At the peak of its fortunes around 1,500 years ago, the historic city of Xi'an was one of the greatest and richest cities in the world, its streets bustling with Chinese and foreign traders.
Once the starting point for the famed Silk Road stretching across Asia to Europe, Xi'an was China's first international commercial center and a showcase of imperial glory, most notably during the Tang Dynasty. At a time when Beijing was only a remote trading outpost and Shanghai barely even a fishing village, Xi'an was the first city in the world to have a population of more than one million.
Jump forward a couple of millennia and Xi'an is again positioning itself as a commercial gateway – a strategic entry point to China's underdeveloped west and a key staging post on the "Neo-Eurasia Continental Bridge," effectively a revived version of the old Silk Road.
As the central government urges foreign and domestic businesses to 'Go West,' this city of 6.6 million people and the surrounding province of Shaanxi are marketing themselves as low-cost manufacturing and sales centers for investors seeking new opportunities beyond the rich and economically vibrant east coast.
Located almost exactly at the geographic center of modern-day China, and renowned internationally as the home of the ancient Terracotta Warriors, Xi'an has embarked on a multi-billion dollar building program, establishing sprawling development zones on its fringes aimed at luring foreign investment and pushing this ancient city firmly into the 21st century.
With its rich cultural and archaeological heritage Xi'an has long been one of China's top tourist destinations, a status that has in turn made it one of the best-connected second-tier cities in China. The city's new airport, which opened in October 2003, has flights to almost all of China's major cities as well as several international destinations in Korea, Japan and South-East Asia.
Meanwhile Xi'an is also at the focus of a rapidly improving expanding highway and rail network with plans to spend more than $15 billion on expressway construction over the next 10 years, reinforcing the city's position as a road transport hub for western China.
Xi'an's long history has also made it an important center of learning and given it an intriguing ethnic make-up – among its population, for example, are some 30,000 Muslims.
While tourism remains the Xi'an's economic staple, at a commercial and industrial level the city had, until recently, lagged far behind the powerhouses of Shanghai and Guangdong.
"Ten-to-fifteen years ago Xi'an was a very depressing, very polluted place – a real rustbelt city," said Bin Liu, a native of Xi'an and Financial Controller at a capacitor plant owned by Swiss-Swedish engineering giant ABB. "Now it's almost unrecognizable," he continued. "People are a lot more optimistic, have a lot more disposable income and can experience things they couldn't even dream of 10 years ago."
Signs of that upturn in Xi'an's fortunes can be seen along the city's perpetually crowded main downtown shopping street, Nan Da Jie, home to a growing band of gleaming new malls with luxury brands such as Prada and Luis Vuitton opening up shop to cater for the city's newly emergent elite.
Industrially Xi'an is rebuilding itself as a major engineering center, specializing in aerospace manufacturing, as well as automobiles, textiles and optics. Like many cities it's also pushing hard to become a center for technology with city authorities planning to create China's largest software processing center in the form of another out of town development zone, the Xi'an Software Park.
According to official statistics, almost 2,000 foreign enterprises have established sales or manufacturing operations in Xi'an with contracted foreign investment in 2003 hitting US$906 million, up 36% on the previous year.
One of the oldest and most successful foreign investment projects is the Xian-Janssen pharmaceutical plant, founded in 1983 by the Belgian subsidiary of US giant Johnson & Johnson.
The $190 million plant has become the largest pharmaceutical joint venture in China, and has won several industry awards and has been consistently labeled one of the most successful foreign JV's in China.
A more recent arrival is Germany's Infineon Technologies, which in June last year opened a semiconductor research and development center in the Xi'an High-Tech Development Zone – part of a US$1.3 billion investment in its China operations.
According to the company the Xi'an development will become one of the biggest foreign-owned R&D centers in China, employing upwards of 1,000 technicians by 2007.
Another growing area of foreign interest is in Xi'an's status as the center of China's aviation industry.
Originally focused on the production of military aircraft, the city is increasingly also becoming a center for civil aviation with plans on the table for China's largest aviation park. The world's two aviation giants, Boeing and Airbus, both have tie-ups with local manufacturers amid expectations that Xi'an will emerge as a major manufacturing center in the world's fastest-growing aviation market.
