Foreign firms finding new fields

Visitors look at a model of an intelligent industrial park during an international investment fair in Chongqing last Thursday. Enterprises from 43 countries and regions including the United States, Germany, Singapore and France attended this year's fair. [Photo / Xinhua]

Editor's note: As some observers become concerned that foreign businesses will move factories or investments out of China and transfer them elsewhere during the country's economic slowdown, a series of our reports look at the increasing tendency of foreign investment to go into western China.

Despite loving Chinese history and culture, Kwon Oh-hyun didn't make his first trip to Xi'an, capital of Shaanxi province and an ancient capital of the country, simply to see the sights.

He instead went to help Samsung Electronics make plans for its future in the country's western region.

Kwon, vice-chairman of Samsung, took a group of 20 senior company officials to Xi'an in March to announce that Samsung will spend $7 billion to make advanced gadgets in the city, which is most associated with the army of terracotta warriors and horses that were unearthed at a site nearby.

"The move is sort of unheard-of before in Samsung, not only in the scale of investment but also the technology we would like to transfer to the Chinese side," said Kwon. "We expect to create a miracle here."

The factory, which will make NAND flash technology, a type of digital memory widely used in smartphones and tablet computers, is expected to come into operation in 2013. The operation will be the fruit of the largest foreign direct investment measured by value made in China's western region.

While labor costs are increasing rapidly along the coasts of East China, more foreign companies such as Samsung are looking to the country's west. Their plans promise to both bring renown to the region and to turn it into a magnet for foreign investment in the coming years.

In October, Samsung's headquarters decided to open a factory there. But the region didn't immediately grab the company's attention.

"Xi'an wasn't on the list even at the beginning," said Kwon, declining to elaborate on that statement.

After learning Samsung wanted to make a large investment somewhere in China, the Shaanxi government formed a special team charged with talking to the company. Two months later, Xi'an appeared on a final list of places that the company was most seriously considering investing in, finding a place alongside Beijing and Chongqing. Samsung chose Xi'an in March.

The city's greatest asset is its government support, Kwon said.

"Their great enthusiasm (in attracting the project) was so impressive that it triggered our decisions," he said.

To provide Samsung with a site for the project, the Xi'an municipal government prepared an area of 9 square kilometers in the western part of the city. Xi'an is also planning to establish an area that Samsung can use to import supplies tariff-free.

"We spent days on completing Samsung questionnaires that included more than 1,000 questions, and they covered a wide range of matters and issues, even including the quality of electricity in Xi'an," said Zhao Hongzhuan, a member of the Standing Committee of the Xi'an Municipal Committee of the Communist Party of China.

"We responded quickly to all their requirements, and of course, we were lucky to win the project.

"It's time (for foreign companies) to concentrate on cities in the west of China and to invest in the region, which is becoming a new driving force for China's economy," said Wang Zhile, director of the Ministry of Commerce's research center of transnational corporations.

Samsung is not alone in its interest in China's west.

In 2011, the computer maker Hewlett-Packard and electronics company Foxconn Technology Group announced they would invest $3 billion in Chongqing, a city in Southwestern China.

In early April, Ford Motor Co said it would modify its Chongqing factory to increase its annual output from 350,000 to 950,000 vehicles by 2014 in a project to be undertaken with its joint venture partner, Changan Automobile Group Co.

During the past year, the foreign direct investment going into China's western region has increased at a faster rate than that going into the country's coastal regions.

The Ministry of Commerce said China received $116 billion in foreign direct investment from last January to December, up 9.72 percent from a year before. Of that, the western region received $11.6 billion, up 28.24 percent year-on-year.

"Samsung's decision will lead to good results down the road," said Zhao, who is also secretary of the Working Committee of the Communist Party Committee of Xi'an Hi-tech Industries Development Zone.

"We are confident more foreign investment will continue to go into China's western region as well as into Shaanxi province."

Most of the foreign investment that goes into Shaanxi province is put into the development zone.

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