Lanzhou New Zone Looks to New Opportunity

China's newest state-level development zone in northwest China is looking toward Central and West Asia to increase trade flow as export confidence remains shaken by the eurozone debt crisis and economic slowdown in the Pacific Rim.

The Lanzhou New Area, China's fifth state-level development zone, was established in August to "explore the market of the Commonwealth of the Independent States", said Lu Wucheng, the top Party official in Lanzhou, capital of Gansu Province.

Sitting in the geometric center of the country and the traditional transportation hub toward Europe, Lu said the city, with its advantage of oil refining and equipment manufacturing, is well prepared to develop energy industries by importing more raw materials from Central Asia and Mongolia.

The Lanzhou New Area targets the markets of Central Asian countries and the Commonwealth of the Independent States, said Yuan Zhanting, Lanzhou's mayor, noting that this sets Lanzhou apart from the other four State-level development zones.

Previously, China had set up similar areas with ocean access in Shanghai and Tianjin, and river access in Chongqing. Experts said the new zone indicates a strategic shift in the world's second-largest economy to seek economic growth in the western inland as it struggles with sluggish domestic demand and a diminishing price advantage.

China's foreign trade grew by 7.1 percent in the first seven months of the year, far behind the annual target of 10 percent.

Yuan said the development of the new area will rely on its traditional advantages such as oil refining, nonferrous metal smelting and biological medicine, but with the focus shifted from raw material production to deep processing.

The local government is planning to import more petroleum from Kazakhstan, he said, in addition to the current annual volume of about one million tons, and the new oil refinery will be set up on about 20 square km of the Lanzhou New Area.

The New Area is also expected to import more nonferrous metal from Mongolia to promote the industry of deep processed nonferrous metal.

Yuan said the government has been negotiating with TCL, Konka, Haier and other industry leaders to join an electronic appliance industrial park, which is under construction, and the products will be intended for export to West and C entral Asian economies.

The railway will be the main means of transportation for imports and exports, he said. Lanzhou is already the largest railroad hub in west China and more transportation infrastructure is expected to be added to extend its role as a logistics center.

Experts have warned of potential threats to the local ecosystem and urged the government to introduce more eco-friendly industries.

Ding Sibao, an economics professor at Northeast Normal University, said in a telephone interview the environment in Gansu is fragile, and pollution of the local water resources, on the upstream of the Yellow River, can endanger residents on the lower stretch of the river.

The area, which covers 806 sq km and has a population of about 110,000, has already attracted 90 investment projects, with a total volume of 70.7 billion yuan (US$11 billion).

Some of the country's top 500 companies, including Geely Automobile and Sany Heavy Industries, have already set up plants or are building factories there.

The area's GDP is expected to reach 50 billion yuan by 2015 and 270 billion yuan by 2030, and its population is likely to exceed 500,000 by 2020.

The other State-level new areas are Shanghai's Pudong, Tianjin's Binhai, Chongqing's Liangjiang, the Zhoushan Islands in Zhejiang Province, and Nansha in Guangdong Province, the development plan of which was approved by the State Council on Sept 6.