdong (see Table 1-2)




                                                                                                                                                  8
      Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




      Table 1-2: Composition of Exports in the Four Provinces/Region and
      Guangdong in 2006 (USD 100 million)
                                                                                     State-     Foreign-
                                 General         Processing           Other                                  Other
                  Total                                                              owned       funded
                                  Trade            Trade              Trade                                Enterprises
                                                                                   Enterprises Enterprises
Nationwide     9,690.7       4,163.2     5,103.7                          423.8           1,913.4              5,638.3                2,139.0
Guangdong      3,019.5         800.0     2,083.9                          135.7             485.3              1,939.2                  595.0
Sichuan            66.2         52.4         11.8                           2.1              26.1                 11.7                   28.4
Guangxi            35.9         26.7          5.2                           4.0              11.1                  8.1                   16.7
Yunnan             33.9         22.3          6.5                           5.0              18.2                  3.0                   12.7
Guizhou            10.4          8.4          2.0                           0.0               7.4                  1.2                    1.7
      Source: Ministry of Commerce Website, China



                The export structure reflects the comparative advantages of a region to
      some extent, and its role in international trade cooperation. Export figures from the
      four southwestern provinces/region obviously show a very different structure
      compared with Guangdong (see Table 1-3). Exports from the four
      provinces/region were concentrated in a general trade pattern, with ratios as high
      as 66-81% and with a relatively small amount of processing trade, quite the
      contrary of Guangdong. The reason for this is that the four provinces/region
      mainly export natural resource products such as agricultural goods, while
      Guangdong has more foreign enterprises engaging in processing industries and
      exports more manufactured goods such as light industry products. It is noticeable
      that in Guangxi and Yunnan the amount of other types of trade is very high. This
      is because border inhabitants in Guangxi and Yunnan tend to trade on a much
      smaller scale with their ASEAN neighbours whilst tariffs have been reduced by
      50% to encourage this special export pattern.


                 Besides, the four provinces/region were engaged in export trade mainly
      through the state-owned enterprises and other local enterprises, whilst foreign
      enterprises were few. Even though foreign enterprises can enter the four
      provinces/region, they were mainly engaged in the inland market catering to the
      needs of local people due to the relatively backward transport facilities. In Sichuan
      and Guangxi, a substantial amount of agricultural and elementary manufactured
      products processing was carried out. Private enterprises (i.e. the “other
      enterprises” shown in the table) can participate in the production and export of
      these processing industries. In Guizhou and Yunnan, however, their main exports
      were minerals and natural resource products which are mostly state-owned or
      monopolised. Foreign enterprises cannot enter these industries. Local private
      enterprises are small in scale and have limited technological capability. So, state-
      owned enterprises have naturally become the main exporters.


                                                                                                                                9
     Social, Economic and Political Developments in the Pan-PRD Region    Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




     Table 1-3:Composition of Exports in the Four Provinces/Region and
     Guangdong in 2006 (%)
                                                                                      State-     Foreign-
                                  General         Processing             Other                                Other
                  Total                                                               owned       funded
                                   Trade            Trade                Trade                              Enterprises
                                                                                    Enterprises Enterprises
Nationwide       100%           43%            53%            4%                               20%                  58%               22%
Guangdong         100%           26%            69%           4%                               16%                  64%               20%
Sichuan           100%           79%            18%           3%                               39%                  18%               43%
Guangxi           100%           74%            15%         11%                                31%                  23%               46%
Yunnan            100%           66%            19%         15%                                54%                   9%               38%
Guizhou           100%           81%            19%           0%                               72%                  12%               16%
     Source: Figures were calculated from the previous table.


                In terms of average annual growth, the traditional “both ends abroad”
     processing trade was formed between 2001 and 2006. The national figure was as
     high as 28% for processing trade, but it was still lower than general trade (30%) of
     products from local production. In the past, Hong Kong enterprises have seen
     good growth in the processing trade, but this fell behind general trade. This means
     that Guangdong has succeeded in transforming its industrial structure to local
     industries with fewer processing industries. The increase in other enterprises
     (mainly civilian-run enterprises) provided the evidence (see Table 1-4). In the four
     southwestern provinces/region, Sichuan and Guizhou experienced a relatively
     faster pace of growth in the processing trade, which was probably due to a lot of
     foreign enterprises investing in the electronic data processing industry in Sichuan.
     In Guizhou, export growth was negative, and thus made growth in the processing
     trade seem relatively outstanding, even though the growth rate was only 7%.


                Since 2001, in all the areas shown in the table, “other enterprises”
     (mainly civilian-run enterprises) experienced remarkable success in exports, with
     annual growth rates as high as 61%, much higher than that of foreign enterprises.
     In recent years, because investors from Hong Kong and Taiwan, as well as most
     foreign investors transferred their enterprises to locations with more favourable
     cost environments, foreign enterprises experienced slower growth. The local
     industrialists of the Mainland, however, grew rapidly and civilian-run enterprises
     boosted the development of each other in a complementary way. A relatively
     comprehensive local industrial system was formed, and this propelled further
     development in general trade. It is predicted that the further development of
     general trade will provide private enterprises with the impetus to catch up and
     ultimately surpass the processing trade and foreign enterprises in the future.


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       Social, Economic and Political Developments in the Pan-PRD Region    Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




       Table 1-4: Annual Average Growth of Exports in the Four Provinces/Region
       and Guangdong, 2001-2006 (%)
                                                                                     State-     Foreign-
                                General          Processing          Other                                   Other
                  Total                                                              owned       funded
                                 Trade             Trade             Trade                                 Enterprises
                                                                                   Enterprises Enterprises
Nationwide           29%               30%                28%               44%          11%         33%         61%
Guangdong            26%               37%                22%               41%            6%        29%         65%
Sichuan              40%               40%                44%               30%          25%         37%         86%
Guangxi              18%               16%                14%              115%           -1%        28%         61%
Yunnan               52%               46%                49%              414%          38%         47%        164%
Guizhou               -4%               -1%                7%              -68%           -5%          3%         -2%
       Source: Raw data taken from the Ministry of Commerce Website, China. Percentages have been
       calculated.




       1.1.2          Import Conditions in the Four Southwestern Provinces/Region


                  Imports basically correspond with export conditions. The processing
       trade, and the amount of foreign enterprises basically determine the growth rate of
       imports (see Table 1-5). Guangxi’s imports were quite remarkable, and border
       trade imports topped the four provinces/region and were higher than the national
       level. This was due to economic development in Vietnam and a subsequent
       increase in imports of Vietnamese products. In 2006, Guangxi’s border imports
       totalled USD 663 million, which represented 21.2% of total imports; while border
       imports from Vietnam reached USD 575 million, or 18.7% of total imports, and
       they were mainly handled by private enterprises or individuals1.

       Table 1-5: Import Structures of the Four Provinces/Region and Guangdong
       (USD 100 million)
                                                                                        State-     Foreign-
                                    General         Processing             Other                                Other
                    Total                                                               owned       funded
                                     Trade            Trade                Trade                              Enterprises
                                                                                      Enterprises Enterprises
 Nationwide       7,916.1      3,331.8        3,215.0   1,369.4        2,252.4                                     4,726.2              937.6
 Guangdong        2,252.6        563.1        1,377.3     312.3          425.0                                     1,513.2              314.4
 Sichuan              44.0        28.4           10.8       4.8           21.6                                        17.3                5.0
 Guangxi              30.7        19.9            3.2       7.6             6.6                                       13.9               10.2
 Yunnan               28.4        20.3            4.8       3.3           21.2                                         1.8                5.4
 Guizhou               5.8         4.7            1.1       0.0             4.7                                        0.7                0.4
       Source: Data taken from China’s Ministry of Commerce Website, China.

       1
           Guangxi Commerce Statistics from the Department of Commerce Website, China.


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       Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




                  In terms of import structure, processing trade and foreign-funded
       enterprise figures for the four provinces/region were lower than those of the
       national total and Guangdong.


       Table 1-6:Composition of Imports of the Four Provinces/Region and
       Guangdong, 2006 (%)
                                                                                    State-     Foreign-
                                General          Processing          Other                                  Other
                 Total                                                              owned       funded
                                 Trade             Trade             Trade                                Enterprises
                                                                                  Enterprises Enterprises
Nationwide        100%           42%           41%          17%              28%                                   60%                 12%
Guangdong         100%           25%           61%          14%              19%                                   67%                 14%
Sichuan           100%           64%           25%          11%              49%                                   39%                 11%
Guangxi           100%           65%           10%          25%              22%                                   45%                 33%
Yunnan            100%           71%           17%          12%              74%                                    6%                 19%
Guizhou           100%           81%           19%            1%             82%                                   12%                  6%
       Source: Figures were calculated according to the data in the previous table.




       1.1.3          Foreign Trade Development Between the Four Southwestern
                      Provinces/Region and ASEAN


                 Geographically speaking, the four southwestern provinces/region are
       adjacent to ASEAN, and economic and trading activities between them are
       frequently carried out. The volume of imports and the neighbouring distance with
       ASEAN is directly proportionate. For example, Yunnan and Guangxi both share
       borders with ASEAN, and naturally had the greatest volume and fastest growing
       trade with ASEAN (see Table 1-7).




                                                                                                                               12
Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




Table 1-7: Import-Export Trade Between the Four Provinces/Region and
ASEAN in 2006
                                                                                           Guangxi
                                           Sichuan        Guizhou       Yunnan                Of which:
                                                                                       ASEAN
                                                                                               Vietnam
           Value (USD
                                   6.24       2.36     16.30      9.85          7.50
           100 million)
           Share of
 Exports                            9%        23%       48%       27%          21%
           Provincial Total
           Increase Over
                                   -6%        26%       50%       19%          16%
           Previous Year
           Value (USD
                                   2.02       0.90      5.40      8.42          7.17
           100 million)
           Share of
 Imports                            5%        16%       19%       27%          23%
           Provincial Total
           Increase Over
                                   78%        33%       16%      111%         108%
           Previous Year
Source: Data taken from the Ministry of Commerce Website, China.
 “Yunnan and ASEAN trade increases - private enterprises accounted for 50% of trade
and were the main force behind the rise.” China Industry and Commerce Times, 19
January 2007.


Trade between Guangxi and ASEAN


            According to statistics from Nanning Customs Service in Guangxi, the
bilateral trade volume between Guangxi and ASEAN reached USD 1,827 million
in 2006, which represented an increase of 49.1% over the previous year. ASEAN
was Guangxi’s top trading partner for the 8th consecutive year 2 , and the
centralising effect of Guangxi as the trading link with ASEAN was increasingly
obvious. A sea route network has been formed with Guangxi’s ports leading the
way, The Nanning-Kunming railway provides the backbone, and links the
highways, waterways, airways and other transportation infrastructural facilities. In
2006, trade from across China engaged in the import-export business with ASEAN
via Guangxi’s ports totalled USD 2.73 billion, an increase of 54.6%, and was one
third the total import-export volume to pass through Guangxi’s ports. A total of
1,444 foreign enterprises from 29 provinces and municipalities in China chose to
settle their ASEAN businesses at Guangxi’s ports. Import-export volumes passing
through Chongqing, Sichuan, Guizhou and Yunnan via Guangxi’s ports totalled
USD 2.58 billion, an increase of 56.4%, which was 65.6% of the total import-

2
 “ASEAN became Guangxi’s No.1 trading partner for the 8th consecutive year”( “東盟已連續八年成為廣
西第一大貿易伙伴”), China Industries Daily, 22 January 2007.


                                                                                                                        13
Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




export trade conducted by outside enterprises at Guangxi’s ports. Guangxi is
undoubtedly an increasingly important sea outlet for the southwestern region3.


           Trading activities between Guangxi and Vietnam were particularly
active. As a consequence of the special beneficial tariff arrangement between
China and ASEAN, Nanning ports imported USD 77.42 million worth of products
from Vietnam, an increase of 63.7% over the previous year, importing mainly
tropical fruits like water melons and longyan, while fruits from northern China4,
such as apples and pears, were exported via Guangxi to Vietnam and other
Indochina markets5.


Trading Activities Between Yunnan and ASEAN


         According to Kunming Customs Service statistics, trade volumes
between Yunnan and ASEAN in 2006 reached USD 2.17 billion, an increase of
40.6%, which represented 34.8% of the total foreign trade volume for Yunnan in
2006. Myanmar topped the trading volume with Yunnan, accounting for USD 690
million worth of trade, which was about one third of the total volume of Yunnan-
ASEAN trade, and an increase of 9.5% over previous year. Trade with Vietnam
came second, with the total volume reached USD 510 million, an increase of
57.6% over the previous year. Meanwhile, trade with Singapore reached a record
high of USD 480 million, an increase of 250% over the previous year. It was
mostly consisted of processing trade.


           Traditional commodities such as metals were still the main export
product from Yunnan to ASEAN, with export volumes reaching USD 330 million,
an increase of 130% over the previous year. Electrical machinery, agriculture
products, chemical fertilisers and textile products increased by 18%, 14%, 22.8%,
and 26.7% respectively. Textile product exports surpassed USD 100 million.
Civilian-run enterprises were the main driving force behind the Yunnan-ASEAN



3
  “Import-export trade via Guangxi ports increased from USD 5.5 billion to USD 7.96 billion in
2006”( “2006 年廣西口岸進出口貿易從上年的 55 億美元猛增至 79.6 億美元”), Nanguo Morning Post,
21 January 2007.
4
  “Growth of China-ASEAN Free Trade Zone greatly benefits the nine Pan-Pearl River Delta
provinces/region”( “中國-東盟自貿區持續推進“泛珠"九省區受惠巨大”), Yeongcheng Evening
Post, 15 January 2007.
5
  Based on study tour findings from Guangxi and northern Vietnam in January 2007.


                                                                                                                        14
Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




trade figures, and their trading volumes reached USD 1.1 billion, an increase of
35.8% over the previous year6.



1.1.4          Import-Export Arrangements                              in      the       Four         Southwestern
               Provinces/Region


           A comparison of the different sets of import-export statisitics for the
four provinces compiled by different methods, import figures based on product
destinations are higher than those based on the location of the trading enterprises.
This implies that imports have been handled by provinces. Guizhou’s problem was
the most acute; around 33% of its imports had to go through other provinces,
while that of the other three provinces were in the range of 12-18%. Sichuan and
Yunnan handled some of the export business of other provinces, which amounted
to 14.3% and 9.7% respectively of their total exports. Sichuan enjoys the
advantage of having access to the Yangtze River and serves neighbouring
provinces via water transport. Yunnan exploits its proximity to ASEAN and
transports goods from other provinces to ASEAN over land. Guangxi in the future
could use its ports, highways and railways to handle ASEAN trade, especially
Vietnamese imports, when the construction of Guangxi’s transport network is
completed.




6
 “Yunnan and ASEAN trade boosted - private enterprise accounts for 50% of trade and was the main force
behind the increase”( “雲南與東盟貿易節節攀升,民企佔一半居絕對主力”), China Industry and
Commerce Times, 19 January 2007.


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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




Table 1-8:Imports and Exports of the Four Southwestern Provinces/Region
in 2006, By Way of Statistics (USD 100 million)
                                                                Value                        Increase Over
                                                           (USD 100 million)               Previous Year (%)
                             Source of
  Province/Region                               Exports                  Imports          Exports          Imports
                             Statistics
                             Location of
                             China’s Foreign
                             Trade Managing
        Sichuan
                             Units                66.24                      43.97              40.9              37.4
                             Places of
                             Destination/Origin   56.76                      49.96              38.7              39.5
                             Location of
                             China’s Foreign
                             Trade Managing
       Guangxi
                             Units                35.93                      30.74              24.9              33.3
                             Place of
                             Destination/Origin   38.31                      37.80              33.4              30.8
                             Location of
                             China’s Foreign
                             Trade Managing
        Yunnan
                             Units                33.91                      28.40              28.4              35.1
                             Place of
                             Destination/Origin   30.61                      32.24              28.3              27.4
                             Location of
                             China’s Foreign
                             Trade Managing
       Guizhou
                             Units                10.38                        5.78             20.9               6.2
                             Place of
                             Destination/Origin   13.51                        8.61             19.0              -4.8
Note: ‘Enterprise location’ refers to the import-export trading volume handled by import-export
enterprises registered with the local Customs Service. Product destination refers to import-export
trading volumes according to the local consumption and needs of production units and their
exports.
Source: China’s Customs Statistics (Monthly Exports & Imports)




1.2            Import-Export Conditions in Sichuan


           In 2006, the import-export trade of Sichuan had the following
characteristics:




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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




                          Civilian-run enterprises had become the number one export
                          enterprises in Sichuan, with exports of USD 2.68 billion, an
                          increase of 72.1% over the previous year. This represented
                          34.9% of total exports from Sichuan and an increase of 42.2%
                          from the previous year7.

                          The structure of exports improved. Electrical machinery and
                          high-tech products grew rapidly, and witnessed export growth
                          higher than the province’s export growth by 14.2 and 20.6
                          percentage points respectively (see Table 1-9). Among traditional
                          products, textile and garment exports increased by 96.9% and
                          shoes by 66.7%. The “Two high, one resource”8 type of export
                          products which the Central Government has intended to
                          minimise, e.g. aluminium electrolyte and iron alloy exports, were
                          reduced by 45% and their share fell from 22% in the previous
                          year to 6%9.

Table 1-9:Major Import and Export Commodities of Sichuan
                                                      Value                   Share of Provincial            2005-2006
                   Item                         (USD 100 million)                    Total                    Annual
                                                 2005       2006               2005        2006               Growth
    Total Exports (By
    Commodity)                                      47.02           66.24      100.0%         100.0%               40.9%
       Machinery and Electronic
    Products                                        15.75           24.52        33.5%           37.0%              55.7%
       Hi-tech Products                              5.90            9.68        12.6%           14.6%              64.0%
       Agricultural Products                         4.43            4.83         9.4%            7.3%               9.0%

    Total Imports (By
    Commodity)                                      32.00           43.97      100.0%         100.0%               37.4%
       Machinery and Electronic
    Products                                        19.87           31.62        62.1%           71.9%              59.2%
       Hi-tech Products                              9.78           17.08        30.6%           38.9%              74.6%
       Agricultural Products                         0.99            1.01         3.1%            2.3%               2.7%
Note: Some of the electrical machinery and high-tech products overlapped. Therefore the total
amount is more than the total import figure for Sichuan.
Source: Commerce statistics for Sichuan are taken from the Department of Commerce Website,
China.


7
  “Sichuan foreign trade is developing”( “四川外貿在發展”), Sichuan Commerce Bureau Website, 15
January 2007.
8
  “Two high, one resource” refers to products which are “highly polluting, highly energy consuming, and
resource based” products.
9
  “Sichuan’s processing import-export trade figures reached a record high in 2006”( “四川省 2006 年加工
貿易進出口創歷史新高”), Sichuan Commerce Bureau Website, 29 January 2007.