One foreign joint venture already well established in the city is Xian Airfoil Technology (XAT), a producer of airfoils for jet engines set up in 1998 by Israel-based Blades Technology International, America's Pratt and Whitney and Xian Aero Engines (XAE) – one of the largest employers in the city.
Its plant, equipped with 12 huge metal presses, high precision milling and measurement machines and a computerized tooling design workshop is located in XAE's sprawling factory – a virtual town in itself of some 50,000 people on the northern outskirts of Xi'an.
Aside from the city's experience in the aviation business, another benefit of setting up in Xi'an is the quality and skills of the local workforce, said XAT's General Manager Sergey Ornes. "The technical education level in this city is very high," he said. "Fifty percent of our staff have university or college degrees and another 25% have diplomas from technical schools."
"People fly with our products," Such skills are vital in an industry using high tech machinery where quality is beyond compromise, said Ornes.
"People fly with our products," he said. "Because of that in our business quality has to be the same as anywhere in the world, and with the technical skills available here in Xi'an we're able to achieve that." Another foreign investor in Xi'an's aviation industry is Rolls Royce, which also has a joint venture with XAE. The JV, named Xian XR Aerocomponents (XRA), employs almost 400 staff producing high precision vanes and nozzles used in engines on such aircraft as Gulfstream and Boeing 717 jets.
"Xi'an is an excellent place to do business if you're considering people as a priority," said Jacob Waites, XRA's Israeliborn General Manager. "Not only are the people here highly educated, they're also very forthcoming, open and the salaries are about a third less than you'd pay in somewhere like Shanghai."
"With so much history behind it, this is still the cultural cradle of China," said Waites. "The city has 42 universities and there's a very high rate of learning here."
Set up in 1996 with an initial investment of US$30 million, X'RA made its first "marginal" profit in 2003, Waites said, adding that he expected turnover to increase by around 15% to US$13 million in 2004.
Currently all of XRA's production is taken up by Rolls Royce, he said, but in the future he hopes to broaden his customer base. The main factor holding him back, Waites said, was concerns among potential buyers over the quality of Chinese-produced goods – concerns, he argued, which are unfounded.
"We're virtually a Western plant that just happens to be located in China," he said. "The parts we make are some of the most critical, sophisticated and difficult to produce components for a jet engine – so for us quality is not an option."
Worries about inferior quality are, Waites said, shortsighted and outdated. "I was originally trained as a naval architect in the UK in the early 1970s. At that time, people in the West dismissed Japan as just a nation which simply copied other people's ships, but now look, Japan is the world's number one shipbuilder – I think a similar transformation is happening here, only on an even bigger and even faster scale."
A Xi'an resident along with his wife for more than four years, Waites said the pace of development in the city has been "nothing short of incredible."
"They've really cleaned the city up," he said, noting that Xi'an has become a much more livable place for foreign workers. "When I first came here there were hardly any quality apartments for rent, now there's an abundance, especially in the greener areas around the new development zones."
Rob Voutier, Australian General Manager of ABB's capacitor plant in the city, agreed that the city had undergone dramatic transformation in living standards in the three-anda- half years since he arrived to start up operations.
"For one thing the environment has improved tremendously," said Voutier. "The government has shut down a lot of the more polluting coal-fired power plants and there have been massive tree-planting campaigns to green the city."
Employing 76 staff, the capacitors produced at the ABB plant are purely for the China market, Voutier said, adding that Xi'an's location and communications made it a strong base for selling across the country.
The prime reason for choosing Xi'an, he said, was that it was the headquarters for an experienced and established local partner in the capacitor industry, XD Group. Aside from that, given the government's push for investment in China's west, "it was also good politics for the company to be represented in this part of China," Voutier said.
As a commercial city, Vouiter said, Xi'an has a strong communications and infrastructural base. "Travel connections are very good and we're well served with fivestar hotels – both of which are the result of Xi'an being such a big tourist center," he said.
