The port city of Ningbo has a grand plan to conquer nature and increase its wealth
The port city of Ningbo lies only 160km south of Shanghai as the crow flies but it has suffered for more than a century from the fact that the broad expanse of Hangzhou Bay stands in the way. Never fear, the resourceful city has a plan to solve the problem – a bridge stretching 33km over the open ocean.
More than anything, the bridge is a recognition of Shanghai's dominant role as the heart of the East China economic web. Cities such as Suzhou, Kunshan and Hangzhou, which are all within an hour or two of downtown Shanghai, are booming. Ningbo is at least four or five hours away by rail or road and is jealousy determined to close the gap.
It is only right that Ningbo should be allowed to benefit from the galloping growth of Shanghai. This is the city which gave modern Shanghai much of its basic culture and flavor. The Shanghainese dialect is heavily influenced by Ningbo, and so are the commercial tendencies of Shanghai residents.
Much of the city has been pretty comprehensively trashed in favor of the new-look Chinese city model – broad boulevards, high-rise offices and strategically placed "green" zones. Like Jinan and several other cities, the Ningbo city fathers razed a huge area of the central city and put in a massive plaza complete with endless fountains dancing to music. The Ningbo version – Tianyi Plaza – is circular in shape with the ring occupied by restaurants and shops and a weird former Catholic church lit up like a gargoyled karaoke palace.
Virtually the only historical site worth visiting is the Tianyi Pavilion (Tianyi Ge) – a Ming dynasty scholar's home and library set in a magnificent garden courtyard complex.
Inferiority complex
Beyond the Pavilion, there is a commercial "go for it" buzz to Ningbo which well predates the Communist Party. This is a small city hurrying towards prosperity, but it has an inferiority complex. While it is proud of the fact that sons of Ningbo, including Y.K. Pao, Rong Yiren and Run Run Shaw, played such a crucial role in the development of Shanghai, Singapore and Hong Kong, there is also a regret that the Ningbo they left behind still has to run so hard to catch up.
It was not always so. Five hundred years and more ago, when Shanghai was an insignificant fishing village, Ningbo was a major seaport, and one of China's key connecting points with Japan, Korea and Southeast Asia. It remained an important trading center, although Shanghai's rise pushed it into eclipse.
In 1840, when the British were taking an increasingly muscular approach to the China problem, it was a toss-up as to where British influence should be centered. The first Chinese territory attacked and annexed by British military forces were the Zhoushan islands just off Ningbo, and there was a vigorous debate about whether British forces should be permanently based there or in Hong Kong. Hong Kong won, or lost, partly as a result of the large number of mosquitoes in the Zhoushan islands, and the rest is history.
Fundamental to the city being outgrown by its neighbors was Ningbo's location 20kminland up the Yong River, which makes access for larger ships tricky or nowadays impossible. The port of old Ningbo is no longer used at all, and even the ferries to Shanghai have ceased with the opening of the expressway.
The main port of Ningbo today is Beilun Harbor, 30km to the east. The approaches are deep, and the port can accommodate the largest vessels – the 200,000 and even 300,000- ton monsters that carry the China-made clothes and plastic flowers, pots and pans which fill supermarket shelves around the world.
One of the main problems facing East China is deepwater container ship access. The plan in the mid-1990s, championed by former Premier Li Peng, was for Beilun to be the answer. It has many natural advantages, but one major disadvantage – it is on the opposite side of Hangzhou Bay from Shanghai.
So while Beilun port still has the second largest throughput of any port in mainland China after Shanghai, Shenzhen is coming up fast and will inevitably pass it.
Now Ningbo has come up with a dramatic plan to grab back the initiative – upgraded port facilities (construction has begun on a new port at Daxie near Beilun with 40 deepwater berths funded by CITIC, the investment arm of the central government) and the bridge across Hangzhou Bay to Shanghai.
It is a fantastic project – a six-lane highway stretching over the open ocean. Work on the bridge, which is budgeted to cost US$1.4 billion, has already begun and completion is expected in 2007 or early 2008, at which point driving time to Shanghai will apparently take just 90 minutes.
The Suzhou challenge
The GDP of Ningbo has been growing at well over 10% per year in recent years and foreign trade at more than 20% per year, even without a bridge. This is faster than China's average, but slower than Suzhou and other cities closer to Shanghai and Ningbo wants to catch up.
The top production items are textiles and garments, with around 12% of China's total textile output coming from Ningbo. Local officials are proud to say that the city makes 1.4 billion pieces of clothing every year – one for every single person in China with a few left over, and some of China's top domestic brands are based in the city, including FIRS and Youngor.
Apart from a few well-known local brands, most Ningbo garment makers – and much of the rest of the manufacturing sector – are anonymous processors for OEM producers – a low risk but also low upside approach. Taiwanese investors are a major factor in terms of the textile processing plants, which is not surprising considering the geography.
Petrochemicals is another big sector, although the coastal locations of the plants are well away from downtown Ningbo which means there is not much impact from them. Corporations with investments here include Concord Oil, Dow Chemical, Exxon and Shell. In the Daxie zone, BP Amoco opened a liquefied petroleum gas plant in 2002 costing US$97 million.
Steel is another area of expansion, and the German engineering firm ABB has recently invested US$21 million with Ningbo Baoxin Stainless Steel in what will be the world's largest stainless steel production facility. Japan's Nisshin Steel has also announced plans to invest a further half a billion US$ in its Ningbo joint venture with Baosteel.
Taiwan's largest petrochemical company, Formosa Plastics, has announced plans to build a US$1 billion PVC plant in the Ningbo coastal zone, but local officials acknowledge that there could be problems getting Taiwan's official approval, even if the more mainlandfavorable KMT should recover the presidency in this year's elections. Much of the growth in recent years has also been in high-tech industries, and that is the sector the city is encouraging. Many investors come from Taiwan, and Singapore has been offered two locations to develop as Suzhou-style hi-tech zones.
As an investment environment, Ningbo is one of the most welcoming in China, and emulation of Suzhou is one of the reasons why. Suzhou lacks Ningbo's harbor and its commercial traditions, so how to explain its phenomenal success in attracting foreign investment in the last 10 years?
"Proximity to Shanghai," said one official. "Suzhou benefits from the satellite city concept. That is why we need the bridge." Ningbo has national, provincial and citylevel economic zones with lots of other small industrial parks besides. Each offer tax breaks and advantages to foreign companies. The result is that more than 60% of foreign companies operating in Ningbo now do so in the form of wholly foreign-owned enterprises (WFOEs), which provides maximum flexibility.
The composition of foreign investment in Ningbo indicates that it's mostly not foreign at all. A third of contracted foreign investment in 2002 was from Hong Kong while another third was from such locations as Cayman, British Virgin Islands and Samoa – probably mostly Taiwan and Mainland money being swilled through nominee entities.
In 2003, Ningbo commissioned a report on the city's investment environment, one of the best documents of its kind produced by any local Chinese government agency. It has a health warning in the foreword:
"The business environment, especially with regard to costs, can change quickly in China. Moreover, costs and operational issues vary from company to company and industry to industry. Companies doing business in China, or planning to do so, are advised to obtain current information and company-specific advice from experienced professional advisors."
All true, but the information in the report, well-presented and clear, points the reader towards the conclusion that Ningbo is probably one of the best places in China in which to invest. They are clearly on the move, at least.