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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




                          Export markets were enlarged and export destinations included
                          nearly 200 countries and regions. Dependence on Asian markets
                          dropped remarkably, and decreased by 6.3 percentage points over
                          the previous year. Meanwhile export markets in Europe, North
                          America, Africa, and Latin America increased by 1.4, 3.4, 1.3
                          and 0.9 percentage points respectively. (Statistics for the top ten
                          trading partners are shown in Table 1-10).


Table 1-10:Major Trading Partners of Sichuan in 2006
                                 Exports                             Imports
                                        Increase                                  Increase
                            Value                                        Value
                                          Over                                      Over
Rank Country/Region (USD 100                         Country/Region (USD 100
                                        Previous                                  Previous
                           million)                                     million)
                                          Year                                      Year
       Total Exports           66.24          41% Total Imports            43.97       37%
  1      USA                   10.98          83%      USA                   9.84     121%
  2      Hong Kong              8.62          50%      Japan                 9.27      48%
  3      India                  4.90         112%      Germany               5.56      33%
  4      Japan                  3.17           -9%     S. Korea              3.46      85%
  5      S. Korea               2.96            4%     Taiwan                2.16      34%
  6      Romania                2.84       1235%       Australia             1.44      29%
  7      Taiwan                 1.68          17%      France                1.31     -44%
  8      Germany                1.62          36%      India                 1.11     -13%
  9      Holland                1.58           -1%     Italy                 1.06     -22%
 10      Pakistan               1.37          52%      Malaysia              0.80      65%
Source: Commerce statistics for Sichuan are taken from the Department of Commerce Website,
China.

                          Various cities and autonomous states in Sichuan developed
                          export trade. In 2000, of the 21 cities and states in Sichuan only 9
                          had exports exceeding USD 10 million. In 2006, 16 cities and
                          states had exports exceeding USD 10 million, of these one
                          exceeded USD 1 billion, seven fell within the range of USD 100-
                          1000 million, and five had USD 50-100 million.


1.3            Import-Export Conditions in Guangxi


           In 2006, import-export trade in Guangxi had the following
characteristics:


                                                                                                                        18
Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




                          In 2006, Guangxi’s import-export trade amounted to USD 6.674
                          billion. Among the 12 western provinces/municipalities, the scale
                          of export ranked fourth after Xinjiang, Sichuan and Shaanxi10. In
                          2006, Guangxi’s import-export border trade was worth USD 1.05
                          billion, an increase of 49.5% over the previous year. Dong Xing
                          became Guangxi’s number one border port and, in 2006, import-
                          export border trade with Vietnam via Dong Xing amounted to
                          USD 390 million, an increase of 130%11.


                          Private enterprises became the number one trading entity for
                          foreign trade in Guangxi, with import-export trading volumes
                          reaching USD 2,473 million, an increase of 56.8% which
                          surpassed the trade volume of foreign capital enterprises.


                          Guangxi’s foreign trade structure obviously improved. In 2006,
                          Guangxi’s electrical machinery import-export trading volume
                          was USD 1,395 million, a rise of 20.2% over the previous year,
                          and its share in the total foreign trade stood at 20.9%. Exports
                          amounted to USD 809 million, an increase of 24.3%, which
                          comprised mainly electrical cables, container machinery and
                          lorries etc. 12 Exports of automobile products stood at a
                          remarkable figure of USD 67.61 million, which represented an
                          increase of 570% compared with 2002, and the exports were
                          destined for 51 international markets. The main market was
                          Southeast Asia, and exports to ASEAN amounted to USD 57.65
                          million, an increase of 460%. Vietnam was the major ASEAN
                          market and exports amounted to USD 56.54 million, or 83.6% of
                          the exports to ASEAN13. Exports of high-tech products reached
                          USD 106 million, an increase of 59.2%, whilst exports of



10
   “Guangxi achieves foreign trade growth again in 2006”( “2006 年廣西外貿再創佳績”), Guangxi Daily,
14 January 2007.
11
   “Guangxi’s border trade exceeded USD 1 billion”( “廣西邊境小額貿易首次突破 10 億美元”), Guangxi
Daily, 21 January 2007.
12
   “Guangxi’s electrical machinery import-export trade reached almost USD 1.4 billion in 2006”( “2006 年
廣西機電產品進出口近 14 億美元”), China Economy Net, 26 January 2007.
13
   “Guangxi’s automobile product export trade encounters industrial structure problems”( “廣西汽車産品
出口增長 面臨産業結構不合理的挑戰”), Nanguo Morning Post internet edition, 25 January 2007.


                                                                                                                        19
Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




                          agricultural products reached USD 357 million, a rise of 13.4%.
                          All surpassed the original targets14.


                          ASEAN was still the number one trading partner. In 2006,
                          Guangxi-ASEAN bilateral trade amounted to USD 1,827 million,
                          an increase of 49.1%.



1.4            Import-Export Conditions in Yunnan


           In 2006, import-export conditions in Yunnan had the following
characteristics15:


                               Trade patterns were transformed from an over reliance on
                               general trade to a more balanced structure consisting of
                               general trade, processing trade and border trade.


                               State-owned enterprises contributed 63.2% of the total
                               import-export volumes. Large industrial groups were the
                               major force in pushing export growth.


                               The export product structure in 2006 apparently changed. The
                               Central Government restricted exports of natural resources,
                               and metal refinery was listed as a prohibited processing
                               industry. The previously dominant export products, especially
                               metallic products, were greatly affected. The export product
                               structure was hence changed to comprise five major
                               categories, namely, metallic products, high-tech products,
                               electrical machinery, agriculture products and phosphorous
                               chemical products.



14
   “In 2006, Guangxi’s trade and economy experienced triumphs. Foreign import-export volumes reached
unprecedented highs”( “2006 年我區商務經濟亮點紛呈全區外貿進出口總額創歷史新高”), Guangxi
Daily, 26 January 2007.
15
   “Last year Yunnan’s foreign import-export figures once again broke previous records”( “去年雲南外貿
進出口再創歷史新高”), Yunnan Daily, 30 January 2007.


                                                                                                                        20
Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




                               The traditional major agricultural products kept growing
                               steadily, especially tobacco, vegetables, coffee, nuts, tea and
                               cut flowers. Exports of several species increased in price and
                               volume. Total exports of agricultural products reached
                               476,000 tons, worth USD 550 million, with export markets in
                               85 countries and regions16.


                               Southeast Asia was still the major trading market although
                               Australia and the USA saw increases in import-export of
                               137% and 41.4% respectively. Australia was Yunnan’s
                               second most important trading partner, Singapore the fourth
                               and the USA the sixth. The structure of trading markets
                               apparently improved.


1.5            Import-Export Conditions in Guizhou


           In 2006, import-export conditions in Guizhou had the following
characteristics17:


                          General trade increased rapidly whilst processing trade decreased.
                          Enterprises tried to evade the decrease in export tax rebate on
                          steel products, declared by the Central Government on 15
                          December 2006, and the newly issued 10% tariff tax. This
                          resulted in a rush to export affected products before 15 December.
                          The processing trade dropped by 31.6%, mainly due to a
                          reduction in exports from Guizhou Wengfu Chemi-Phos and
                          Kyocera Zhenhua, the Japanese mobile phone company. These
                          two enterprises reduced their exports by USD 95.79 million
                          compared with 2005, and this directly affected Guizhou’s
                          processing trade export figure by 32.6 percentage points.


                          The import-export trade generated by state-owned enterprises
                          increased rapidly, and maintained a leading position. They

16
   “Yunnan’s agricultural product exports increased in both quantity and price”( “我省農産品出口量增價
揚”), Yunnan Daily Net, 1 February 2007.
17
   “Guizhou import-export conditions in 2006”( “2006 年貴州全年進出口情況簡報”), Guizhou
Commerce Bureau Website, 1 February 2007.


                                                                                                                        21
Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




                          contributed 75% of the province’s total import-export volume, an
                          increase of 9 percentage points over the previous year.


                          Exports of electrical machinery and mineral products both
                          decreased while those of chemical products and general metallic
                          products increased. (Major export products are shown in
                          Diagram 1-2)



Diagram 1-2: Guizhou’s Export Product Structure Categories, 2006

   40.0%           37.4%
               34.9%
   35.0%

   30.0%

   25.0%                                           22.7%
                               19.0%                                                                              2005
   20.0%                           16.5%
                                              14.3%
                                                                                             12.6%
                                                                                                                  2006
   15.0%                                                      11.0%
   10.0%                                                          8.2%           8.3%
                                                                              8.3%
                                                                                                  6.5%
     5.0%

     0.0%
               Chemical       Mechanical       Common           Mineral        Ruuber          Other
               Prodcuts          and          Metals and       Products       Products        Products
                              Electronic         Their
                               Products        Products


Source: Commerce statistics for Guizhou are taken from the Department of Commerce Website,
China.



          Foreign trade development across different geographical areas remained
uneven. Guiyang, Liupansui, Qinnan, Anshun and Junyi already contributed
98.9% of total exports from Guizhou.


          Guizhou’s biggest trading partner was Asia. Exports to Asia were worth
USD 685 million, an increase of 23.31%, accounting for 66% of the province’s
total export volume. Exports to Europe and North America increased by 19.47%



                                                                                                                        22
          Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




          and 37.08% respectively, and accounted for 13% and 14.35% of the total export
          volume. (The top ten import-export countries are listed in Table 1-11).


          Table 1-11: Major Trading Partners of Guizhou, 2006
                                   Exports                                                              Imports
                                                          Increase                                    Value                          Increase
Rank                            Value           Share of                                                         Share of
                                                            Over                                      (USD                             Over
       Country/Region         (USD 100         Provincial          Country/Region                               Provincial
                                                          Previous                                     100                           Previous
                               million)          Total                                                            Total
                                                            Year                                     million)                          Year
 1     USA                            1.37          13.2%     38% India                                   1.15     19.9%                  0%
 2     Vietnam                        0.91           8.7%           27% Australia                          0.75          12.9%            55%
 3     Hong Kong                      0.84           8.1%           61% Canada                             0.63          10.8%            -13%
 4     Japan                          0.83           8.0%          -35% Thailand                           0.56            9.6%           94%
 5     Taiwan, China                  0.81           7.7%          144% Brazil                             0.36            6.3%      11,616%
 6     S. Korea                       0.77           7.4%             2% Germany                           0.31            5.4%           15%
 7     Indonesia                      0.45           4.3%           45% USA                                0.26            4.6%           -29%
 8     Thailand                       0.37           3.6%           49% Korea                              0.23            4.0%            9%
 9     Philippines                    0.35           3.4%            -5% Malaysia                          0.19            3.3%           52%
 10    India                 0.29          2.8%       28% Japan                    0.17     2.9%                                          -66%
          Source: Commerce statistics for Guizhou are taken from the Department of Commerce Website,
          China.




          1.6            Overall Import-Export Conditions in China


                    The magnificent growth in foreign trade in the four southwestern
          provinces/region is not an isolated event, but is in fact closely related to China’s
          overall development in foreign trade and national competitiveness.


                    Since China introduced an open-door policy and other reforms in the
          1980s, foreign trade and direct investment from foreign enterprises has grown in
          the same direction. Trade surpluses have in fact been lower than the amount of
          investment by foreign enterprises. Therefore, many scholars were of the view that
          China’s trade surplus was driven by investment of foreign enterprises, thus trade
          surplus was the outcome of intensive investment behaviour (see Diagram 1-3).




                                                                                                                                  23
Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




Diagram 1-3: China’s Trade Surplus and Foreign Investment, 1983-2006
                      1,800

                      1,600
                                          Trade Surplus
                      1,400               FDI

                      1,200
   US$, 100 million




                      1,000

                       800

                       600

                       400

                       200

                        -
                                83

                                84

                                85

                                86

                                87

                                88




                                91
                                89

                                90




                                93



                                95

                                96
                                92



                                94




                                97

                                98

                                99

                                00

                                01

                                02

                                03

                                04

                                05

                                06
                              19

                              19

                              19

                              19

                              19

                              19

                              19

                              19

                              19

                              19

                              19

                              19

                              19

                              19

                              19

                              19

                              19

                              20

                              20

                              20

                              20

                              20

                              20

                              20
                      (200)

Source: China Statistical Yearbooks (various years), Department of Commerce Website, China



           From 2005 onwards, China’s trade surplus exceeded the actual
investment of foreign enterprises, and doubled by 2006. This reflected some
meaningful trends. Firstly, China’s growth in trade no longer depended on
investment by foreign enterprises, and was entering a new stage of growth driven
by China’s own comprehensive capabilities and competitiveness. Secondly,
China’s trade growth no longer relied on the ability of foreign enterprises, and
domestic civilian-run enterprises gradually became the major economic entities
propelling trade development. Furthermore, the Chinese economy has built up a
solid manufacturing base. The competitiveness of Chinese industries has not only
increased markedly, but developed quickly as a result of investment by foreign
enterprises, technology transfer and export structure transformation. Therefore,
from 2005 onwards, China’s export competitiveness began to emerge and the
trend has carried on. The revaluation of the RMB did not form a hindrance to
exports.


           Table 1-12 shows that the Chinese trade surplus consists of
manufactured products, of which the biggest categories were machinery and
transport equipment. The trade surplus recorded for these products reached USD
99.3 billion, and accounted for 55.9% of the total trade surplus. However this
figure was still below the record of USD 126 billion reached by textile and
garment products (which contributed 71.9% of the total trade surplus). China’s


                                                                                                                        24
       Social, Economic and Political Developments in the Pan-PRD Region    Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




       textile industry still faces quota restrictions set by the USA and Europe, but these
       restrictions are due to be repealed in 2007 and 2008, and the export power of
       China’s textile and garment industry will become invincible. It is estimated that
       these exports will jump from the present 25% of world market share to more than
       50%. Even though Europe and America will very probably introduce anti-
       dumping and anti-surge mechanisms, they are unlikely to restrict the expansion of
       China’s products on the international market.


       Table 1-12:Composition Analysis of Trading Commodities in China, 2006
                              Value (USD 100 Million)        Share (%)                                              Increase (%)
     Categories
                             Exports Imports Balance Exports Imports Balance                                      Exports Imports
1. By SITC
Classification
Primary Products                   529        1,871         -1,342         5.5%        23.6%        -75.6%            7.9%          26.7%
   Food                            279          229             49         2.9%         2.9%           2.8%          13.1%           6.4%
   Crude Materials                  47          287           -241         0.5%         3.6%         -13.6%          14.8%          21.5%
   Mineral Products                204        1,355         -1,151         2.1%        17.1%         -64.9%           0.3%          32.2%
    Metalliferous
                                     26          465          -439          0.3%         5.9%        -24.7%           -3.6%          20.5%
Ores and Metal Scrap
    Mineral Fuels                  178           890          -712          1.8%       11.2%         -40.1%            0.9%          39.2%
Manufactured
                                 9,162        6,045          3,117         94.5%       76.4%        175.6%          28.5%           18.0%
Products
   Non-ferrous Metal               182           228           -46          1.9%         2.9%          -2.6%         66.6%          33.4%
   Iron and Steel                  325           216           109          3.4%         2.7%           6.1%         68.8%         -17.9%
   Chemical and
                                   445           871          -426          4.6%       11.0%         -24.0%          24.5%           12.0%
Related Products
   Other Semi-
                                   754           262           492          7.8%         3.3%         27.7%          30.3%           17.8%
finished Products
   Machinery and
                                 4,564        3,571            993         47.1%       45.1%          55.9%          29.6%           22.9%
Transport Equipment
   Textile Products                487           164           323          5.0%         2.1%         18.2%          18.6%            5.5%
   Clothes                         954            17           937          9.8%         0.2%         52.8%          28.6%            5.8%
   Other Products                1,450           716           734         15.0%         9.0%         41.4%          19.2%           16.9%

2. By BEC
Classification
   Capital Goods                 2,601        1,517          1,084         26.8%       19.2%          61.1%          29.2%           18.3%
   Intermediate
                                 3,980        5,893         -1,913         41.1%       74.4%       -107.8%           30.8%           19.5%
Goods
   Consumption
                                 3,110           507         2,604         32.1%         6.4%       146.7%           21.2%           20.1%
Goods



                                                                                                                                25
       Social, Economic and Political Developments in the Pan-PRD Region    Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




                              Value (USD 100 Million)        Share (%)                                              Increase (%)
     Categories
                             Exports Imports Balance Exports Imports Balance                                      Exports Imports

3. Other
Classification
   Agricultural
Products                           220           278            -58        2.3%          3.5%          -3.3%         12.2%           12.9%
   (By WTO)
   Machinery and
                                 5,494        4,277          1,217         56.7%       54.0%          68.6%          28.8%           22.1%
Electric Products
   Hi-tech Products       2,815     2,473         342     29.0%       31.2%                           19.3%          29.0%           25.1%
               Total:     9,691     7,916       1,775
       Note: SITC stands for Standard International Trade Classification.
             BEC stands for Broad Economic Categories
       Source: Department of Commerce Website, China.



                  On the other hand, China’s export products are low in technical calibre
       and the ‘Made in China’ label has a poor market image which is associated with
       low value-added and assembly processing. According to Table 1-12, hi-tech
       products account for 31.2% of total exports, although a considerable portion of
       these are still at the relatively low end of the value-added production chain in the
       information technology industry. Overall, China’s manufacturing plants are now
       closely tied to the global manufacturing system and this in turn guarantees the
       steady and rapid growth of China’s exports. The expert group writing this report
       estimates that at the present rate of foreign trade development, China’s trade
       surplus is likely to reach USD 250 billion in 200718.


                The enormous and rapid increase in the trade surplus, and in the actual
       investment by foreign enterprises in China, have created a foreign exchange
       reserve exceeding USD 1,000 billion which is the world’s biggest foreign
       exchange reserve. This brings about a number of unfavourable consequences such
       as an obvious surplus in currency liquidity, affecting the central bank’s
       independent monetary policy and making it more difficult to adjust China’s
       18
         The former chief of the National Statistics Bureau, Mr Li De-shui (李德水), cited the Standard Chartered
       Bank of Britain’s study report which claimed that foreign trade surplus figures contained many
       inaccuracies. This had come about because Mainland factories wanted to get export tax redemptions.
       Foreign enterprises wanted to exchange more RMB and enter the Mainland’s capital market for an
       anticipated appreciation of the RMB, so they exaggerated export values as to counter the Mainland’s
       restriction on capital account. Some Mainland economists have also admitted the existence of this
       phenomenon. However the process of foreign exchange hedging is a costly and complicated procedure in
       China, and the exaggeration of the trade surplus was estimated to be only a small fraction in reality. In
       recent years, as export tax redemption procedures and monitoring mechanisms have improved, there has
       been a reduction in false export claims. Therefore, trade surplus figures are now more accurate.


                                                                                                                                26
Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




macroeconomic performance. Trade conflicts with trading partners are becoming
frequent, increasing economic risks and subjecting the RMB to revaluation
pressures.


