Xinhua Insight: Industrial upgrades make aluminum base city of gold

Facing a supply glut, aluminum plants in most parts of China are struggling to break even. Not so for the northern city of Longkou, which has heeded government calls for industrial innovation and is processing ingots into material worth six times the original value.

With local authorities in Shandong Province offering companies tax breaks for upgrading their equipment, Longkou's aluminum plants use state-of-the-art technology to process the raw material into light, durable sheets needed for high-speed trains, subway cars and automobiles. In this form, a tonne of the element is worth 60,000 yuan (about 9,000 U.S. dollars).

Longkou is setting the standard for the rest of the country. As international competition heats up and the domestic economy cools, China is overhauling its industrial structure and encouraging old mainstays to become more sophisticated. It's a case of modernize or die for aluminum plants, and the local governments that oversee them face mass unemployment if they don't help the plants do so.

Two of China's leading aluminum producers are found in Longkou. Shandong Nanshan Aluminum and Conglin Group handle every level of the aluminum industrial chain from ore to alloy products.

"From planes, cars and ships to ring-pull cans and cellphone shells, aluminum products from Longkou are found almost everywhere," said Cheng Rence, board chairman of Shandong Nanshan.

Starting out producing building materials such as window frames, Longkou's aluminum sector has since focused on high-speed railway fittings, cans and aluminum sheets.

Shandong Nanshan also runs the world's largest factory for plane parts and is in talks to supply Airbus and Boeing.

It has not been an easy journey for Longkou. Like pretty much every other industrial base in China, its pillar industries of aluminum, car components and chemical products once found profits easy to come by from low-end products with little added value. No more.

"We are aware that we must change, and to make the change successful and sustainable, it must be driven by innovation," said Han Shijun, Longkou's Communist Party chief.

As well as offering tax cuts, the local government has cut red tape and encouraged enterprises to invest in R&D, train more staff and seek partnerships with other companies at home and abroad.

It seems to be working, with an aluminum research institute in Longkou pocketing several national prizes for independently developed technology. The city's major businesses have enjoyed an average growth of 12.8 percent in the past five years, with more than half of them now in high-tech sectors.

Han Shijun draws a comparison between the economy and the lightweight aluminum alloy cars Longkou has begun to market. Innovation has made the cars leaner and more efficient, and the same can apply to China's industrial structure, according to Han. Endi