Until recently those hotels catered almost exclusively to the tourist trade, but with Xi'an's resurgence as a commercial center, corporate visitors are arriving in ever-greater numbers. Johnson Zhang, general manager of the Shangri-La Golden Flower Hotel, said that while tourist traffic remains the mainstay of earnings, business travelers are expected to account for 33% of business in 2004, up from 21% in 2002.
"Corporate travel and conferences are becoming increasingly important, so we're repositioning our business and refitting many of our rooms to cater for that," he said. With that growing corporate traffic in mind Hong Kong-based Shangri-La recently began construction of a second hotel in the city's Western Development Zone. The US$50 million 26-floor hotel is slated to open in 2007 and will be aimed squarely at the business traveler and conference market, Zhang said.
On the political scene, meanwhile, a key development has been the appointment of Chen Deming, former mayor of the economically progressive city of Suzhou, to the vice governorship of Shaanxi province.
While Xi'an's officialdom is still far from matching that of the more business savvy commercial centers on China's east coast, Chen has been a key player in transforming the city and provincial governments away from their old bureaucratic ways.
"Chen has brought new ideas and a new drive," said Zhang, noting that another encouraging sign was a steady stream of younger officials entering government.
Xi'an's rapidly rising prosperity has also bought its problems, primarily in terms of an almost continuous traffic gridlock. Dealing with that challenge has led to some interesting public debates about the developmental direction Xi'an should take – with a growing number of voices urging greater emphasis on protecting the city's architectural heritage.
Tourism, after all, remains one of the city's top earners, and despite the efforts of the cover-everything-in-white-tiles school of architecture, Xi'an remains a treasure chest of brilliantly preserved historical buildings.
The almost-complete city walls for example are simply vast in scale and stunningly evocative of the city's long-lost imperial glories. Standing in front of the massive Western Gate for example, it is easy to imagine the sheer awe weary Silk Road travelers must have felt as they neared the city and journey's end.
Almost as impressive is the huge Ming Dynasty Bell Tower that remains the centerpiece both literally and symbolically of the city, although it appears rather lost in the midst of Xi'an's busiest traffic intersection.
But of course Xi'an itself is most famous around the world for the Terracotta Army – a 2,200-year old battalion of life size pottery soldiers about an hour's drive northeast of the city.
Designed as a permanent guard for the tomb of the first emperor of all China, Qin Shihuang, the warriors were only discovered 30 years ago by a team of peasants digging a well.
It was a discovery that became the Chinese equivalent of finding Tutankhamun's tomb and a lucrative earner for the region's economy. Not least for the peasants who made the original discovery, all four of whom are still alive and now make a tidy profit signing autographs for the two million tourists that visit the site each year. The army also serves as the basis for another important Xi'an industry – that of churning out tens of thousands of reproduction soldiers, from key ring-size to US$500 life-size versions.
The Terracotta Army, though, is just one of Emperor Qin's many legacies. Not only did he unify China for the first time, through sheer dictatorial force he imposed uniformed systems of weights, measures and currency; standardized the Chinese language; and launched one of the world's biggest-ever construction projects, the building of the Great Wall.
In all some 8,000 warriors are thought to have made up Qin's Terracotta Army, each of them unique and all of them in pieces when the tomb was uncovered. To date several hundred have been painstaking reassembled and they make for an impressive sight – particularly when one considers the vast resources and labor poured into the project for the sake of one man's immortal vanity.
It's hard not to think that the million-plus workers supposedly conscripted for the tomb's construction could have been put to a more commercially productive use. Had they done so, one could also argue, the Qin Dynasty might have lasted rather longer than four years after his death.
As for Qin himself his mausoleum lies under an artificial mound 1.5 km west of the Terracotta Army, and offers more intriguing insights into the extraordinary cult he built around him. According to historical documents his tomb contains replica palaces, inlaid with vast quantities of gold and precious stones and a map of Qin's empire complete with rivers and oceans made of mercury.
Curiously though, despite the possible riches to be found, the tomb has never been excavated.
All of which leaves the tantalizing possibility that Qin has a few more secrets buried under the fields around Xi'an that have yet to be uncovered.
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