           In view of the problems caused by the huge trade surplus, the Central
Government called a Central Economic Work Conference at the end of 2006 and
determined the principles and major economic tasks for the year 2007. These
include maintaining a reasonable growth in exports and the utilisation of foreign
capital, and actively increasing imports. The strategy of “adjusting investment,
encouraging consumption, and reducing surpluses” was put forward, to the effect
that the international payments will ultimately be balanced and this has to be
achieved before 2010. The Minister of Commerce, Mr. Bo Xi-lai, made it clear at
the National Commerce Working Conference held on 15 January 2007 that the
reduction of the trade surplus would be the most important job for foreign trade
development this year.



1.7            Import-Export Development in the Southwestern Provinces/Region
               and China, and the Implications and Policy Recommendations for
               Hong Kong


           The direction of import-export development in the four southwestern
provinces/region basically goes for general trade. In other words, they will utilise
their local resources and build up a comprehensive industrial chain and production
system, instead of going for Hong Kong’s mode of conducting processing trade.
As a result of their deficiency in customs and transportation facilities, they still
have to rely on other regions to handle their material imports. Building a logistics
network takes time and foreign processing trade enterprises may not be interested
in transferring their production lines from the coastal regions to the inland
provinces. Therefore the model of ‘both ends abroad’ featuring a large volume of
imports and exports is not appropriate for the four southwestern provinces. From
the long-term point of view, the transfer of international production chains to
China is near completion. The southwestern province/region mainly deal with the
ASEAN market and not the European/American markets, whilst Guangdong’s
OEM (Original Equipment Manufacture) production model is not suitable for the
four provinces/region.


       The Beibu Gulf region of Guangxi and Yunnan share borders with
ASEAN countries. Even if some local enterprises want to develop a processing-


                                                                                                                        27
Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




trade model for their industries, it should be in the electronic information industry,
or to cooperate with ASEAN countries to develop the automobile industry in
which the interflow of parts and components would be handled by Guangxi and
Yunnan or through Shenzhen and Guangzhou. If the four provinces/region want to
develop their own textile and garment industries on a large scale, related raw
materials could be supplied at low cost from the Mainland. The Hong Kong SAR
Government should of course encourage our logistics industry to invest and
develop in Guangxi and Yunnan. However, because ASEAN goods do not have to
be transported via Hong Kong, the logistics enterprises of Hong Kong are unlikely
to reap any benefits from industrial development in the four southwestern
provinces/region. Little can be done to boost the local logistics industry in Hong
Kong.


           Furthermore, an analysis of trade development trends in the four
provinces/region reveals that their industries are not the same labour-intensive
industries that Hong Kong specialises in. It is questionable whether their business
environment can satisfy the needs of Hong Kong enterprises who wish to transfer
their industries to the four provinces/region. The “buyer-driven” type of
production value-chain that Hong Kong enterprises are used to will face heavy
pressures due to the following factors: the rapid expansion of China’s trade surplus,
world supply greater than demand, European and American anti-dumping and
anti-surge policies, the revaluation of the RMB, and a decrease in export tax rebate.
The challenge for Hong Kong enterprises is not only to upgrade their investment,
but also to transform their industries.


           Under the new economic strategy of “adjusting investment, encouraging
consumption, and reducing surpluses” put forth by the Central Government, Hong
Kong should not emphasise its role as the gateway for Chinese products to the
international market in order to be a part of the Chinese economy. In fact, as China
is under pressure to reduce its trade surplus, the volume of Chinese products
exported via Hong Kong destined for international markets will probably fall
rather than increase. Besides, port facilities in Guangxi and the Pearl River Delta
are developing. The container port business in Hong Kong will encounter greater
challenges, and the status of Hong Kong as a shipping centre will be put in
jeopardy. As a result of a change in the national economic strategy, it is unlikely
that the Hong Kong SAR Government could leverage support for the shipping
business from the Central Government. Therefore, Hong Kong should act from the
perspective of “adjusting investment and encouraging consumption”.




                                                                                                                        28
Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




           Firstly, it could help Chinese enterprises invest abroad. This does not
mean making arrangements for financial capital, instead Chinese enterprises
should actually invest abroad. At present, the Central Government is studying the
strategy of “going global”. If Hong Kong can initiate a strategic study on “related
services for going global” and in collaboration with the Central Government,
Hong Kong could seize this opportunity and transform its economy. Take for
example, China plans to establishment investment development zones in other
countries. Hong Kong enterprises could build service centres in these development
zones to provide related services, to help Chinese enterprises handle their daily
operational matters, transfer and protect intellectual property rights, and recruit
international talent.


           Secondly, “encouraging consumption” has two aspects. One is the
expansion of the Mainland consumption market. This implies that Hong Kong
enterprises should make their objectives the development of the Mainland market,
but a more important aspect is “the encouragement of imports to China”. Chinese
manufacturers are providing cheap quality products to satisfy market demands in
China. Hong Kong could exploit the “high echelon, fast changing” fashion market
segment. Considering the sensitivity of Hong Kong enterprises to the international
market and its fast and efficient logistics system, Hong Kong enterprises should be
in a good position to grasp a fraction of the Chinese market. However, the most
crucial point is that Hong Kong enterprises should change the traditional business
model of “mass production and win orders by cheap prices”.




                                                                                                                        29
     Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




     2              Trends and Updates on the Four Southwestern
                    Provinces/ Region


     2.1            Economic Performance of the Four Southwestern Provinces/Region


               Overall the economy of the four provinces/region kept growing rapidly
     and steadily throughout 2006. Except for Guizhou, the growth rates of the other
     three provinces’ GDP were higher in the last quarter than in the previous three
     quarters. The GDP growth rates in Sichuan, Guangxi, Yunnan and Guizhou in
     2006 stood at 13.3%, 13.5%, 11.9% and 11.5% respectively, all higher than the
     national average of 10.7%.


     Table 2-1: Economic                           Performance             of       the       Four         Southwestern
     Provinces/Region in 2006
                                                  Value-Added of
                                                                                Total Investment in Fixed
                         GDP                    Industrial Enterprises                                                  Urban
                                                                                         Assets
                                               Above a Designated Size                                               disposable
Province/
                                Increase                       Increase                              Increase        income per
 Region         Jan-Dec                         Jan-Dec                           Jan-Dec
                                  Over                           Over                                  Over         capita in May
               (RMB 100                        (RMB 100                          (RMB 100
                                Previous                       Previous                              Previous          (RMB)
                million)                        million)                          million)
                                  Year                           Year                                  Year
Nationwide         209,407         10.7%                   -      16.6%                109,870          24.0%                       -
Guangdong           25,969         14.1%            10,719        18.3%                  8,117          16.7%                       -
 Sichuan             8,638         13.3%             2,597        24.0%                  4,525          30.1%                     816
 Guangxi             4,802         13.5%             1,091        23.8%                  2,246          27.0%                     798
 Yunnan              4,002         11.9%             1,240        17.8%                  2,220          26.5%                     875
 Guizhou             2,260         11.5%                   -            -                1,193          17.2%                     776
     Note: Some figures are preliminary estimates subject to later adjustments, and may be different
     from later figures in the National Statistics Bureau reports.
     Sources:
     1. National Statistics Bureau Net, http://www.stats.gov.cn
     2. Sichuan Statistics Net, http://www.sc.stats.gov.cn
     3. Guangxi Statistics Net, http://www.gxtj.gov.cn
     4. Yunnan Statistics Net, http://www.stats.yn.gov.cn
     5. Guangdong Statistics Net, http://www.gdstats.gov.cn
     6. Guizhou Commerce Window Net, http://guizhou.mofcom.gov.cn



                In terms of industrial production, the growth rates of Sichuan, Guangxi
     and Yunnan were all higher than the national average. Sichuan saw value-added of
     industrial enterprises above a designated size gain the most, with growth rates also
     top of the four provinces/region. Yunnan came second in terms of total production,


                                                                                                                             30
Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




but fell behind Guangxi, which increased its efforts to develop the port economy,
by 6 percentage points.

          Only Guizhou’s growth rate fell short of the national average with
respect to total investment in fixed assets. It is worth noting that Sichuan’s
investment not only grew rapidly, higher than 30%, but the total amount exceeded
half of Guangdong’s. As the effects of investment display themselves in the
coming years, Sichuan may well see further development, and this will widen the
gap with the other western provinces and regions.


           With regards to foreign trade, the four provinces/region have all
witnessed historically high imports and exports. Except for Guizhou, the other
three provinces/region saw trade surpluses further expand. Sichuan was the most
notable, with the growth rate of its foreign trade surplus never falling below 40%
throughout 2006. Sichuan was also the only southwestern province with a double-
digit growth rate for its foreign trade surplus. Generally speaking, foreign trade in
the four provinces/region saw healthy and steady development in 2006 and the
details have already been presented in previous reports.




                                                                                                                        31
Social, Economic and Political Developments in the Pan-PRD Region     Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




2.2            Trends and Updates on Sichuan



2.2.1          Economic Performance of Sichuan


         In 2006, Sichuan’s economy developed rapidly, and it performed
remarkably well in agricultural and industrial production, investment,
consumption and foreign trade, and other economic indicators.


Table 2-2: Major Economic Indicators in Sichuan in 2006
                                                                                                     Increase Over
 Economic Indicators                                                2006 (RMB 100 Million)
                                                                                                     Previous Year
 GDP                                                                                      8,638              13.3%
 Of which:Primary Industry                                                                1,604               3.0%
             Secondary Industry                                                           3,775              20.0%
             Tertiary Industry                                                            3,259              11.6%
 Total Retail Sales of Consumer Goods                                                     3,422              14.8%
 Total Value of Exports and Imports
                                                                                             110               39.5%
 (USD 100 million)
 Per Capita Net Income of Rural Households (RMB)                                          3,013                 7.5%
 Fiscal Revenue                                                                             607                26.6%
Note: Regional figures are preliminary figures and subject to later adjustments, and may be
different from future reports published by the National Statistics Bureau.
Source: Sichuan Statistics Net, http://www.sc.stats.gov.cn/



          Although it experienced a severe drought this summer, Sichuan saw
primary industry maintain its steady growth with the exception of grain production,
animal husbandry, aquatic production and forestry which grew rapidly19.


          Since the establishment of a strong industrial strategy for the province,
Sichuan has reaped rich rewards. Value-added of industrial enterprises above a
designated size increased by 24%, the third highest in ten years20, contributing to
60% of Sichuan’s economic growth, which became the main driving force behind



19
   “The Economic Performance of Sichuan in 2006 and a Forecast Analysis on its 2007 performance, Part
1”( “2006 年四川經濟形勢及 2007 年走勢分析(一)”), Sichuan Statistics and Information Net, 25 January
2007, http://www.sc.stats.gov.cn/stats_sc/zxtjxx/200701260039.htm.
20
   Ibid.


                                                                                                                          32
Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




local economic growth21. The industrial structure was consistently optimised, and
the value-added of the four major superior industries (hi-tech, superior resources,
equipment manufacturing and agricultural processing) accounted for 73.3% of the
value-added of industrial enterprises above a designated size22.


           Total investment increased steadily. Private investment also saw
vigorous development, growing by 36.7%, and its proportion of total investment
increased to 49.3% from 46.9% in 2005. The sectoral investment structure
experienced continuous optimisation with investment in superior industries
increasing more rapidly. Electronic information and technology saw the most
spectacular development, growing by 69.9%, while investment in some other
industries heavily regulated by the state, such as iron and steel, and coking, saw
negative growth23.


          The consumer market kept booming, and the accommodation and
catering industry expanded rapidly, with total retail sales increasing by 17.8%,
which was higher than that of the retail industry by 3.5 percentage points. One of
the highlights was vehicle sales, which grew by 41.6%, which was the fastest
growing commodity in 2006 in terms of comprehensive ranking24.


           Although Sichuan’s economy fared rather well in 2006, quite a few
economic issues still need to be tackled. Firstly, economic growth has been driven
mainly by investment, and the pace of industrial adjustment is quite slow whilst,
Sichuan has made little progress with respect to energy conservation. It is
expected that energy consumption per 10,000 RMB of GDP throughout 2006 will
be 2% lower than the previous year, far short of the 4% target25. All of the above
issues will become key issues for Sichuan to tackle this year.




21
   “Sichuan’s industrial development in 2006 contributed 60% to economic growth”( “四川省 06 年工業對
  經濟增長貢獻率達到 60%左右”), The All China Data Centre, 26 January 2007,
  http://data.acmr.com.cn/freesource/zixunshow.asp?id=7225.
22
   Ibid.
23
   “Sichuan’s total investment in fixed assets grew steadily in 2006”( “2006 年四川全社會投資穩定增
  長”), Sichuan Statistics and Information Net, 1 February 2007,
  http://www.sc.stats.gov.cn/stats_sc/zxtjxx/200702020062.htm.
24
    “The Economic Performance of Sichuan in 2006 and a Forecast Analysis on its 2007 Performance. Part
1”( “2006 年四川經濟形勢及 2007 年走勢分析(一)”), Sichuan Statistics and Information Net, 25 January
2007, http://www.sc.stats.gov.cn/stats_sc/zxtjxx/200701260039.htm.
25
   Ibid.


                                                                                                                        33
Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




2.2.2          Updates on Sichuan – Chengdu Strives to become China’s Capital
               for Ladies Shoes


           Between 12 and 14 December 2006, the International Purchasing
Festival for ladies shoes was held in Chengdu. Purchasers of major categories of
shoes from the European Union, America, Russia and Japan came to the Wuhou
District (武侯區) of Chengdu, and conducted shoe trade negotiations with 1,700
shoe manufacturing enterprises from the Wuhou District and 3,000 related
accessories enterprises. At the festival, Chengdu enterprises signed purchasing
contracts worth more than USD 10 million with buyers from Russia and Italy26.
According to statistical data from the Commerce Office of Sichuan, shoe exports
from Sichuan increased from the previous year by 50.1%, and were worth USD
162 million. Compared with the 2000 figure of USD 6.38 million, shoe exports
have increased 24 folds in six years. Chengdu has become an important shoe
manufacturing centre in China’s “Three Zhous, One Du” (The “Three Zhous”
being Guangzhou of Guangdong, Quanzhou of Fujian, and Wenzhou of Zhejiang).


          At present, China is the world’s largest shoe manufacturing and
exporting country. In 2005, China manufactured 9 billion pairs of shoes, which
represented 53% of the world shoe manufacturing total and shoe exports totaled
USD 19.05 billion, which is 60% of the total world figure27. Guangdong, Fujian
and Zhejiang were the first, second and third most important manufacturing and
export bases respectively. In 2006, shoe exports from Guangdong, Fujian and
Zhejiang accounted for 37.2%, 18.1% and 14.7% of total shoe exports from China.
Sichuan, however, contributed a mere 0.7% of the nation’s total shoe exports (see
Table 2-3). Nevertheless, since 2000, Sichuan’s shoe manufacturing industry has
developed rapidly, and Chengdu showed great potential for becoming an
important “du” within the “Three Zhous, One Du”




26
   “The International Purchasing Festival for Ladies Shoes has closed, and Chengdu shoe enterprises
attracted USD 10 million”( “女鞋國際採購節閉幕,成都鞋企攬千萬美元”), China Shoe Commerce and
Trade Net, http://www.vshoe.com/news/200612/abbcf60674d48894b8ea294e4f23b41e.html.
27
   “The lack of brand names for China’s shoes causes problems”( “中國鞋業的品牌缺失之痛”), China
Brand Net,http://www.cbrand.com.cn/news_detail.aspx?id=249.
In the 2000s, China became the world’s largest shoe exporting country, but the proportion of China’s
exports of the world’s total shoe exports is not as high as China estimated. According to commodity trade
figures from the United Nations, shoe exports from China (including Hong Kong and Macao) in 2004 were
worth USD 12.67 billion, which was 14.8% of the world total. In 2005, there was growth, but the
percentage did not increase by much. http://unstats.un.org/unsd/comtrade/


                                                                                                                        34
Social, Economic and Political Developments in the Pan-PRD Region    Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




Table 2-3: China’s Shoe Product Exports (Units: USD 100 million)
                    2003           Share            2004            Share         2005          Share           2006             Share
 Sichuan                0.4             0.3%           0.9             0.6%          1.1            0.6%             1.6            0.7%
 Guangdong             54.4            42.0%          62.6            41.2%         74.2           39.0%            81.1           37.2%
 Fujian                22.8            17.6%          27.6            18.2%         34.7           18.2%            39.4           18.1%
 Zhejiang              15.3            11.8%          20.0            13.2%         26.6           14.0%            32.1           14.7%
 Nationwide           129.6           100.0%         152.0           100.0%        190.5          100.0%           218.1          100.0%
Source: Foreign trade statistical figures from the Department of Commerce website, China and
various provinces.



           In the “Three Zhous, One Du” plan for China’s shoe industry, Chengdu
manufactures ladies shoes, Wenzhou (溫州) manufactures various leather shoes,
Quanzhou ( 泉 州 ) manufactures sports and leisure shoes, and Guangzhou
(including the neighbouring Dongguan (東莞), Weidong (惠東) and the Pearl
River Delta region) manufactures and exports a wide range of shoes. A
considerable cluster of related enterprises has been established also. Guangzhou,
Wenzhou and Quanzhou started the shoe industry in the 1980s and rapidly
developed sizeable clusters of shoe manufacturing enterprises able to compete
internationally, which now play an important role in the world market. In 2006,
total shoe exports from Guangdong, Fujian and Zhejiang accounted for 71% of
China’s total exports, and based on the fact that China’s shoe exports in 2005
accounted for 60% of world exports, Guangdong, Fujian and Zhejiang were
estimated to account for 42.6% of the world’s shoe exports. However, as land
supply has tightened, and rent and labour costs have risen gradually in the coastal
provinces in recent years, the labour-intensive shoe industry has begun to transfer
to the western provinces.


           Sichuan, amidst the “eastern shoes go west” movement, leverages on its
labour and energy resources, large rural hinterland market and proximity to the
leather manufacturing base. It carries out the processing and finishing part of the
manufacturing process for shoe enterprises in the eastern provinces, such as the
Aokang Group and the Kangnai Group of Wenzhou, and has concentrated on the
manufacture of ladies shoes. After years of development, the Chengdu shoe
industry had established the “One Du, Two Yuan” plan ---- one Du being the
Wuhou District shoe enterprise cluster development area. Its functional objectives
are to become the centre for R&D, trade, exhibitions, logistics, talent, and
enterprise headquarters. The Two Yuan refers to the Chongzhou production base
and Jintang Shoe Industrial Park. At present, the Wuhou District has pooled more
than 80% of Sichuan’s shoe enterprises, including 1,700 shoe manufacturing
enterprises and more than 3,000 related shoe accessory enterprises. A complete
industry chain of enterprises has been formed from production to sales, and annual


                                                                                                                           35
Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




production has exceeded 100 million pairs which was worth over RMB 10 billion.
A total of 1,100 firms are engaged in ladies shoes manufacturing and accounted
for more than 90% of the province’s total shoe production value. Ladies shoes
production in Chengdu now ranks third in China, and the city has become China’s
largest purchasing base for ladies shoes as a product and of OEM (Original
Equipment Manufacture) production28.


