The central Chinese city of Wuhan took a battering during the summer floods of 1998. Even today, much of the outlying districts remain sodden and rebuilding work is still going on.
Some 370,000 people and soldiers were mobilised to combat the floods and 96,000 people were evacuated from their homes. City mayor Wang Shouhai declared that they had achieved a decisive victory in repelling the waters which had risen to within 30cm of their highest-ever recorded level.
Manufacturing industry has coped well in the circumstances. According to official figures, industrial output value grew by 10 per cent in the first nine months of 1998 compared with the same period in 1997. However, there has been an economic cost ?more than 1,100 enterprises stopped production in the summer, causing direct economic losses of Yn800m.
Most overseas-funded firms managed to maintain normal production. Many of them, including Coca-Cola, Citroen and Pilkington, are in Wuhan Economic & Technological Development Zone (ETDZ), situated 15km from the centre of the city.
Third Yangtze bridge
Wuhan, the capital of Hubei province, is one of the most developed and progressive cities in central China. It is the infrastructural, commercial, industrial and financial centre of the province. Architecturally there is little of note but the 4m residents living in urban areas are regarded as friendly and open.
With its good communication links, Wuhan is at the crossroads of the national transport system. In 1997, Hong Kong's New World Group decided to funnel US$722m into the city's infrastructural facilities, as well as high-technology, tourism, industry and real estate ?34 per cent of the group's investment across the whole of mainland China.
Wuhan is working hard on its infrastructure. It is one of the biggest inland ports in China, with a cargo-handling capacity of 15m tonnes, and the ability to accommodate 5,000-tonne vessels. Ocean-going ships can sail directly to and from Hong Kong, Singapore, Malaysia, Thailand and Japan via the Yangtze River. Plans are also under way to develop a major new container facility at Yangluo. The two new berths will have a combined throughput capacity of 50,000 teu.
Wuhan's second bridge over the Yangtze, linking Hankou and Wuchang and completed by New World Development in 1995, has eased urban congestion. The authorities have begun the construction of Wuhan's much-needed third bridge across to Baishazhou. This six-lane bridge, designed to carry 50,000 vehicles a day, will cost US$170m to build. In late November the two main towers of the Wuhan Baishazhou Bridge were completed and the whole project should be ready by June 2000. It is expected to serve as a major traffic hub for the future 921(m-long Wuhan Ring Road, a project which it is hoped will also help alleviate traffic congestion.
A 20km expressway leading to Tianhe International Airport was opened in 1995. Wuhan also lies on the of the Beijing-Zhuhai expressway due for completion by 2000.
The World Bank has provided a US$156m loan to build several sewage disposal projects around Donghu and Moshui lakes. In the past few years, an annual 150m tonnes of industrial waste water and 500m tonnes of other waste water were being poured directly into the Yangtze and Han rivers, threatening the safety of drinking water for local residents. By the end of the century the city should be able to treat 197m tonnes of waste water a year. Sithe Energiesof the US and Marubeni of Japan invested US$450m to build a 600MW coal-fired power plant 120km south of Wuhan in early 1998. The third 1,200MW phase of Wuhan Yangluo thermal power plant, which requires US$1.2bn in funding, should also help lessen concerns about municipal power supply.
Pressure on the old Guangzhou-Wuhan railway ?a transportation bottleneck for many years ?has been relieved by the opening in 1996 of the 2,300km Beijing-Wuhan-Guangzhou line. But rail links with Shanghai remain circuitous and inadequate.
Charter flights to and from Japan, Singapore, Malaysia, Thailand and Hong Kong depart from the Nanhu and Wangjiadun air-ports. Tianhe Airport, opened in early 1995, has an annual capacity of 4.2m passengers and 33,000 tonnes of cargo. Built at a cost of US$181m, with investment from New World Infrastructure, it is China's first joint venture airport (see box).
Wuhan currently dominates two industrial sectors in China ?silicone and fibre optics. By 2000 China is expected to need 1.4m tonnes of silicone steel sheet, of which 300,000 tonnes will be required in the form
of oriented steel sheet. Currently, only Wuhan Iron and Steel Company nationally cart produce oriented steel sheet on a large scale. Its current capacity is 100,000 tonnes a year and land expansion of the plant is therefore a priority for the company, which announced profits of Yn400m for 1997. Towards the end of 1997 the firm merged with two other local steel firms ?Echeng and Daye ?to form a group with assets of US$6bn. Meanwhile the director of Tongda Steel Pipe Factory in Wuhan was sentenced to death in early 1998 for transferring more than Yn9m into his personal bank account.
The urgent future need for fibre cable wasrecognised in 1988, when Wuhan Changfei Optical Fibre was established by the Chinese Mitistry of Posts and Telecommunications and Wuhan city government, with the multinational Philips taking a minority share. Since then, fibre cable plants have been set up in other parts of the country, including Shanghai, Guangzhou and Chengdu, bringing total national annual capacity to more than lm km. Since 1992, Wuhan Changfei has exported in excess of 400,000km of optical fibre cable.