          Chongzhou (崇州) is China’s pig rearing base, the market centre for
animal leather production in western Sichuan, and one of the largest pig leather
products export centres. Chongzhou started the shoe industry in the 1970s and
now has more than 30 shoe manufacturing enterprises of considerable size. Annual
shoe production has reached 2.5 million pairs and leather production 9.05 million
sq. km which was valued at more than RMB 1 billion. Exports are destined for
Russia, South Korea, North America and South Africa, plus Chengdu and 13
provinces and municipalities all over China29.


           The planned Chongzhou production base will have a total area of 6,000
mu (one mu is approximately equal to 667 square metres; one hectare is equal to
15 mu) and will be completed in two phases over the next eight years. Phase One
involves an area of 3,600 mu and will bring in more than 200 enterprises, with the
total investment worth more than RMB 2 billion. The shoe manufacturing capacity
is expected to expand to 60 million pairs. Of this middle and upper echelon shoes
will account for 20% or more, the annual production will be up to RMB 3 billion
and the trading value is expected to exceed RMB 4 billion. A related market
information service centre will be established in addition to shoe manufacturing.
Phase Two covers an area of 1,400 mu, and is expected to develop the capacity to
manufacture 100 million pairs by 2015, with middle and upper echelon shoes
accounting for 40% or more of this. In addition, the annual production value is
expected to reach RMB 6 billion and annual trade value over RMB 8 billion.


          Recently, YKK of Japan, CTC of France, BF Engineering, Asia Shoes,
and a number of other shoe manufacturers, designers, consultants, and brand
management companies have come to “China’s capital for ladies shoes” with new
design concepts, management models and productivity methods. The world’s
largest shoe producer, Taiwan Baocheng International Group, also came to

28
   “China’s capital for ladies shoes: International Purchasing Festival opened in Chengdu, Sichuan”( “2006
‘中國女鞋之都’ 國際採購節在四川成都開幕”), Consumption Daily, 13 December 2006.
29
   “ China’s capital for ladies shoes: Shongzhou, Sichuan manufacturing base opens for investment”( “ ‘中
國女鞋之都’ 四川崇州生產基地集群招商紀實”), Chengdu Daily, 29 September 2006.


                                                                                                                        36
Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




Chengdu with an action plan for the city. Sichuan hoped to make further use of the
opportunity presented by the “eastern shoes go west” movement and strengthen its
attraction for internationally renowned companies that could bring forth impetus in
design, R&D, brand management, shoe manufacture and shoe material supplies.
Thus, a bigger cluster of related enterprises will be centred in Chengdu and it is
hoped that in three to five years time, “China’s capital for ladies shoes” will
become a world renowned regional brand name.


          The following facts indicate a positive outlook for Chengdu’s plans to
become “China’s capital for ladies shoes”. Firstly, the world shoe manufacturing
industry, which started in Italy, expanded to Taiwan, South Korea, Brazil, Spain
and central European countries in the 1970s and 1980s. In the 1990s, the shoe
industry moved to areas with lower production costs such as the Pearl River Delta,
Wenzhou of Zhejiang, Quanzhou of Fujian, Taiwan, South Korea, Central Europe,
and Brazil. Only Italy and Spain were able to maintain their competitiveness in the
shoe industry (Italy in fact contracted out processing to Romania). Vietnam has
now risen to become the second largest low cost shoe manufacturing base after
China30. Production costs are the most influential factor in the transference of the
shoe manufacturing industry, and as shoe manufacturing is highly labour intensive,
labour costs are the most significant factor. At present, Wenzhou and the Pearl
River Delta area have encountered considerable increases in labour costs, whilst
Sichuan with its abundant supply of labour and relatively low labour costs
obviously has an advantage in this area.


          Secondly, the western region is China’s main leather production base.
Chongzhou is the most important pig leather manufacturing and export base.
Sichuan is hence close to the shoe material production area. The abundant supply
of genuine leather is an important factor in the production of middle and upper
echelon shoes.


           Thirdly, China’s shoe industry is making a major contribution to the
world market. The export of shoes from Wenzhou, Quanzhou and the Pearl River
Delta is drawing frequent anti-dumping accusations from the European Union and
America. Labour costs in the eastern provinces have risen, the power supply

30
  Allen J. Scott, “The changing global geography of low-technology, labour-intensive industry: clothing,
footwear and furniture”, World Development, 34:9 (2006), pp.1517-1536. The Italian shoe manufacturing
base, Brenta, experienced a transformation and sent processing work to Romania. The experience is of
referential value to the Pearl River Delta and Hong Kong. See Roberta Rabellotti, “How globalisation
affects Italian industrial districts: the case of Brenta”, in Hubert Schmitz, ed., Local Enterprises in the
Global Economy: Issue of Governance and Upgrading, Cheltenham, Edward Elgar, 2004, pp.140-173


                                                                                                                        37
Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




sometimes experiences shortages, and industrial upgrading pressures have all
made “eastern shoes go west” a definite trend. The fact that Chengdu enterprises
have carried out OEM production for Aokang and Kangnai of Wenzhou is
evidence enough.


            Fourthly, Sichuan has the largest number of shoemakers. According to
statistics, 30% of frontline workers in the Chinese shoemaking industry are from
Sichuan, and a large proportion of these are workers with years of experience in
the coastal provinces, expertise, skills and marketing knowledge. At the
managerial level, workers from Sichuan also make up about the same proportion31.
With the appropriate government policies, the outlook for the shoe industry is
promising. Initially income may be lower compared with the eastern provinces,
but a great number of skilled labour and managerial staff will return to Sichuan, to
start their own business, or to form a core of related enterprises.


           Fifthly, ladies shoes are not only daily necessities; they are also fashion
and accessory items. Shoes should match with clothing and other items and
therefore involve an important aspect of consumer psychology. In China, middle
class consumption is growing and this consumer group is interested in purchasing
upper echelon shoes while demanding greater choice. The problem of
transportation may hinder Sichuan’s exports but the huge Mainland market will
certainly boost the development of Chengdu and become “China’s capital for
ladies shoes”. Besides, Sichuan is rich in hydroelectricity, coal and land resources.
The impact on the environment by pollution from the shoemaking manufacturing
process is small but will need tight control. All in all, the outlook for Sichuan’s
shoe industry is good.


Implications for Hong Kong


           At present Hong Kong enterprises still have quite a few firms engaging
in shoe manufacturing in Dongguan, Guangzhou and the Pearl River Delta area.
Rising land, rent and labour costs, together with the current energy shortage have
created problems for them. It is imperative that they upgrade or transform their
industries, or they will go out of business. Some enterprises who find it difficult to
upgrade or transform may consider moving west, and Chengdu might be a good
choice since it is keen to attract shoe enterprises. Hong Kong enterprises with solid
31
  “Eastern shoes go west, Sichuan shoes on the road home”( “東鞋西移,川鞋踏上回家路"), Western
China Metropolitan Daily electronic edition.
http://www.wccdaily.com.cn/2006/10/23/200610235050146509160.htm.


                                                                                                                        38
Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




brand names, relatively good design and/or sound management, should study the
experience of NIKE Shoes. They should choose a specific sector of the market in
which to operate, then select the most dynamic part of the market segment, and
with the right design and brand management, contract out the manufacturing
processing to external enterprises. This ensures that the company can attain the
most advantageous position in the value-chain. The company could then transform
from simply carrying out manufacturing processing to the middle and upper part
of the value-chain including R&D, design and servicing.


           Mainland enterprises mostly feature “large factories, minor brand
names”. They do not have their own designs or brand names but carry out
manufacturing processing for world renowned brands. They are at the bottom of
the “smile curve”32 and earn rather small profits. Hong Kong enterprises are at the
centre of the fashion and international information centre, and have relative
advantages in design, brand name management and overseas market relations. It is
possible that Hong Kong enterprises could provide Mainland enterprises with
fashionable and functionally designs, and brand name consultancy services. They
could help the Mainland counterparts to produce more creative designs and value-
adding brands, and aid their transformation from the current low-price strategy to
the high echelons of the international market. Hong Kong firms should abandon
the existing model of fulfilling orders and their role as Original Equipment
Manufacturers, and become brand name strategists, or at least become involved in
original design, just as Italy and Japan did during their transformation processes.


           The Mainland market of 1.3 billion people represents a huge consumer
market. As average income levels rise and the middle class emerges, market
demand for middle and upper echelon commercial products like shoes, jewellery
and accessories will certainly grow. It would undoubtedly be profitable for Hong
Kong enterprises to develop specific market segments. In the past, Hong Kong
enterprises have catered to the needs of the international market and engaged in
low value-added processing manufacturing. The Mainland domestic market was
neglected, but it is now obvious that China is one of the world’s fastest developing
markets. The Chinese market presents an attractive choice when compared with

32
   The “Smile Curve” is a model for profit distribution for U-Type Industries. The term was coined by the
founder of the Taiwan Hongji Computer Company, Mr. Zee Chun-rong(施振榮), after years of study and
experience in the personal computer industry. In the value chain of the personal computer industry, the
CPU design, accessories, and manufacturing (the upper section of the value chain), brand name
management and servicing (the lower section of the value chain), i.e. the two ends of the industrial value
chain, are highly profitable. The middle section, the assembling of computer parts, is the least profitable, as
it is at the bottom of the U-shaped profit distribution curve. Therefore, business enterprises should upgrade
their production towards the two ends of the “smile curve”, that is, to develop accessory parts or brand
name selling, in order to land a more profitable portion of the value chain.


                                                                                                                        39
Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




Europe and America with their frequent anti-dumping charges and protectionism.
The lack of a sales network in China means that Hong Kong enterprises should
form partnerships with Mainland enterprises. If Hong Kong enterprises can
actualise their superiority in “design”, “brand management” and “sales and
promotion”, and cooperate in a complementary way with the Mainland enterprises
which are strong in “manufacturing” and “channel building”, they could identify
areas for development. However, the present order-driven commercial model of
the Hong Kong enterprises makes them too biased towards consumer demands and
sales patterns developed by overseas markets. Transforming sales to the Mainland
will involve many changes and the transformation of local needs in the Chinese
market. Further effort and studies are needed in this area.


            The shoe, textile and clothing industries are closely related. Production
in all parts of the industrial chain can be completed in Mainland China. Once a big
cluster of related enterprises is established in one area, a combination of service
providers in design, production, logistics, sales and brand management will follow.
The resulting synergy effects will be strong enough to offset the rise in production
costs due to wage increases. As a result of the abolishment of the quota system for
textile and clothing industries, and the fact that China and India have made rapid
economic progress, textile and clothing industries in China will encounter huge
growth potential in domestic and overseas markets in the coming years. If China
can improve design and brand management, drop the outdated OEM mode of
processing for international brands, and begin to develop its own designs and
brands (or regional brands resembling that of “made in Italy” or “made by
Brenta”), and sell and promote to the world market, China should be able to
dominate markets at all levels, from the lower to upper echelon. Hong Kong has
accumulated much experience and personnel expertise in the shoe, textile and
clothing industries. With some appropriate guidance and support and by timely
catching the boom in these industries, Hong Kong should have a good chance of
playing a dominate role in the value chain of shoes, textiles and clothing industries
across the world.


           Hong Kong should develop into a “centre for clothing, accessories and
fashion”, with these industries as the core elements. With Hong Kong’s strength in
the East-Meets-West culture, the accumulated experience and knowledge of
exhibitions, and the strong manufacturing capability of the Mainland factories, it is
highly possible that Hong Kong could become an Asian centre for fashion and
design for branded clothing and shoes, and of course for the distribution, sales,
promotion and marketing of these products. In time, Hong Kong will be
transferred into a high calibre distribution centre for high fashion and accessories.



                                                                                                                        40
Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




It could then diversify the tertiary industry of Hong Kong and add impetus and
value to the economy.


           The vogue industry relies on talent and is knowledge-intensive. It
depends on the production and management of the global value-chain and the
international market, and is a high value-added metropolitan industry. If Hong
Kong could integrate the textile and garment, shoes, accessories and jewellery
industries now scattered in various areas of the Mainland, and transform the
manufacturing pattern from made-to-order OEM (Original Equipment
Manufacture) to ODM (Original Design Manufacture), it would provide a feasible
way for Hong Kong to upgrade its industries. It would go hand in hand with the
development of Hong Kong into Asia’s international metropolitan city, whilst
placing Hong Kong in an excellent position to exploit the rapid growth of
domestic demand on the Mainland.




                                                                                                                        41
Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




2.3            Trends and Updates on Guangxi Zhuang Autonomous Region



2.3.1          Economic Performance of Guangxi


           In 2006, Guangxi saw its economy grow by more than 10% for the fifth
consecutive year, reaching 13.5%, which was one of the best in recent years33.
Agricultural and industrial production, investment, and foreign trade were among
the highlights of Guangxi’s economy.


Table 2-4: Major Economic Indicators of Guangxi in 2006
                                                                     2006 (RMB 100               Increase Over
 Economic Indicators
                                                                        Million)                 Previous Year
 GDP (The First Three Quarters)                                                  4,802                   13.5%
 : Primary Industry                                                              1,032                    6.5%
  Secondary Industry                                                             1,882                   19.2%
  Tertiary Industry                                                              1,888                   12.1%
 Total Retail Sales of Consumer Goods                                            1,601                   14.6%
 Foreign Trade (USD 100 million)                                                    67                   28.8%
 Budgetary Government Revenue                                                      568                   19.5%
 Consumer Price Index (%)                                                        101.3                      1.3
Note: Statistics from each province represent preliminary data, which may be subject to change,
and may vary from those published by the National Bureau of Statistics later on.
Source: Guangxi Statistics and Information Net: http://www. gxtj.stats.gov.cn



           Benefiting from the rapid development of such featured and superior
industries as silkworm breeding and pine resin processing, Guangxi’s primary
industry grew steadily, with value-added crossing the threshold of 100 billion
RMB, reaching 103.2 billion RMB. Major agricultural products such as vegetables,
fruit and sugar cane all saw increased production. Grain production increased by
230 million kilograms, reaching 15.39 billion kilograms34 , despite the negative
impact of drought and flood.



33
   “Guangxi’s economy has been growing at double-digit rates for five consecutive years”( “廣西經濟連續
5 年保持兩位數增長”) , Guangxi Statistics and Information Net, 23 January 2007,
http://www.gxtj.gov.cn/view/news_display.asp?sendid=11736.
34
   “The Ten Highlights of Guangxi’s economic and social development in 2006”( “2006 年廣西經濟社會
發展十大亮點”), The All China Data Centre, 26 January 2007,
http://data.acmr.com.cn/freesource/zixunshow.asp?id=7217.


                                                                                                                        42
Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




           The breathtaking pace of Guangxi’s industrial development has hit new
highs over the last ten years. The value-added of industrial enterprises above a
designated size increased by 23.8%, breaking the threshold of 100 billion RMB.
Industrial growth was mainly driven by the heavy industries, the value-added of
which increased by 27.3% than in 2005, contributing as much as 74.3% to the
growth in the value-added of the industrial enterprises above a designated size.


           With regards to investment, Guangxi’s total investment in fixed assets
grew by 27%, another new high, and it took only two years for Guangxi to reach
200 billion RMB from 100 billion RMB. Spurred by featured industries, industrial
investment expanded tremendously, growing by 46%35.


           As for consumption, with Guangxi’s rapid economic development and
the rising income of rural and urban residents, the sales and marketing industry
grew by a quarter. Driven by the fast-growth in tourism, retail sales for the
accommodation and catering industry increased by 16.1%, the highest of all the
industries36.



2.3.2          Updates on Guangxi Zhuang Autonomous Region — New
               Industrial Developments in Guangxi’s Port Cities


          The port cities of Beihai, Qinzhou and Fangchenggang form the outlet
to the sea for the southwestern inland provinces. They are the important
connecting point between China and the ASEAN countries, and form the main
area of economic cooperation within the Pan-Beibu Gulf (including Guangxi and
the coastal ASEAN countries from Vietnam to Singapore). Therefore, port and
land transport construction are of great significance.




35
   “Guangxi’s total investment in fixed assets grew by 27% in 2006”( “2006 年廣西全社會固定資產投資
增長 27% ”), Guangxi Statistics and Information Net, 2 February 2007,
http://www.gxtj.gov.cn/report/news_display.asp?sendid=11797.
36
   “Guangxi’s consumer market boomed amid steady growth in 2006”( “2006 年廣西消費品零售市場穩
中趨旺 ”), Guangxi Statistics and Information Net, 30 January 2007,
http://www.gxtj.gov.cn/economy_news/news_display.asp?sendid=11777.


                                                                                                                        43
Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




Diagram 2-1: Map of Beibu Gulf (Guangxi) Economic Zone




Source: Promotional information from the Beibu Gulf (Guangxi) Economic Zone Construction
Management Committee Office.


          However, the three port cities of Beihai, Qinzhou and Fangchenggang
have been relatively backward economically for a long period of time, compared
with other coastal cities of China (see Table 2-5). One major reason for this is that
industries are extremely underdeveloped, and there is a lack of hinterland support.
Take the year of 2004 as an example, the share of industries in the economy of
these three cities is only about half the figure of other coastal cities. The three
cities witnessed unprecedented growth following Beibu Gulf economic
cooperation and the “M Strategy” put forth and endorsed by the Central
Government. During the last two years, industry figures have shown promising
growth.




                                                                                                                        44
  Social, Economic and Political Developments in the Pan-PRD Region     Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




  Table 2-5: GDP and Industrial Value-Added for the Three Guangxi Port
  Cities and Some Coastal Cities of China in 2004
                                                                                   Industrial Value
                                                     Industrial Value-
                          GDP                                                        Added as a              Per Capita GDP
       2004                                               Added
                      (RMB100 million)                                              Percentage of                (RMB)
                                                    (RMB100 million)
                                                                                        GDP
Tianjin                                2,932                          1,436.8                 49.0%                       31,550
Qingdao                                2,164                          1,024.1                 47.3%                       29,809
Ningbo                                 2,158                          1,086.8                 50.1%                       39,174
Dalian                                 1,962                            851.3                 43.4%                       34,978
Yantai                                 1,639                            839.7                 51.2%                       25,183
Fuzhou                                 1,548                            668.8                 43.2%                       25,505
Wenzhou                                1,403                            721.5                 51.4%                       18,846
Nantong                                1,226                            577.6                 47.1%                       15,806
Weihai                                 1,009                            568.5                 56.4%                       40,476
Beihai                                   162                             44.2                 27.3%                       10,989
Qinzhou                                  175                             36.4                 20.9%                        5,131
Fangchenggang                             85                             23.7                 28.1%                       10,662
  Source:
     1. Li Yu-hua: “Put industries first, boost development in Beihai – a comparison of Beihai
          and some open coastal cities, and related thoughts”( 李玉華:“突出工業主導地位,推
          動北海跨越發展——北海市與部分沿海開放城市的比較與思考”) Economic Research
          Centre of the People’s Government of Beihai City, survey study report, No. 4, 2005
          (Issue No.124)
          http://www.bheinet.gov.cn/dybg/sysdb/dyDetail.asp?id=158
     2. Statistics Yearbook 2005, Guangxi Zhuang Autonomous Region.



  Beihai (北海)


             In 1984, Beihai was added to a list of 14 opened-up coastal cities.
  However, due to a lack of development, Beihai slipped to be the last on the list,
  after Linyungang of Jiangsu. In 2003, production growth of industrial enterprises
  above a designated size only reached 10.53% 37 , and even though this was the
  highest in history, it was below the average growth rate for the nation. However in
  2004 and 2005, the growth rate improved and exceeded 30%. The year 2004
  represented the major turning point when growth began to accelerate. In 2005, the
  share of industrial output in GDP of Beihai reached 33.3%, increase by 6
  percentage points over the previous year.




  37
    According to Beihai Statistics Reports from 2000 to 2004, and the Guangxi Statistical Yearbook 2006,
  yearly growth rates for industrial output of industries above a specified scale for the years 2000 to 2005
  were: 10.11%, 8.20%, 7.87%, 10.53%, 31.54% and 37.55% respectively.


                                                                                                                            45
   Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




   Table 2-6: Economic Performance of Beihai City, 2004-2005
                              Increase      Output Value of      Increase    Industrial     Increase                    Industrial
         Total Investment
                             Compared          Industrial       Compared       Value-      Compared       GDP         Value-Added
          in Fixed Assets
Beihai                          With      Enterprises Above        with        Added          with      (RMB100            as a
             (RMB100
                              Previous     a Designated Size     Previous    (RMB100        Previous     million)     Percentage of
              Million)
                                Year      (RMB100 million)         Year       million)        Year                        GDP
2004               51.41       18.7%                  74.73       31.5%          44.21       23.7%        161.89           27.3%
2005               67.24       30.8%                 102.79       37.5%          60.45       36.7%        181.62           33.3%
   Source:
      1. Guangxi Statistical Yearbook 2005
      2. Guangxi Statistical Yearbook 2006
      3. Beihai City Economic and Social Development Statistics Report, 2004
      4. Beihai City Economic and Social Development Statistics Report, 2003



              While industrial development accelerated, the industrial structure of
   Beihai city also improved, transforming from light industries to heavy industries
   and going for large production projects. In 2000, light and heavy industries were
   about equal in value added but by 2005, the ratio was 36:64 38 , with heavy
   industries in the majority.


   Table 2-7: Industrial Value-Added to the Four Major Industries of Beihai
   City, 2005
                                   Industrial Value-
                                                                Share of the City’s Total
                                    Added in 2005                                                   Increase Over 2004
                                                                Industrial Value-Added
                                  (RMB 100 million)
   Electricity                                    6.04             10.32%                 18.8 times
   Smelting and
   Pressing of Ferrous                    1.48                      2.53%                   41.26%
   Metal
   Electronic Data
                                          2.54                      4.34%                   66.94%
   Processing
   Medicine                               2.83                      4.84%                   25.44%
   Source: Ning Soon-ju, Wu Jun-chi: “Strategic study on the acceleration of industrial development
            in Beihai City”, Economic Research Centre(寧順主、吳俊起:《關於加快推進北海市
            工業化進程的對策研究》), People’s Government of Beihai City, survey study report,
            No. 16, 2006 (Issue No. 153)
            http://www.bheinet.gov.cn/dybg/sysdbDetail.asp?id=190



           The industrial park economy played an important role in the industrial
   development of Beihai, and achieved good results in the clustering of industries. In
   38
     Ning Soon-ju, Wu Jun-chi: “Strategic Study on the acceleration of industrial development of Beihai
   City”( 寧順主、吳俊起:《關於加快推進北海市工業化進程的對策研究》), Economic Research
   Centre, People’s Government of Beihai City, survey study report, No.16, 2006, (Issue No.153)
   http://www.bheinet.gov.cn/dybg/sysdb/dyDetail.asp?id=190.


                                                                                                                           46
Social, Economic and Political Developments in the Pan-PRD Region     Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




2005, the Beihai Industrial Park, the Hi-Tech Industrial Park, and the Hepu
Industrial Park produced industrial value-added of RMB 1.73 billion, about 30%
of the city’s total industrial value-added39. However even though the four main
industries have formed industrial clusters and become the new pillar industries of
Beihai, their size and performance are still limited (see Table 2-8).


Table 2-8: Four Industrial Clusters (New Pillar Industries) of the Beihai
Industrial Park Areas
             Industrial Clusters                Leading Enterprise                         Number of Enterprises
                                          Beihai Yinhe Hi-tech
Electronic Information                                                                                  17
                                          Industrial Co. Ltd.
                                          Guangxi Beisheng
Biological Medicine                                                                                     15
                                          Pharmaceutical Co. Ltd.
                                          Beihai Gofar Marine
Marine Bio-Engineering                                                                                  26
                                          Biological Industry Co. Ltd.
                                          Panzhihua Iron and Steel
New Materials                                                                                           10
                                          (Group) Corporation
Source: See Table 2-7


            Under the auspices of the “M Strategy”, the Pan-Beibu Gulf economic
cooperation experienced unprecedented progress last year. Beihai city took the
initiative and attracted a considerable amount of incoming investment (see Table
2-9).


Table 2-9: Investment Items of Beihai City, 2006
                                                 Contract
                                    Item         Amount
               Date                                                                       Project Details
                                   number       (RMB 100
                                                 million)
                                                                    Electronics, construction materials, electric
                                                                    automation, engine making, cosmetics, food
21 July                              20             5.96
                                                                    processing, marine products (Beihai
                                                                    Industrial Park)
Early November (during
                                     22             22.5
the “Third Meeting”)
                                                                    Advanced manufacturing industry, port logistic,
11 Nov                               17             133.6
                                                                    recyclable energy, tourism etc.
Sources:
   1. “20 projects started/completed in Beihai Industrial Park”( “北海園區20個項目喜慶開
       (竣)工”), Guangxi News Net, 23 July 2006,
       http://sub.gxnews.com.cn/staticpages/20060723/newgx44c258e0-663258.shtml.


39
     Ibid.


                                                                                                                          47
       Social, Economic and Political Developments in the Pan-PRD Region     Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)



            2. “20 big projects started and agreements signed in Beihai, two ‘industries
               accelerated”( “北 海 20 大 項目 同日 啟動 落成 和簽 約,提 速建 設‘兩 化’”), China
               Economics Net Guangxi Channel, 12 November 2006,
               http://www.gxce.cn/jjgc/ShowArticle.asp?ArticleID=18697.



       Qinzhou (欽州)


                  The city of Qinzhou was established in 1994, with backward industries
       and a belated start in economic development. The population stood at 3 million,
       which was double the population of Beihai City. In 1999 and 2000, the Guangxi
       Autonomous Region Government named Qinzhou as its coastal industrial city and
       port, and this started the process of industrialisation in Qinzhou. During the 10th
       Five-Year Plan period, industries in Qinzhou underwent rapid upgrading,
       especially in the year of 2005 (see Table 2-10).


       Table 2-10: Comparison of Qinzhou in the 10th and the 9th Five-Year Periods
                                                       10th Five-year Period                 Compared to 9th Five-year Period
       Annual Growth in GDP                                    10.6%                                    + 0.7%
       Annual Growth in Industrial
                                                                14.6%                                       + 5.2%
       Value-Added
       Share of Industries in GDP
                                                                26.86%                                      +7.9%
        (at End of Period)
       Total Investment in Fixed Assets                  RMB 26.1 billion                                   +170%
       Annual Growth in Total
                                                                 31%
       Investment in Fixed Assets
       Source: “Qinzhou city achieved great economic and social accomplishments in the 10th Five-
       Year Period”( “欽州市“十五”時期經濟社會取得重大成就”), Guangxi Radio Net,
       http://news.gxradio.com/news/2006/0301/gxxw/101234.htm.



       Table 2-11: Economic Performance of Qinzhou in 2004-2005
                Total         Increase       Output Value of      Increase                       Increase
                                                                                Industrial                                      Industrial
            Investment in    Compared           Industrial       Compared                       Compared         GDP
                                                                               Value-Added                                   Value-Added as
Qinzhou     Fixed Assets        with       Enterprises Above        with                           with        (RMB100
                                                                                (RMB100                                      a Percentage of
              (RMB100         Previous      a Designated Size     Previous                       Previous       million)
                                                                                 million)                                         GDP
               Million)         Year       (RMB100 million)         Year                           Year
2004               62.41                              38.66                           36.43                      174.65            20.86%
2005               89.85      43.97%                  74.91      93.77%               55.21      51.55%          205.52            26.86%
       Sources:
          1. Guangxi Statistical Yearbook 2005
          2. Guangxi Statistical Yearbook 2006



                The rapid growth of industries in Qinzhou in 2005 was due to regional
       economic cooperation and a plentiful supply of investment which was poured into


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    Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




    the city in 2003 and 2004. In 2003, the CPC and Municipal Government of
    Qinzhou put forward the economic development strategy of “Let the port enrich
    the city, and the city boost the port; let projects be pillars, and the open-door
    policy be the engine for building a coastal industrial city”. Their objectives were
    “Big Port, Big Industries”, and massive promotional works were carried out to
    attract incoming business and investment.


    Table 2-12: Incoming Business and Investment Attracted to Qinzhou
           Projects (number)               Amount (RMB 100 million)                                  Note
         93(Above RMB                                                                Actualised amount RMB 536.5
2003                                   (contract)15.6                                million, an increase of 335% over
         500 million)
                                                                                     previous year
2004     345 (total)                   (contract)138.8                               Increased 21% and 672%
2006     350 (related items)           (actualised)52                        Actualised capital increased 43%
                                       1. Dong Oil 1 million ton asphalt factory
                                       2. Guangxi Cassava Comprehensive Development Exhibition Project
Leading industrial projects            3. Dayang 0.8 million ton soybean processing factory
that have come to Qinzhou in           4. Oriental Resource Iron Alloy Factory
recent years                           5. Coal thermal electricity generating plant
                                       6. Jingui Forest-pulp-and-paper Integration Project
                                       7. Sino Petrol 1 million ton petroleum processing project
    Sources:
       1. “Industrial development in Qinzhou”(“欽州工業發展情況”), Xinhua Net Guangxi
           Channel, 14 July 2004, http://www.gx.xinhuanet.com/dtzx/2004-
           07/14/content_2494101.htm.
       2. ““Yien bird effect” to build Qinzhou’s coastal industrial features”( ““雁陣效應”打造欽
           州臨海工業特色”), China Hightech Net, 5 August 2005.
           http://www.chinahightech.com/chinahightech/News/View.asp?NewsId=2323434353
       3. “Guangxi: Qinzhou solicited 350 internally related projects and RMB 5.2 billion
           actualised capital”(“ 廣西:欽州市引進內聯項目 350 個到位資金 52 億元”), China
           Bidding Net, 31 December 2006,
           http://www.cnbidding.com/alibaba/aricledisp_aid_a459705201fd7b.html.


                The massive influx of projects and capital not only sped up industrial
    development in Qinzhou, it also transformed its industrial structure. Traditionally,
    the pillar industries of Qinzhou were sugar, medicine and construction materials.
    In 2003, the chemicals and metal melting surpassed the medical and construction
    material industries in industry output and became the second and fourth largest
    industries 40 . In the past three years, Qinzhou has increased efforts to attract
    incoming business and investment, and new industrial coastal projects have


    40
      “Industrial development in Qinzhou”( “欽州工業發展情況”), Xinhua Net Guangxi Channel, 14 July
    2004, http://www.gx.xinhuanet.com/dtzx/200407/14/content_2494101.htm.


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Social, Economic and Political Developments in the Pan-PRD Region    Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




arrived. Now, there are roughly two types of industries in Qinzhou 41 : the
traditional industries (sugar, medicine, construction materials, food and
machinery), and the coastal industries (petro-chemicals, lumber-paper, bio-energy
etc.). Despite this, the industrialisation level of Qinzhou is still lower than Beihai
city but this just marks the beginning for Qinzhou.


Fangchenggang (防城港)


           Among the three cities, Fangchenggang is the least economically
developed, and GDP and per capita GDP are less than half of that of Beihai and
Qinzhou (see Table 2-13). The population is only just above 800,000, with an
urban population of over 300,000. Although the economy is small in scale, the
level of industrialisation in Fangchenggang and the share of industry in GDP are
higher than that of Beihai and Qinzhou. In 2005, the four big industries (edible
plant oil processing, sugar, chemical materials and animal feeding material)
contributed 85.0% of the output of the city’s industrial enterprises above a
designated size42.


Table 2-13: Industrial Development in Fangchenggang in recent years
             Fangchenggang                               2003             2004           2005             2006
 Total Investment in Fixed Assets
                                                            19.07            30.40          42.96            68.00
 (RMB 100 million)
 Increase Over Previous Year                                22.9%           59.4%          41.3%            58.3%
 Industrial Investment
                                                              5.71            9.92          17.39
 (RMB 100 million)
 Increase Over Previous Year                              167.0%            73.7%          75.3%
 Total Industrial Output
                                                            80.71            93.62        119.08           148.00
 (RMB 100 million)
 Increase Over Previous Year                                21.3%           16.0%          27.2%            24.3%
 Industrial Value-Added
                                                            19.97            23.74          30.52            38.50
 (RMB 100 million)
 Increase Over Previous Year                                21.0%           18.9%          28.6%           26.1%
 GDP(RMB 100 million)                                        75.52           84.60          94.77          113.00
 Industrial Value-Added as a
                                                            26.4%           28.1%          32.2%            34.1%
 Percentage of GDP
 Share of Industrial Investment in
                                                            29.9%           32.6%          40.5%
 Fixed Capital Investment


41
   “Qinzhou Daily: ’11th Five Year Plan Period: ‘Three big objectives’ boost Qinzhou”( “欽州日報:‘十一
五’:‘三大目標’為欽州強身壯骨”), Beibu Gulf News Net, 7 April 2006,
http://www.bbwnews.com.cn/ReadNews.aspx?ID=18302.
42
   “Fangchenggang national economy and social development statistics report, 2005”,
http://www.gx.xinhuanet.com/dtzx/2006-06/23/content_7321249.htm.


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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)



Sources:
   1. Fangchenggang National Economy and Social Development Statistics Report, 2003
   2. Fangchenggang National Economy and Social Development Statistics Report, 2005
   3. Guangxi Statistical Yearbook, 2005.
   4. Guangxi Statistical Yearbook, 2006
   5. Data for 2006 are projections, cited from:
   a. “The 11th Five-Year Plan for Fangchenggang Represents a Good Start”( “‘十一五’防城
       港市開局良好”), Guangxi Fangchenggang Commerce Window, 28 December 2006.
       http://fangchenggang.mofcom.gov.cn/aarticle/gzdy/200612/20061204163217.html
   b. “Fangchenggang industrial output expected to reach RMB 14.8 billion”( “防城港市工業
       總產值預計達 148 億元”), Guangxi Fangchenggang Commerce Window, 19 December
       2006,
       http://fangchenggang.mofcom.gov.cn/aarticle/dongtai/200612/20061204079054.html.



            It is difficult for Fangchenggang to attract business because the size of
its economy is relatively small and so the ability of the city to attract incoming
business and investment is not as good as Beihai or Qinzhou. In 2006,
Fangchenggang only solicited actualised capital investment of RMB 2.36 billion,
just 45% of that of Qinzhou43. At present, the industries of Fangchenggang are of
little significance in the Beibu Gulf economic cooperation. However, according to
the National Plan for China’s Coastal Ports issued in 2006 by the National
Development and Reform Committee and the Department of Transport,
Fangchenggang is one of the three major ports in the southwestern coastal area,
and one of the 24 major coastal ports of China, while Beihai and Qinzhou are only
listed under the top 25 regional ports. This means that as a port, the importance of
Fangchenggang is much greater than Beihai and Qinzhou, and therefore, the future
outlook of industries in Fangchenggang is not necessarily less promising than
Beihai and Qinzhou.


Port Development and Future Outlook of the Three Cities


           In recent years, these three cities have made considerable progress in
industrial development due to the construction of port and land transport facilities.
However at present the related figures are still small, especially when compared
with more developed ports like Ningbo (see Table 2-14).




43
  “The 11th Five Year Plan for Fangchenggang city represents a good start”( “‘十一五’防城港市開局良
好”), Guangxi Fangchanggang Commerce Window, 28 December 2006,
http://fangchenggang.mofcom.gov.cn/aarticle/gzdy/200612/20061204163217.html.


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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




Table 2-14: A Comparison of Industrial Investment in the Three Ports of
Guangxi and Ningpo
                                                                                                                 Share of
                                                                                   Industrial                   Industrial
                                 Total Investment in Fixed Assets
                                                                               Investment (RMB                Investment in
                                      (RMB 100 million)
                                                                                 100 million)                 Fixed Capital
                                                                                                               Investment
     Beihai (2005)                                    67.2                     19.8                                    29.5%
    Qinzhou (2006)                                  118.3                      42.7                                    36.1%
 Fangchenggang(2006)                                  69.0                     32.6                                    47.2%
    Ningbo (2006)                                 1,370.4                     752.5                                    54.9%
Sources:
  1. Ning Soon-ju: “Strategic Study on the acceleration of industrialisation in Beihai city”( 寧順
     主、吳俊起:《關於加快推進北海市工業化進程的對策研究》), Economic Research
     Centre, People’s Government of Beihai city, No.16, 2006, (Issue No.153),
     http://www.bheinet.gov.cn/dybg/sysdb/dyDetail.asp?id=190.
  2. “Ratio of secondary industry surpasses primary industry for the first time”( “我市第二產業
     比重首次超過一產”), Qinzhou Daily, 1 March 2007
  3. “Investment contributed 70% to the economic growth rate of Qinzhou.”( “投資對去年欽州
     市經濟增長貢獻率達 70%”), 7 March 2007,
     http://www.bbwnews.com.cn/ReadNews.aspx?ID=29011.
  4. “Fixed capital investment in Fangchenggang remained in a good condition in 2006”( “防城
     港市 2006 年固定資産投資繼續保持良好態勢”), Guangxi Statistics Information Net.


           This shows that the focus of investment in these three cities is not in the
industries, but in port and infrastructure construction. Industrial development, port
construction, and logistics development have not established adequate interactions.
The economic foundations of these port cities are still poor, and remain in the
elementary stage. The geographical location and characteristics of the three cities
are quite similar. Because they are located in the same region, all lack in
hinterland support and coordination for division of labour, there are problems in
unfriendly competition and redundant infrastructural facilities.