The number of foreign-invested businesses in the city was put at 3,391 in May 1998, with cumulative utilised investment of about US$4.4bn since 1984. One city initiative designed to cut investors' costs was the introduction of a unified fee collection system. The Wuhan Overseas Investment Fee Collection Centre, which collects only on an authorised list of charges, aims to curb the number of arbitrary fees which had mush-roomed to 229 at one stage. It is the only office in the city allowed to levy charges on overseas enterprises operating in the city.
One of the drawbacks for businesses settling in Wuhan is the city's tangled internal communications. Wuhan is made up of three cities which were once quite distinct ?Hankou, Hanyang and Wuchang ?separated from one another by the Yangtze and Han rivers. Wuhan's two airports, its commercial centre and best hotels are all in Hankou, while its two State Council-approved investment zones are in Hanyang and Wuchang. Consequently, many foreign business people have cause to travel from one district to another almost daily.
Construction began on the Wuhan ETDZ in 1991 which is located to the south-west of the city centre on the edge of the Hanyang district. By the end of 1997 it had attracted 116 foreign firms with utilised investment of US$313m. These include Citroen, Coca-Cola, Pilkington Glass, Anheuser-Busch, Hyundai and the Taiwanese noodle-maker Master Kang. Some 30 companies have set up with investments in excess of US$12m and Wuhan ETDZ's total output value reached US$855m in New World places its trust in Wuhan from Cathay Pacific and two US firms, the Civil Aviation Administration of China (CAAC) had banned foreign participation in the operation of mainland airports until Beijing eased restrictions on foreign participation in China's aviation industry. Airports are seen as politically sensitive as most of them were still under the control of the military.
The rift forced NWI to separate its Yn460m investment in a 40 per cent stake in an 18km airport expressway from the airport project itself. The investment in Tianhe air-port has not been shown in the company's balance sheet.
As China plans to complete the construction of 41 major airports by 2000, foreign capital is desperately needed. In May 1998 CAAC decided to raise the ceiling on foreign ownership in Chinese airlines from 35 per cent to 40 per cent, and to allow foreign Airport in Wuhan, Lnina-s first joint venture airport, has been selected by Beijing as a pilot project allowing operational participation by a foreign party. But Tianhe's `foreign' investor, New World Infrastructure (NWI) of Hong Kong, has yet to receive any revenue following its investment of Yn350m four years ago.
The construction of Tianhe Airport, with an annual capacity of 3.2 million passengers, was completed in 1995. Legal wrangling about NWI's entitlement and stake in the project started almost immediately after the company secured a contract with Wuhan government in 1994 to invest in the project. The group may have known it was in breach of the ban on investment in the airports sector but it believed that it would be protected by its close relationship with the local government.
Even as NWI fended off competing bids
participation in the operation of China's air-ports. CAAC now concedes that only when foreign partners are involved in the operation of the joint venture projects can their interests and returns be guaranteed.
Previously, foreign investment had been restricted to the construction of terminal areas, ground services, aircraft maintenance and locally situated hotels.
NWI said it had sound backing from the Wuhan government as NWI is one of the largest foreign investors in the city. NWI invested about Yn 1.6bn in three bridges in Wuhan ?New Yangtze Bridge, Han Bridge No. 1 and Han Bridge No. 2. NWI's parent company, New World Group, has invest ments in a Wuhan hotel, commercial property, land improvement and subsidised housing projects. Right across the mainland it is involved in a variety of infrastructural areas including power generation, container ports, roads and bridges, and water treatment.
1997. While there is a ready supply of land in the zone and strong official support, the logistics of getting to the zone can cause problems for workers.
Dongfeng Motor's venture with Citroen is by far the largest investment, with a planned total capital input of more than US$ l bn. It produced 30,000 cars in 1997 and aims at an eventual production capacity of 300,000 cars. It also began trials on the new Fukang ZX model in 1997. The venture announced plans in 1997 to manufacture heavy and medium-duty trucks at its Shiyan plant and light-duty trucks and diesel vehicles at its Xiangfan factory. The Wuhan plant aims to cut down on medium-duty trucks and focus instead on special-purpose cars. Dongfeng's parent company is to invest US$320m in its Xiangfan plant by 2000, including the construction of a 30,000-tonnes-a-year castings plant. As many as 35 factories in the Wuhan ETDZ produce components for this car assembly venture.
While the Donghu New-Technology Development Zone is less successful than Wuhan ETDZ, it does have the advantage of being located in the university district of Wuchang, where there are 23 universitiesand 56 research and design institutes. Describing itself as a `silicon valley in central China', the zone has attracted leading multinational names such as Xerox, NEC Mitsui, ABB and Philips.
The presence here of the Ministry of Posts and Telecommunications No 54 Research Institute ?one of China's premier optical fibre research centres is said to have been a factor attracting telecoms ventures such as Wuhan NEC and Changfei Optical Fibre. The zone also contains Rainbow Villas, Wuhan's sole Western-standard residential development.
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