          Last year the Guangxi Autonomous Region Government formed the
Beibu Gulf (Guangxi) Economic Planning Construction Management Committee,
headed by Mr. Chan Wu, Vice Chairman of the Autonomous Region. The work of
the Committee is to plan and integrate port resources, and put forward major
construction and industrial projects. Last December, the Committee conducted a
meeting to invite opinions on the draft edition of The Plan for the Cities and
Townships in the Beibu Gulf (Guangxi) Economic Region. This Plan is one of the
ten major planning tasks of the Beibu Gulf (Guangxi) Economic Region for this
year, under the auspices of the China City Planning Design Institute of the
Department of Construction. They will be assisted by the Guangxi Construction


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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




Comprehensive Design Institute and the Guangxi Urban and Rural Planning
Design Institute, with specific study items carried out by the Hong Kong
University and the China Science Academy and Geography Institute. The Plan
will study the division of labour and positioning of the cities, their spatial
distribution, communication networks, ecological protection and infrastructural
facilities construction. The planning work will be completed by July 200744. It
forms the major strategy for planning the construction of the region’s economy,
and will formulate a path for future development and a comprehensive plan for the
three Beibu Gulf ports.


           However, some time earlier, the new party chief of Guangxi, Mr. Liao
Chi-bao, put forth the Pan-Beibu Gulf economic planning strategy, to promote
regional cooperation between China and ASEAN based on the “One Axis, Two
Wings” initiative. The proposal was endorsed and supported by the Central
Government. Mr. Tsang Pue-yin of the State Council even put Beibu Gulf together
with Bohai Gulf, which formed part of the “Two Deltas (Yangtze River and Pearl
River), two Gulfs, and two coasts (of the Strait of Taiwan)” slogan45. In 2006, the
Guangxi Autonomous Region Government invested RMB 5.8 billion in
infrastructural facilities construction, to improve the shipping channels, road
networks, water pipes, drainage, and electricity supply to the three cities.


           In recent months, the Guangxi Autonomous Region Government has
started a number of big projects, including the 1.2 million kilowatt Fangchenggang
Thermal Electricity Plant Phase One, the Jingui forest-pulp-and-paper project
which produces 1.8 million tons of pulp and 2.5 million tons of paper, the
Qinzhou-based 10 million ton coal oil project, the Fangchenggang Hongshang 10
million ton steel project, the 6 million watt Fangchenggang nuclear energy project
and the Stora Enso project which produces 1.2 million tons of pulp and 0.9 million
tons of paper (Stora Enso is a company from Finland)46. The Central Government
was highly supportive of the investment projects in Beibu Gulf and the port
construction and coastal industrial areas of the three cities have undergone healthy
development under the direct and indirect involvement of government. When the
infrastructural facilities and heavy chemical industries projects are completed, the
three cities will show colossal transformation.
44
   “Experts study the ‘Beibu Gulf (Guangxi) Economic Regional Township Concept Plan”( “專家研討《北
部灣(廣西)經濟區城鎮群概念規劃》”), Pan Beibu Gulf Economic Cooperation Forum Website, 28
December 2006, http://www.fecbg.org/staticpages/20061228/newgx459317ab-917730.html.
45
   Information from departmental discussions with the Guangxi Autonomous Region Government during
January 2007, Guangxi Study Tour.
46
   Beibu Gulf (Guangxi) Economic Regional Planning Construction Management Committee Office,
“Beibu Gulf (Guangxi) Economic Regional: Open and Development Conditions”( 《北部灣(廣西)經濟區
開放開發情況介紹》), 23 January 2007.


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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




Diagram 2-2: China-ASEAN “One-Axis-Two-Wings” Regional Economic
Cooperation




Source: Beibu Gulf (Guangxi) Economic Planning Construction Committee Office information
material.



Implications for Hong Kong


           The port and industrial development of the three cities is in the
infrastructure construction stage, and relies on the funding and support of the
Central Government and the Guangxi Autonomous Region Government, including
the attraction of big investment projects from abroad, such as the Finland paper
project. It illustrates the fact that government is a critical factor in strengthening
the economic development and competitiveness of a city or region in a short time.
At this stage, there is little that Hong Kong can participate in. One reason is that
Hong Kong industries lack strengths and experiences in the heavy and chemical
industries, ferrous products, and port construction. In terms of port cargo transport,
the three cities face competition from Zhanjiang and the risk of investment in
building a network of cargo hinterland is high, therefore normal channels for
commercial investment are not advised. Another reason is that Hong Kong lacks
government investment institutions and public institutions specialised in



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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




international business. It is therefore difficult to participate in the port, city and
regional development of the Beibu Gulf area.


           However, Beibu Gulf does lack human resources. In the economic and
industrial upgrading and transformation stage, the demand for human resources is
great. Beihai city is planning to build a University Town, but it will take some
time before the university produces graduates. Hong Kong could provide some
assistance, offer training to management personnel and government officials in the
three cities, and build up a cooperative relationship for the future.




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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




2.4            Trends and Updates on Yunnan



2.4.1          Economic Performance of Yunnan


           In 2006, Yunnan’s economy developed rapidly, and saw breakthroughs
in agriculture and industry. The consumer market boomed and foreign trade kept
growing.


Table 2-15: Major Economic Indicators for Yunnan in 2006
                                                                     2006 (RMB 100               Increase Over
 Economic Indicators
                                                                        Million)                 Previous Year
 GDP                                                                              4,002                  11.9%
 Primary Industry                                                                   751                   6.8%
 Secondary Industry                                                               1,710                  16.9%
 Tertiary Industry                                                                1,541                   9.1%
 Total Retail Sales of Consumer Goods                                             1,189                  14.9%
 Foreign Trade (USD 100 million)                                                   62.3                  31.4%
 Urban disposable income per capita (Yuan)                                       10,070                   8.7%
Note: Statistics from each province represent preliminary data, which may be subject to changes,
and may vary from those published by the National Bureau of Statistics later on.
Source: Yunnan Statistics and Information Net: http://www.stats.yn.gov.cn.



           Yunnan’s GDP grew by 11.9%, the highest growth rate since 1995.
Agriculture developed rapidly and value-added stood at 75.1 billion RMB,
growing by 6.8%, which represented the fastest growth rate in 16 years. Yunnan’s
industry was stimulated by heavy industry and became the major driving force
behind the economic growth. The value-added of heavy industrial enterprises
above a designated size grew by 27.1% more than in 2005, higher than the growth
rate of light industry by 17.5 percentage points, and the ratio of heavy industry
also exceeded that of light industry for the first time in 30 years47.


         The consumer market was also booming thanks to the steady increase in
the income of rural and urban residents, and retail sales for urban and rural
consumer markets grew by 15.3% and 14.5% respectively. The major driving

47
  “A Summary of Yunnan’s National Economic Development and Social Development in 2006”( “2006 年
雲南國民經濟和社會發展概述”), Yunnan Statistics and Information Net, 30 January 2007,
http://www.stats.yn.gov.cn/ynstjjwz/4685150987348869120/20070130/104346.html.


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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




force behind the growth of the consumer market came from the wholesale and
retail industry, which was 15.3% higher than the previous year, and retail sales
accounted for 79.9% of total consumption48.


           As for investment, the three main industries all witnessed growth with
industrial investment growing by 24.1%, and accounting for 38.9% of total
investment. The chronic shortage and low proportion of industrial investment saw
considerable improvement49, which will be beneficial for the rapid development of
Yunnan’s industry in the future.



2.4.2          Updates on Yunnan – Commercial Opportunities in the Cut
               Flowers Industry

           According to statistics from the China Customs Office, between January
and November 2006, the export of Yunnan’s cut flowers reached USD 10.45
million, and for the first time surpassed USD 10 million. Taking into account cut
flowers exported through agents of enterprises outside Yunnan, the export
earnings from Yunnan’s cut flowers should far exceed the above figure, probably
to the level of USD 40-50 million. The Flower Industry Association of Yunnan
estimated that in 2006, cut flowers production reached 4.1 billion pieces, with
export earnings reaching USD 65 million. These are believed to be reliable
figures50.


Table 2-16: Cut Flower Exports Through the Kunming Custom Office,
Yunnan (Unit: USD 10,000)
                Year                                 Export Volume                  Increase Over Previous Year
                2000                                                        60                               -
                2001                                                       113                          88.33%
                2002                                                       191                          69.03%
                2003                                                       252                          31.94%
                2004                                                       472                          87.30%
                2005                                                       667                          41.31%
           2006 (Jan-Nov)                                                1,045                          56.67%
Source: Customs Statistics Information Net

48
   Ibid.
49
   Ibid.
50
   Chang Yu: “Yunnan becomes the major cut flower producing province”( 張銳:“雲南成為鮮切花生產
大省”) , Xinhua Net Yunnan Channel, 30 December 2006,
http://big5.xinhuanet.com/gate/big5/www.yn.xinhuanet.com/newscenter/2006-12/30/content_8931211.htm.


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http://www.chinacustomsstat.com/CustomsStat/OperateForm/StatNewsViewAllow.aspx?guid=22
f3256b-070d-4baf-9829-d8a24eaa30af.



Accelerated Development


          In recent years, China’s cut flowers production and exports have
increased rapidly, especially after 2001. National production increased by 30-40%,
and the figure for Yunnan grew even faster. For over ten years, production in
Yunnan has ranked first in China51. Before 2000, annual exports were below USD
1 million but in 2006, exports exceeded USD 10 million, with an annual rate of
increase of 65.8%. Among Yunnan’s featured agricultural products, cut flowers
witnessed the fastest growth rate.


Good Prices Increased Earnings


           Between January and November 2006, cut flower exports from Yunnan
totaled 4,362 tons, an increase of 8.6% over the same period in the previous year.
The price of cut flowers greatly increased and export earnings rose by 85.9%. This
good performance was due to an improvement in the quality of the cut flowers and
farming technologies, as well as growing market demand. In addition, besides the
major species of rose, carnation, lily, and gerbera, there was an increase in the
export share of orchids and other new high echelon flowers that are higher value-
added and require more sophisticated farming technologies. This caused export
earnings to increase remarkably.


Strong Market Demand Sustained


          Between January and November 2006, exports of cut flowers from
Yunnan to the ASEAN market reached USD 3.62 million, and increased by 100%
over the same period in 2005. Singapore and Thailand were the main importers.
This was a preliminary effect of the China-ASEAN Bilateral Free Trade
Agreement.




51
 Yi Chuen: “China’s cut flower production and sales increase yearly, exports await breakthrough”( 依
群:“我國鮮切花產銷連年增長,出口有待突破”), China Flower Newspaper, 19 October 2006.


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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




          Japan is still the single largest market for Yunnan’s cut flowers.
Between January and November 2006, Japan imported USD 2.75 million worth of
Yunnan’s cut flowers, an increase of 18% over the same period in the previous
year. Hong Kong is the second largest market and the fastest growing market, and
imported USD 2.71 million, an increase of 350% over the same period in the
previous year. The Singapore and Thailand markets exceeded USD 1 million, and
imported USD 1.67 million and USD 1.21 million respectively, representing
increases of 98.8% and 120%. Russia and Korea were also major markets.


Foreign and Civilian-run Enterprises Performed Well


          In recent years, many foreign enterprises have entered the Yunnan cut
flowers industry and their capital and technical inputs have helped to boost the
industry significantly. At the same time, their competitive strengths have also
helped motivate existing enterprises to upgrade their competitive abilities.


Table 2-17: Volumes of Cut Flower Exports Through Kunming Customs,
Yunnan (Jan-Nov 2006)
                                            Export Volume (USD 10,000)                       Increase Over Previous Year
Foreign Enterprises                                                               574                                  +2.9 times
Civilian-run Enterprises                                                          267                                    +66.9%
State-owned Enterprises                                                           204                                     -20.3%


Internal Sales Market


           The demand for cut flowers is closely related to the income level of
consumers. As the Chinese economy develops rapidly and urbanisation increases,
the population of the middle and upper income level urban habitants and their
purchasing power have also increased rapidly. While exports rise, domestic sales
have also increased. Domestic sales are in fact greater than export sales. In 2004,
for example, cut flowers consumption across the whole of China reached 8.1
billion pieces, worth RMB 4.3 billion, whilst export earnings in 2004 were USD
51 million, equivalent to RMB 0.4 billion. Around 62% of the total flower
production is carried out in Yunnan, Liaoning and Guangdong, and there is some
division of labour among them. Yunnan supplies spring, summer and autumn
flowers, with limited winter production. Liaoning has the advantages of winter



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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




greenhouse production whilst Guangdong with its warmer winters has a cost
advantage during these months52.


           In the past, the domestic market was dominated by Guangzhou,
including the Hong Kong and Macau markets. However, since Guangzhou started
cut flower production more than decade ago, due to inadequate subsequent
investment, over-emphasis on the Hong Kong and Macau markets, relatively high
costs and prices, there has been little improvement in its flower quality and
diversity. In 2000, Guangzhou served the South China market and was the main
supplier to Southeast Asia. Starting from 2002, roses from Yunnan entered, and
soon dominated the Hong Kong and Macau markets. With their good quality, the
Yunnan roses even seized the conventional markets of Guangzhou cut flowers in
Shenzhen and Zhuhai. As a result, Guangzhou cut flowers retreated to the local
Guangzhou market and smaller cities in Hunan, Hubei, Fujian and Jiangxi. It is
because these markets are less accessible for Yunnan flowers by air transport53.


           In 2003, the Dounan Flowers Market of Chinggong County (呈貢縣斗
南花卉市場) of Kunming enjoyed sales exceeding RMB 1.2 billion and sold 1.6
billion pieces of flowers, about 80% of the total for Yunnan and 57% of those in
China. The flower turnover of Dounan Flower Market exceeded 3.5-5 million
pieces per day in 2003, in 2005 it had increased to 5-6 million pieces, and in 2006
it reached 5.5-7 million pieces, of which about 800,000 pieces were sold to the
domestic market of over 70 cities in China. In autumn and winter, major markets
like Shanghai and Beijing consume 80-90% of Yunnan flowers54.


           Yunnan cut flowers production mainly takes place in Kunming city. In
2006, cut flowers production reached RMB 1.23 billion, an increase of 15.8% over
the same period in the previous year and produced 3.16 billion pieces of flowers,
an increase of 3.5%. Sales to places outside Yunnan totalled 2.83 billion pieces of
flowers, about 89.6% of total production, with exports amounting to 0.28 billion




52
   Ibid: Yi Chun
53
   Kwok Jin-fang, Huang Chang-Bing: “Winter production facilities improved regional advantages.
Guangzhou cut flowers strive for market success”( 郭金鳯,黃正秉:“冬季生產設施改造區域佔優,廣
州鮮切花揚長避短搶市場”), China Flower Newspaper, 15 January 2007.
54
   Fan Xin: “Dounan Flower Market transactions account for around 60% of China’s volume”( 范欣:“斗
南花市交易量佔全國近六成”), China Flower Newspaper, 13 May 2004; Lu Ji-leung: “2006 Yunnan cut
flowers have good prospects”, “China Flower Newspaper”, 9 January 2007.


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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




pieces, about 8.9% of total production, or 9.9% of the sales to places outside
Yunnan, and export earnings reached USD 41.22 million55.


Trends in World Flower Production and Trade


           The flower industry is one of the most dynamic industries in the world.
There are no quota restrictions, but there are tariffs. In recent years, trade
agreements have lowered import tariffs. Air shipment and improved cost
structures have helped the formation of four major traditional flower wholesale
markets. These are Amsterdam in Holland, Miami in the USA, Bogota in
Columbia and Tel Aviv in Israel.


           However, flower consumption in the developed countries has reached a
stable level. Globalisation means that the centre of flower production is moving
from developed countries to developing countries. In areas with the right climate,
where land and labour costs are low, and government policies support the industry,
such as Columbia, Ecuador, Kenya, China and India, flower production has
increased. This has resulted in a global surplus and prices have fallen. In
developed countries, the cost of production is so high that they cannot offer a
competitive price56.


          The global cut flower markets are in Western Europe, America and
Japan, and account for 42%, 20% and 18% of the global import market
respectively. Germany is the single largest importer 57 . The international cut
flowers market is characterised by the high concentration of species and supply
countries, and roses are the main trading species. In the three main markets,
supplying countries concentrate on a few countries in the region. The American
market is mainly supplied by Columbia (about 65%), Ecuador and Costa Rica58.
The Western Europe market is mainly supplied through the Amsterdam wholesale

55
   This export earning figure should include figures outside of the Customs statistics for Yunnan. Figures
from Yunnan Customs, other Chinese Customs authorities and figures from the industry showed disparities,
and reflect the lack of export facilities in Yunnan. Lo Kun-ya: “Last year Kunming cut flowers external
sales reached 2.83 billion flowers, about 90% of total production”( 羅昆婭:“去年昆明鮮切花外銷 28.3
億枝,接近生產總量的九成”), Yunnan Agriculture Information Net, 22 January 2007.
56
   “Flower production and trade inside and outside China”( “國內外花卉生産及貿易概况”), Nantianzhu
Flowers and Gifts Net, http://www.nantianzhu.com/News/Show.aspx?ID=450.
57
   Ulrike Grote, “Sustainable development in the eco-label flower sector?” Presentation at Deutscher
Tropeutag 1999, Berlin.
58
   “New movement in the American cut flowers market”( “美國鮮花市場新動向”), China Agriculture Net,
29 May 2003,http://www.zgny.com.cn/ifm/consultation/2003-5-29/563.shtml.


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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




market. Holland is the chief producer, but its market share has been eroded slowly
by Kenya and Israel. Kenya in fact is now the largest supplier to Western Europe,
and has about 25% share in the market of EU59. The Japanese market in the 1990s
was mainly supplied by Holland, Thailand, New Zealand and Taiwan60 . India,
with its roses, has surpassed Holland as the second largest supplier to Japan61.
Yunnan’s cut flowers still have a negligible share in the three world markets. This
reflects a difference in competitiveness but could also mean that the room for
development is great. Kenya is taking over the Western European market and
India has made inroads into the Japanese market in just a matter of a few years. As
a result of the competitive nature of cut flowers, new suppliers with lower
production costs can easily topple the market situation.


           The downward pressure of production costs is now a global trend.
Developing countries can develop and increase cut flower production by making
use of their advantages in climate and low production costs. Therefore some
developed countries are seeking cooperative businesses with countries with low
production costs. At present, Holland, the USA and Japan have set up large flower
production bases in Columbia, Malaysia and China, to lower their costs and
increase their market sales. Holland and Israel have set up show farms and training
centres in China, and enterprises from many countries have set up offices in China.
Their move into China has greatly helped develop the domestic flower industry.


Yunnan’s Natural Advantages


           According to statistics from the China Flower Association, since the
dawn of the industry in the 1980s, the production area has expanded to reach
86,000 hectares, the largest in the world, and six times the area of production in
1984. Annual production has reached RMB 9.6 billion, and is 16 times the figure
in 1984. These growth rates are also the highest in the world. The development of
the flower industry has changed from an increase in quantity, to better quality and
efficiency. The flower industry has formed a combination of state-owned, private-
owned, individual, China-foreign joint investment, and solely-owned foreign
capital enterprises. Flower exporting areas include Guangdong, Shanghai, Yunnan,
Fujian, Zhejiang, of which Guangdong ranks first and Yunnan the second. In
terms of cut flowers, Yunnan accounts for 28.7% of national production, ranking

59
   Angela Hale and Maggie Opondo, “Humanising the cut flowers chain: confronting the realities of flower
production for workers in Kenya”, Antipole 2005, pp. 301-323.
60
   “Cut flowers”, JETRO Japanese Market Report, No. 58, March 2001.
61
   Alka Kshiragar, “Japan turns to fragrance for cut flower exports. India replaces Holland as 2nd largest
supplier”, http://www.theindianbusinessline.com/2007/01/23/stories/2007012301200.htm.


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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




first, and Guangdong ranks second with its share of production standing at 22.8%.
Yunnan and Guangdong together account for half the total output of China. At
present, Chinese flowers are still way behind the international market level in
terms of quality and quantity, and export quantities are small. The Yunnan
Provincial Government planned in 2005 to make Yunnan the largest flower
production and trading centre in Asia 62 but export figures have yet to reflect
Yunnan’s natural advantages.


Japan is the Main Export Market


            At present, the plantation area and flower output in the China flower
industry ranks the first in the world, and the flower plantation area in fact is about
a third of the world total. However, Chinese flower exports account for a mere 2%
of the world figure, and export earnings are relatively low. In 2005, flower exports
were only worth USD 150 million. There is a gross imbalance between production
quantity and export earnings. China’s flowers are exported mainly to Japan,
Europe, America and Russia, of which Japan is the main market. Japan is the
world’s major flower consumption country, with an annual consumption figure of
USD 4.5 billion, and annual flower imports of USD 3.6 billion. One reason is that
due to the climate, many species of flowers cannot be grown in Japan63, and hence
there is a serious seasonal shortage. Besides, the flower industry is a labour
intensive industry with large energy inputs. This has led the Japanese to upgrade
their industries and decrease activities in flower production. The serious shortage
of flowers therefore equates to a big demand for imports.


           Flowers naturally incur higher logistics costs compared with other
manufactured products because they are fresh agricultural products. The cost of
transporting flowers between China and Japan is relatively low due to the
proximity of the two countries. Air shipment or sea shipment are the usual means
of transport. Like Japan, Russia is another relatively close neighbour of China
which cannot produce enough flowers to meet consumer demands due to its
climate. In contrast, Europe and America are higher echelon flower markets with
strict requirements and a large demand for high quality flowers and novel species,
especially flowers from the subtropical region. Yunnan and Guangdong cannot

62
   “Yunnan cut flowers rank the first in China year after year”( “雲南鮮切花產量連續幾年全國稱雄”),
Nanfang Daily Net, 19 March 2005,
http://www.nanfangdaily.com.cn/southnews/tszk/nfncb/hh/200503210306.asp.
63
   Western Europe and America import mostly sub-tropical flowers while Japan imports tropical flowers
(mainly orchids). J. Tsai, “The comparative advantage of Taiwan’s major cut flowers”, Agricultural
Economics, no. 47, 2001 (6), pp.265-270.


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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




meet their demand. Cut flowers from Kunming of Yunnan and the Pearl River
Delta are more competitive than other suppliers such as India or Thailand in
shipping by air to Japan, Korea or Russia. The cost of production is lower than in
Taiwan. Therefore in years to come, China’s cut flower export markets will
mainly be in the Northeast Asian region64.


Investment by the Swire Group


           The Swire Group, the renowned listed company from Hong Kong, has
formally invested in the flower industry in Yunnan. After studying for more than
six months, the Swire Group selected the Flower Show Park Area of Xiao Jie
Town (小街鎮) of Song Ming County (嵩明縣) and set up there a 1,083 mu
flower production base. Swire will invest USD 25 million (RMB 200 million) and
set up a sole capital production and sales company. It is at present the largest sole
capital investment project in the Yunnan flower industry.


          The Swire Group will make good use of the favourable climate,
geography, transport and water features, and the group’s advanced cultivation
techniques and management experience, to cultivate and produce high quality high
output flowers. The Swire Group is a diversified multinational enterprise,
engaging in real estate, air transport, drinks, agriculture, marine services and trade.
At present their agriculture interests includes tea, rubber, timber and flowers. Its
subsidiary, the Finlay Flowers Company, owns 90 hectares of flower greenhouses
in Kenya, and exports 100 million pieces of roses and carnations from there
annually. The Swire Group wishes to expand from the flower production base in
Yunnan into other types of agricultural production65.


         Mr Christopher Dale Pratt, Chairman of the Hong Kong Swire Holding
Company, disclosed that the flowers would all be for export, mainly to Japan and
the Middle East markets 66 . The Middle East market in fact is very attractive.
According to the German Flower Import and Wholesale Company, the Gulf
Cooperation Committee countries have a flower market worth USD 240 million,

64
   “The international market demand for Chinese flowers”( “國際市場對中國花卉的需求重點”), Jiangsu
Forestry Net, 3 November 2006, http://www.jsforestry.gov.cn/show_news.asp?id=2196.
65
   “Swire Group of Britain invests RMB 200 million in Kuming’s flower industry”( “英國太古集團在滇投
2 億元發展花卉業”), Soongjie Agriculture Net, 24 January 2007, http://www.99sj.com/news/105120.htm.
66
   “Swire Group of Britain invests USD 25 million in Kuming’s flower industry” (“英國太古集團 2,500 萬
美元投資雲南花卉產業”), Xinhua Net Yunnan Channel, 17 January 2007,
http://big5.xinhuanet.com/gate/big5/www.yn.xinhuanet.com/newscenter/2007-01/17/content_9066211.htm.


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and this is expected to increase to USD 2,380 million over the next few years.
(The global flower trade is currently worth only USD 4,700 million.) Take the
example of the Arab Emirates which imports around 15,000 tons of plants and cut
flowers annually, about 50% of the total for the Gulf nations. Statistics from the
International Trade Centre showed that in 2003, the Arab Emirates was one of the
30 largest flower importing countries. Dubai also invested USD 70 million to
build a Dubai Flower Centre in the Dubai International Airport, and intents to
make Dubai the plant and cut flowers trading centre for the Gulf area67.


Opportunities for Hong Kong


           As described above, Hong Kong has become the fastest growing
importer of Yunnan’s cut flowers. In the first eleven months of 2006, import
figures rose to USD 2.71million, an increase of around 350% over the same period
last year. It is possible that with such trends, Hong Kong may surpass Japan and
become the largest importer of Yunnan’s cut flowers. The Swire Group’s
investment in Yunnan illustrates the fact that there are plenty of opportunities for
cooperation with Yunnan. The Swire Group’s Cathay Pacific Airway could
develop an export business for flowers shipped to Japan and the Middle East, with
Hong Kong as an airway hub. There are quite a number of factors encouraging
cooperation between Hong Kong and Yunnan.


            One is that the Kunming Customs cut flowers export figure represents
only a small portion of the output of the whole province. This shows the lack of air
shipment capability and the insufficient airport services at Kunming. If the Hong
Kong International Airport and the Kunming Airport could cooperate and form a
joint shipment route from Kunming, via Hong Kong, to other parts of the world,
more cut flowers could be shipped to Northeast Asia, the Middle East and even
further to America and Western Europe. The second point is that Yunnan’s cut
flower exports have experienced the largest increase in Hong Kong. This shows
that the reliance of Yunnan on Hong Kong air shipment has increased.


           Hong Kong should start from the air freight services provided by Cathay
Pacific Airway of Swire Group, and develop other supportive services, including
participation in the cut flower export business with Yunnan export enterprises,
foreign capital and Hong Kong enterprises. In the vicinity of the Zhuhai Airport or

67
  “The Gulf flower market will increase to USD 2.38 billion”( “海灣鮮花市場將增至 23.8 億美元”), Sina
Enterprise Service Net, 5 April 2006, http://chanye.finance.sina.com.cn/nl/2006-04-05/283703.shtml.


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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




the Hong Kong International Airport, a cut flower mid-way service station should
be established. The Zhuhai Airport could be used to assist the Hong Kong
International Airport in handling the increasing Kunming air services to export
Kunming’s flowers through the Hong Kong International Airport. The Guangzhou
cut flowers production base could also be helped to export through this way. Also,
Hong Kong could imitate India in setting up Market Facilitation Centres in Tokyo
and Amsterdam to handle and coordinate exports of flowers to Japan and Western
Europe.


         Furthermore, Hong Kong could also help Yunnan solve the eco-labels
problem and overcome non-tariff barriers set by overseas markets.




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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




2.5            Trends and Updates on Guizhou



2.5.1          Economic Performance of Guizhou


           In 2006, Guizhou’s economy developed steadily. Consumption,
industrial production and investment all maintained a balanced growth.


Table 2-18: Major Economic Indicators of Guizhou in 2006
                                                                     2006 (RMB 100               Increase Over
 Economic Indicators
                                                                        Million)                 Previous Year
 GDP                                                                             2,260                   11.5%
 Total Retail Sales of Consumer Goods                                              690                   13.7%
 Foreign Trade (USD 100 million)                                                    16                   15.2%
 Amount of FDI Actually Used (USD 100 million)                                       2                   19.4%
 Budgetary Government Revenue                                                      449                   22.5%
 Urban disposable income per capita (Yuan)                                       9,117                   10.1%
Note: Statistics from each province are preliminary data, which may be subject to changes, and
may vary from those published by the National Bureau of Statistics later on.
Sources:
1. Guizhou Business Window: http://guizhou.mofcom.gov.cn/
2. The All China Data Centre: http://data.acmr.com.cn/freesource/zixunshow.asp?id=7260.



           The development of the tertiary industry was promising, with value-
added increasing by 11.5%. It accounted for 40% of GDP and also contributed
40% to economic growth. Driven by the fast-growing tourist industry, the
consumer market boomed. The growth rate in retail sales for accommodation and
the catering industry was higher than that of the wholesale and retail industry by
4.5 percentage points, standing at 17.6%. Total retail sales of consumer goods also
increased by 17.6% over 2005, the highest in six years68.


           Industrial enterprises above a designated size of the province grew
rapidly, and the five major sectors including the power industry, beverage industry
and chemical industry saw their value-added reach more than RMB 1 billion,
which contributed to an increase of 73.1% in industrial growth with the power

68
  “Guizhou’s GDP saw growth last year, and the average income of urban residents rose to over RMB
9,000”( “去年 GDP 增長,城鎮居民人均收入 9 千多元”), Guizhou Business Window, 29 January 2007,
http://guizhou.mofcom.gov.cn/aarticle/sjshangwudt/200702/20070204342178.html.


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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




industry performing the best. Its value-added accounted for 31.2% of that of the
other industrial enterprises above a designated size and contributed 30.5% to
industrial growth69. The information industry also grew steadily, with value-added
increasing by RMB 1.45 billion, 10.7% higher than the same period last year70.


           Total investment in fixed assets grew by 17.2%. Energy construction
attracted the most investments, accounting for 27.4% of the total amount of urban
investment, with investment in coal mining growing by 35.8%, whilst the power
generation and supply industry grew by 4.9% 71 , enabling Guizhou to take
advantage of its rich resources.



2.5.2          Updates on Guizhou – The 11th Five-Year Plan for the Development
               of Science and Technology and Hi-tech Industries in Guizhou
               Province


          In late October 2006, Guizhou Provincial Government worked on the
basis of the objectives and intentions laid down in the Planning Outline for
Guizhou Province’s National Economic and Social Development and the
Plannning Outline for Guizhou Province’s Medium and Long-Term Scientific and
Technological Development, 2006-2020 72 (hereafter refer to as the “Planning
Outline”). In addition, it also produced and issued The 11th Five-Year Plan for
Development of Science and Technology and Hi-Tech Industries in Guizhou
Province (hereafter refer to as the “Plan”). The “Plan” summarised the
development results of Guizhou’s science and hi-tech industries during the 10th
Five-Year Plan period, pointed out major problems in the development process,
and laid down an approach and planning work for development in the 11th Five-
Year Plan.




69
   Ibid.
70
   “Guizhou’s information industry grew steadily in 2006”( “2006 年貴州資訊產業穩步增長”), Guizhou
Business Window, 1 February 2007,
http://guizhou.mofcom.gov.cn/aarticle/sjshangwudt/200702/20070204342178.html.
71
   “Guizhou’s GDP saw growth last year, and the average income of urban residents reached more than
RMB 9,000”( “去年 GDP 增長,城鎮居民人均收入 9 千多元”), Guizhou Business Window, 29 January
2007, http://guizhou.mofcom.gov.cn/aarticle/sjshangwudt/200702/20070204342178.html.
72
   This research paper did a thorough analysis of “Planning Outline of Guizhou Province’s Medium and
Long-term Science and Technology development, 2006-2020” in October, 2006. Please refer to the
October issue for details.


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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




Main Details of the “Plan”73


           The “Plan” covers the time period between the first phase (2006-2010)
of the “Planning Outline”. The major objective is to strengthen Guizhou’s ability
to self-innovate, promote new industrialisation, transform and upgrade traditional
industries, improve industrial structures, and change the mode of economic growth.
To achieve this, the “Plan” laid down clear working objectives. During the 11th
Five-Year Plan period, scientific and technological innovation should be
developed so that it is compatible with the socio-economic development of the
province, with the preliminary formation of an industry-education-research
institutional mechanism. This includes speeding up the transformation of military-
civilian dual technologies to the civilian domains. Hi-tech industries are to see
value-added growth increase by 20% annually, and by 2010 this should account
for about 12% of the total value-added to industry (see Table 2-19).


Table 2-19: Overall Objectives of the Hi-tech Industries
        Hi-tech Industrial Output            Hi-tech Industrial Value-Added
                            About RMB                                About RMB
 2010 output                              2010 value-added
                               50 billion                              19 billion
 Output average annual                    Value-added average
                             About 25%                                About 20%
 growth                                   annual growth
                                          Share in Guizhou’s
 Share in Guizhou’s
                              About 6% total industrial value-        About 12%
 GDP
                                          added
Source: The 11th Five-Year Plan for the Development of Science and Technology and Hi-Tech
Industries in Guizhou Province



           Several major objectives of the “Plan” and the “Planning Outline” are
the same, but the targets for application and granting of patents are greatly reduced
(see Table 2-20). This change reflects the conservative and careful attitude of the
Guizhou Provincial Government in assessing the province’s scientific
technological capability and potential for development. It also reveals that the
Guizhou Provincial Government also emphasises the importance of other means
such as alignment and fusion of technologies to realize the objectives of improving
the value-added of industries and upgrading the traditional industries. The number
of patents is a good indicator for assessing scientific technological development,
but patents reflect the results of scientific research, not the commercial

73
  The 11th Five Year Plan for the Development of Science and Technology and Hi-Tech Industries in
Guizhou Province ( 《貴州省“十一五”科學技術和高新技術產業發展專項規劃》), Guizhou scientific
technology net, 7 November 2006, http://kjt.gzst.gov.cn/content.jsp?id=877&type=1.


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applications of scientific research. Guizhou is an underdeveloped province.
Guizhou’s R&D funds as a percentage of GDP is far below the average national
figure. Therefore, it is realistic to lower the targets in regional patents.


Table 2-20: Comparison of Some Major Objectives in Phase 1 of the “Plan”
and the “Planning Outline”
                                                                                                               “Planning
                                    Indicators                                               “Plan”             Outline”
                      Applied technology R&D funding in fiscal expenses                                  2%
 R&D resources
                      Total R&D funds in Guizhou’s GDP                                                  1.2%
                      National focus laboratory or province-department joint
                                                                                                         3-5
                      focus laboratory
 Basic facilities
                      National engineering technology research centres                                   1-2
                      National enterprises technology centres                                            7-8
    Scientific
  technological       Percentage of contribution by scientific advancements                             40%
    efficiency
                      Number of new hi-tech enterprises                                                 400
    Industry
  development         Number of new hi-tech enterprises of which output
                                                                                                         20
                      exceeding RMB 500 million
                      Annual average growth in number of patent
                                                                                              10%                15%
                      applications
     R&D              Number of patent applications granted                                   1,000              2,100
  development         Annual average growth in number of patent
                                                                                               5%                15%
                      applications granted
                      Ratio of inventive patents to total patents granted                               30%
Note: Categorisation and grouping of major objectives have been rearranged.
Sources:
   1. The 11th Five-Year Plan for the Development of Science and Technology and Hi-Tech
       Industries in Guizhou Province
   2. Planning Outline for Guizhou Province’s Medium and Long-Term Scientific and
       Technological Development, 2006-2020



           The “Plan” focuses on Guizhou’s developmental advantages and needs
and proposes agriculture, energy, environment and health as priorities for
development. Economic, social and health issues are covered (see Tables 2-21
and 2-22) and details of R&D technologies and products are listed. Besides,
although Guizhou does not have much advantages in developing the information
industry and equipment manufacturing, the “Plan” expects such industries to be
developed into important growth points through R&D in new hi-tech development
areas and military industrial bases. Furthermore it is hoped that through the
technologies will be dispersed to the other sectors, so that the other manufacturing
industries can be developed and upgraded. A point to note is that the “Plan”
differs from the “Planning Outline”, and does not list modern service industries as
being important. In the short term, Guizhou’s scientific technological development


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        Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




        is likely to be biased towards production and environmental conservation
        industries, while efforts to upgrade the informatisation of financial, logistics,
        tourism and other services are not taken into consideration. This reflects the
        pragmatic attitude of Guizhou Provincial Government. However, modern services
        like producer services can improve the efficiency of the traditional manufacturing
        industries and agriculture. The lack of input for improvements in these services,
        and planning according to the traditional way of industrialisation, is a bit too
        conservative and backward. This reflects the fact that the Provincial Government
        does not understand how the combination of scientific technological progress and
        producer services like logistics services could significantly upgrade the value-
        added of production.


        Table 2-21: The “Plan” and Scientific Technological Developments in Major
        Areas and Major Projects
 Key Development Domains                                               Key Special Projects
                                                                                     11. The reproduction and breeding
1. Information industry               1. Energy exploitation and conservation        techniques of new breeds of animals and
                                                                                               poultry
                                                                                               12. The production of featured
2. Manufacture of equipment           2. New electronic components
                                                                                               agricultural products and food safety
3. Material industry                  3. Information storage products                          13. New medicine and ethnic medicine
4. Modernisation of Chinese                                                                    14. Prevention of endemic fluorine and
                                      4. Key parts and complete equipment
medicine                                                                                       arsenic poisoning
                                      5. Non-ferrous metallic, alloy materials and             15. Famous brands of cigarettes and
5. Agriculture
                                      products                                                 wine
6. Featured food products and                                                                  16. Research infrastructure for science
                                      6. New composite materials and products
other advantageous industries                                                                  and technology
                                      7. Electronic functional materials and products
7. Energy and resources
                                      in fine phosphorus chemical industry
                                      8. Comprehensive techniques to combat Karst
8. Environment
                                      desertification
9. Transportation, construction       9. Resource exploitation and comprehensive
and urbanisation                      utilisation of waste
                                      10. The cultivation of new seedlings and
10. Health and public security
                                      related planting techniques
        Source: The 11th Five-Year Plan for the Development of Science and Technology and Hi-Tech
        Industries in Guizhou Province.




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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




Table 2-22: The “Plan” for Hi-tech Industrial Development in Major Areas
and Major Projects
        Key Development Domains                                               Key Special Projects
                                                    (1) R&D and industrialisation of storage technologies
                                                    (2) R&D and industrialisation of new electronic components and
1. Electronic information domain
                                                    visual products
                                                    (3) Development of software and featured information products
                                                    (1) Intensive processing and comprehensive utilisation of aluminium,
                                                    magnesium, titanium and manganese
2. New materials domain                             (2) R&D and industrialisation of denatured polymer materials
                                                    (3) R&D and industrialisation of new energy materials, other
                                                    structural and functional materials
                                                    (1) Industrialisation of fundamental components for aviation and
                                                    space travel
3. Advanced manufacturing domain
                                                    (2) R&D and industrialisation of modern mechanical complete
                                                    equipment for general purposes
                                                    (1) Development and the application of agriculture and food
4. Advantageous manufacture domain                  biological technologies
                                                    (2) Biosocial and medicine industry
                                                    (1) Development and industrialisation of coal and coal-chemical
5. Development and industrialisation of             products
coal and coal-chemical products                     (2) Development and industrialisation of phosphorus and
                                                    phosphorus-chemical products
6. Resources conservation technologies
                                                    (1) Exploitation and comprehensive utilisation of coal-bed gas
and new energy domain
Source: The 11th Five-Year Plan for the Development of Science and Technology and Hi-Tech
Industries in Guizhou Province.



            The “Plan” decided to speed up the process of attracting, promoting,
assimilating and innovating advanced technology. It plans to construct a regional
scientific technological innovation system based on enterprises, and a combination
of industry-education-research institutions. It will strengthen private sci-tech
enterprises, and support the innovative activities of medium and small-size
enterprises, to the effect that they will become a major force in the new high
technology industries development.


Strategic Implications of the “Plan”


           The publication of the “Plan” marked the implementation stage of
scientific and technological development in Guizhou. First, the “Plan” revealed
that Guizhou would no longer follow the long and slow path of urbanisation by
extensive industries. Secondly, in the field of scientific and technological
innovation, Guizhou need not start from the rudimentary level. Innovation costs
can be reduced and time for innovation can be shortened by technology transfer


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and assimilation. After that, the new system could carry out its own innovation
activities. This strategy will help Guizhou narrow its differences with other areas
inside and outside China in economic, scientific, technological and industrial
competitiveness, within a relatively short period of time.


            Besides, the “Plan” is favourable to the development of Guizhou and
the neighbouring region. In the past, Guizhou has crudely developed energy and
metallic products and heavy industries, which caused great damage to the
environment and tourism resources; however Guizhou cannot afford to abandon
such superior industries. Highly efficient use of resources, recycling of used
material, and development of technology to eliminate pollutants will help Guizhou
develop a more sustainable economy. Conservation of resources and
environmental improvements will be favourable to the development of new
industries and the sustained development of traditional superior industries. More
importantly, they will help reduce the pollution of water resources and ecological
damage to the Yangtze River and the middle and lower streams of the Pearl River,
and is in line with the direction and focus of development in the national 11th Five-
Year Plan.


           However, Guizhou still has to face a number of problems before it can
become a true base for science and technology. First, funding of science and
technology in Guizhou has been too low. In 2005, the R&D fund was only RMB
1.1 billion74, a mere 0.56% of the province’s GDP75, which was below the level of
the southwestern provinces and the national level (see Table 2-23). Besides, the hi-
tech industries are too small. In 2005, their value-added amounted only to RMB
5.35 billion, less than 1% of the nation’s total, and less than 10% of the total
value-added of the province’s industrial enterprises above a designated size76 (see
Table 2-24). There is hence still a big difference. Even though Guizhou might be
able to reach the 2010 targets, the development of its hi-tech industries will still
fall behind the national level (see Table 2-25). Therefore, the “Plan” only revealed
Guizhou’s intention to catch up with the average national level.




74
   “China science and technology statistics, 2006”, China Science and Technology Statistics Net,
http://www.sts.org.cn/sjkl/kjtjdt/data2006/2006-1.htm
75
   China Science and Technology Databank, China Science and Technology Statistics Net,
http://www.sts.org.cn/kjnew/maintitle/MainTitle.htm
76
   Ibid.


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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




Table 2-23: Comparison of Science and Technology Funding in the
Southwestern Provinces, 2005
                  Total R&D Fund (RMB 100 million)                     As a percentage of GDP of the region
 Nationwide                                  2450                                                          1.34%

   Sichuan                                               96.6                                                      3.22%
   Yunnan                                                21.3                                                      1.28%
   Guangxi                                               14.6                                                      1.27%
   Guizhou                                               11.0                                                      0.56%
Sources:
     1. China Science and Technology Databank, China Science and Technology Statistics Net,
         http://www.sts.org.cn/kjnew/maintitle/MainTitle.htm.
     2. “China Science and Technology Statistics Data, 2006”( 《中國科技統計數據
         (2006)》), China Science and Technology Statistics Net,
         http://www.sts.org.cn/sjkl/kjtjdt/data2006/2006-1.htm.



Table 2-24: Comparison of Value-Added of Hi-Tech Industries, 2005
                                                     As a percentage of the
              Value-added of New and Hi-                                            As a percentage of the Nation’s
                                                     Region’s Value-Added
                    tech Industries                                                  Value Added of New and Hi-
                                                    of Industrial Enterprises
                  (RMB 100 million)                                                         tech Industries
                                                    Above a Designated Size
 Sichuan                                  203.6                        9.42%                                       2.50%
 Guizhou                                   53.5                        9.13%                                       0.66%
 Guangxi                                   42.6                        5.36%                                       0.52%
 Yunnan                                    24.5                        2.46%                                       0.30%
Sources: China Science and Technology Databank, China Science and Technology Statistics Net,
http://www.sts.org.cn/kjnew/maintitle/MainTitle.htm.



Table 2-25: Comparison of Guizhou and the Nation’s R&D Funding and Hi-
tech Industries in 2010
                      Total R&D Funding as a
                                                            Value-added Share of New and Hi-tech Industries
                        percentage of GDP
 Nationwide                                       2.0%                                                         18% *
  Guizhou                                         1.2%                                                         12%**
Note:
* Share in the value-added of manufacturing industries
** Share in the value-added of industrial enterprises above a designated size.
Sources:
      1. China’s 11th Five-Year Plan for Science and Technological Development
      2. The 11th Five-Year Plan for the Development of Science and Technology and Hi-tech
          Industries of Guizhou Province




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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




The Impact of Guizhou’s Science and Technology Policies on Hong Kong


            Various recent policies and works of the Guizhou province, in addition
to the “Plan”, all basically reveal that the Guizhou Provincial Government was in
the process of transforming Guizhou into a province major in energy, minerals,
tobacco, alcohol, agriculture, materials and new and high technologies industries.
Environmental preservation, energy conservation, and the development and use of
new sources of energy will set the trends for science and technological
development in Guizhou. In Hong Kong, the focus of development is on the
service industries, which is basically different from that of Guizhou. There should
be little competition, but plenty of room for cooperation.


           What should be of concern is that the major areas of focus for science
and technological development include car accessories, electronic functional
materials, information technology and Chinese medicine. These are quite similar
to the areas of research of the Chinese Medicine Research Institute and some
newly formed R&D centres in Hong Kong. At present, the overall technological
level of Guizhou is generally below the developed regions of the Mainland, but
not necessarily below Hong Kong. The duplication of R&D in the same areas
between Hong Kong and Guizhou, or other Mainland provinces, may not be good.
In such areas, Hong Kong should try to develop and compete by differentiation,
concentrating at specific topics.


           From the perspective of value-chain, Guizhou is striving to transform
from an economy based on unilateral manufacturing processing, to one based on
research and design, which are of higher value-added, at the upper stream of the
value-chain. However, linkage and supporting production sectors, and producer
services under the category of modern services, are not included in the major areas
of development. Logistics, advertising, market research, information consultation,
and exhibitions are the major components of producer services, and are
indispensable in the modern industrial production process. Guizhou at present is
still weak in these areas and this is where Hong Kong could get involved.




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3              Personnel Changes in the Four Provinces/Region


3.1            Senior Appointments in Sichuan 77


               Du Qing-lin (杜青林 ) was elected the Director of the Standing
               Committee of the Sichuan Provincial People’s Congress


               On 31 January 2007, Du Qing-lin was elected the Director of the
               Standing Committee of the Sichuan Provincial People’s Congress
               during the Fifth Session of the 10th Sichuan Provincial People’s
               Congress.


               Jiang Ju-feng ( 蔣 巨 峰 ) elected the Governor of the Sichuan
               Provincial People’s Government


               On 31 January 2007, Jiang Ju-feng was elected as the Governor of the
               Sichuan Provincial People’s Government during the Fifth Session of the
               10th Sichuan Provincial People’s Congress.


               Born in 1948, Jiang Ju-feng served as the member of the Standing
               Committee of the CPC Committee of Zhejiang Province, the Secretary
               of the CPC Committee of Wenzhou City (溫州市) in 2000, the Deputy
               Secretary of the CPC Committee of Sichuan Province and the Executive
               Deputy Governor since 2002. He has been the Governor of Sichuan
               Province since January 2007.




77
     Xinhua Net Sichuan Channel, http://www.sc.xinhuanet.com/.


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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




3.2            Senior Appointments in Guangxi 78


          On 31 January 2007, Liu Qi-bao was elected the Director of the
Standing Committee of the Guangxi Provincial People’s Congress during the
Third Plenary Session of the Fifth Session of the 10th Guangxi Provincial People’s
Congress.



3.3            Senior Appointments in Yunnan 79


               Qin Guang-rong (秦光榮) elected Governor of Yunnan Province


               On 31 January 2007, Qin Guang-rong was elected as the Governor of
               the Yunnan Provincial People’s Government during the Third Plenary
               Session of the Fifth Session of the 10th Sichuan Provincial People’s
               Congress.


               Wang Xue-ren ( 王 學 仁 ) elected the Director of the People’s
               Political Consultative Conference of Yunnan Province


               On 29 January 2007, Wang Xue-ren was elected as the Director of the
               People’s Political Consultative Conference of Yunnan Province during
               the Fifth Session of the 9th People’s Political Consultative Conference of
               Yunnan Province.


               Wang Xue-ren formerly served as the Director of the Rural Policy
               Research Office of the Yunnan Provincial CPC Committee, the member
               of the Standing Committee of the CPC Committee of Yunnan Province,
               the Deputy Secretary of the CPC Committee of Yunnan Province and
               the Secretary-General of the CPC Committee of Yunnan Province.




78
     Xinhua Net Guangxi Channel, http://www.gx.xinhuanet.com/.
79
     Xinhua Net Yunnan Channel, http://www.yn.xinhuanet.com/.


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3.4            Senior Appointments in Guizhou


               Lin Shu-sen (林樹森) elected as Governor of Guizhou Provincial
               People’s Government


               On 27 January 2007, Guizhou province’s 10th People’s Congress fifth
               conference elected Lin Shu-sen as Governor of the Guizhou province
               People’s Government.


               Huang Yao (黃瑤) elected as chairman of the 9th Guizhou province
               committee of the Guizhou Province Political Consultative
               Committee


               On 26 January 2007, the Guizhou Province 9th PCC fifth conference
               elected Huang Yao as chairman of the province’s Political Consultative
               Committee.


               Huang Yao, was head of the Propaganda Department of Guizhou
               province, and secretary of the CCP of Qin Sinan Prefecture (黔西南州).
               In August 1998, he was elected as the standing committee member of
               the 8th Guizhou Province CCP, and later as deputy secretary of the
               Guizhou CCP. In January 2007, he was elected chairman of the Guizhou
               Province PCC. Huang was reserve member of the 14th, 15th and 16th
               Central CCP.




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Table 3-1: The Latest Personnel Arrangements at Provincial Level in the
Four Southwestern Provinces/Region
 Province/
                    Names               Current Posts                         Original Posts                   Predecessors
  Region
                                      Director of the
                      Du           Standing Committee                 Secretary of the Provincial               Zhang Xue-
   Sichuan
                    Qing-lin         of the Provincial                     CPC Committee                          zhong
                                    People’s Congress
                                                                        Deputy Secretary of the
                     Jiang                                                 Provincial CPC                          Zhang
   Sichuan                                  Governor
                    Ju-feng                                              Committee, Acting                       Zhong-wei
                                                                              Governor
                                        Secretary of the
                      Liu                                             Deputy Secretary of the
  Guangxi                               Provincial CPC                                                         Cao Bo-chun
                     Qi-bao                                          Provincial CPC Committee
                                          Committee
                                                                        Deputy Secretary of the
                     Qin
                                                                           Provincial CPC
   Yunnan           Guang-                  Governor                                                            Xu Rong-kai
                                                                         Committee, Acting
                     rong
                                                                              Governor
                     Lin                                                Vice Governor, Acting
  Guizhou                                   Governor                                                            Shi Xiu-shi
                   Shu-sen                                                    Governor




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Social, Economic and Political Developments in the Pan-PRD Region                                             Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




Appendix:


Appendix I:Statistical Data for the Pan-PRD Provinces/ Region

                Major Economic Indicators of Guangdong and the Four Southwestern Provinces/ Region

Table 1:Social and Personal Consumption in the Four Southwestern Provinces/Region, November 2006
                                                                                                             Per Capita
                                                             Per Capita Disposable Income of
                                                                                                    Consumption Expenditure of
                 Total Retail Sales of Consumer                     Urban Residents
  Province                                                                                                Urban Residents                     Consumer Price Index
                      Goods in November
  / Region                                                                Growth Rate Over the                 Growth Rate Over the           Jan-Nov Cumulative
                       (RMB 100 Million)                   Jan - Nov                             Jan - Nov
                                                                           Same Period in the                    Same Period in the
                                                            (RMB)                                 (RMB)
                                                                             Preceding Year                       Preceding Year
  Sichuan                                    3,065.1            8,535.3                  11.3%       6,793.3                  11.1%                               102.2%
  Guangxi                                    1,450.7            9,100.9                  10.8%       6,220.7                    5.4%                              101.2%
  Yunnan                                     1,047.9            9,195.2                   8.5%       6,699.9                    4.5%                              101.8%
  Guizhou                                      626.0            8,340.7                  11.6%       6,307.9                  11.6%                               101.6%
Source: National Statistics Bureau Website, 10 major economic indicators from the Western Region, (November 2006)
http://www.stats.gov.cn/tjsj/qtsj/xbdqsjbj/t20070109_402379588.htm




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Table 2: Total Value of External Trade for the Four Southwestern Provinces/Region, January to November 2006
                                                                                                                                Total Value of External Trade
                                                     Total Value of External Trade
                                                                                                                               by Foreign-Invested Enterprises
 Provinces/
                                              Growth Rate Over the                               Trade Balance
  Region            Jan - Nov                                               Proportion to                                 Jan - Nov                    Proportion to
                                               Same Period in the                                  (USD 100
                 (USD 100 Million)                                          National Total                             (USD 100 Million)               National Total
                                                 Preceding Year                                     Million)
  Sichuan                          89.1                        42.9%                  0.6%                   18.8                        25.7                        28.8%
  Guangxi                          52.7                        26.3%                  0.4%                    4.2                        19.4                        36.8%
  Yunnan                           50.7                        30.9%                  0.4%                    3.9                         4.4                         8.7%
  Guizhou                          13.1                        19.9%                  0.1%                    4.1                         1.8                        13.8%
Source:
1. China Customs Statistics (Monthly Exports and Imports), Issue No. 207, November 2006, Pages 17 and 23.
2. National Statistics Bureau Website, 10 major economic indicators of the Western Region (November 2006),
http://www.stats.gov.cn/tjsj/qtsj/xbdqsjbj/t20070109_402379588.htm
Note:
1. The figures are taken as and where the import-export product trading enterprises are located.
2. Trade differences in negative figures indicate import surpluses.




Table 3:Fiscal Indicators of the Four Southwestern Provinces/Region, January to November 2006
                            Government Revenue (Funds Excluded)                              Government Expenditure (Funds Excluded)
 Provinces/
  Region               Jan - Nov                    Growth Rate Over the Same            Jan - Nov                  Growth Rate Over the Same
                    (RMB 100 Million)               Period in the Preceding Year      (RMB 100 Million)             Period in the Preceding Year
  Sichuan                                 531.4                            27.3%                        915.1                                   19.6%
  Guangxi                                 300.9                            20.1%                        552.1                                   13.7%
  Yunnan                                  338.8                            23.7%                        645.3                                   11.9%
  Guizhou                                 206.0                            25.2%                        429.8                                   14.0%
Source: National Statistics Bureau Website, 10 major economic indicators of the Western Region, (2006.11)
http://www.stats.gov.cn/tjsj/qtsj/xbdqsjbj/t20070109_402379588.htm




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                   Appendix II:English-Chinese Glossary

Amsterdam                                                 亞姆斯特丹


“Adjusting Investment, Encouraging
Consumption, and Reducing          “調投資、促消費、減順差”
Surpluses”


Border Trade                                              邊境貿易


Buyer-driven                                              採購者驅動


Central Economic Work Conference                          中央經濟工作會議


Civilian-run Enterprises                                  民營企業


Cut Flowers                                               鮮切花


Director of the Standing Committee
                                                          省人大常委主任
of the Provincial People’s Congress


Eco-label                                                 環保標籤


Export Tax Rebate                                         出口退稅


Fashion Design Industry Cluster                           服飾設計產業群


Functional Specialisation and
                                                          分工與整合
Integration



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Social, Economic and Political Developments in the Pan-PRD Region   Guangxi, Yunnan, Guizhou, Sichuan (9th Report / February)




Strategy of “Going Global”                                “走出去”戰略


High-End Fashion Hub                                      高端和時尚服飾集散中心


Manufacture of Footwear                                   製鞋業


Market Facilitation Centre                                市場便利中心


Mechanical and Electrical Products                        機電產品


“M Strategy”                                              “M 型戰略”


Ordinary Trade                                            一般貿易


Private Enterprises                                       私營企業


Processing Trade                                          加工貿易


Secretary of the CPC Committee                            黨委書記


The Plan for the Cities and
Townships in the Beibu Gulf Rim                           《北部灣(廣西)經濟區城鎮群規劃》
(Guangxi) Economic Region


The 11th Five-Year Plan for the
Development of Science and                                《貴州省“十一五"科學技術和高新技術
Technology and Hi-tech Industries                         產業發展專項規劃》
in Guizhou Province




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