Lanzhou zone to be inland growth engine

A sunflower oil packaging plant run by Gansu Joy Agriculture Tech Co in the Lanzhou New Zone. The zone is the first inland national level economic development area in the country. Zhang Wei / China Daily

One year after the central government designated the Lanzhou New Zone as the nation's first inland national level economic development area, the zone looks pretty much as it did a year ago.

Local officials said it will take at least 10 years to build the zone, which is deep inside the vast Loess Plateau in Gansu province, into a fully functioning industrial engine in western China.

But an eight-lane road connecting the new zone and a nearby highway is seeing more traffic than a year ago. The Lanzhou municipal government has moved some of its departments to the area, which is an hour's drive from downtown Lanzhou, in a bid to fuel the development of the 800 square kilometer industrial zone.

City authorities also have pledged to move more public infrastructures, such as kindergartens, schools and hospitals, into the new zone by 2015. The move not only will improve the living conditions of current residents but also will lure more people to the area, local administrators said.

However, a large number of high-rise residential buildings still remain empty because major projects are yet to be finalized.

"Building a new zone on this scale requires patience and constant investment," said Zhang Aisheng, director of the zone's economic development bureau. "It will be a decade-long struggle, and the current task is to make sure that all the infrastructure facilities are in place."

Meanwhile, local authorities are satisfied with the short-term achievements and optimistic about the area's future.

The total output value of Lanzhou New Zone was 11.56 billion yuan ($2 billion) in the first 10 months of this year, up 27 percent year-on-year.

Fixed-asset investment was more than 28 billion yuan from January to October, a jump of nearly 65 percent compared with a year ago, according to the Administrative Committee of Lanzhou New Zone.

Petrochemical and heavy machinery manufacturing companies will be the biggest industries operating in the area after construction work is completed, said Zhang. But he also admitted it will take at least five years to build a large petrochemical plant in the zone.

State-owned oil producer China National Petroleum Corp has a 10.5 million ton crude oil refinery plant in downtown Lanzhou, which will be moved out of the city and into the zone.

In June, the 55-year-old factory will spend 15 billion yuan to build the nation's biggest petrochemical equipment manufacturing plant in the Lanzhou New Zone. Along with 30 facilities estimated to have an annual output of 20 billion yuan, the ambitious project also includes 1.2 million square meters of residential buildings for workers.

The company pledged to put the first facility in use in two years, but it's facing challenges such as the freezing winters in Northwest China, which make it hard for cement to solidify. Some parts of the construction work have to wait until spring before resuming.

Other projects in the area have to deal with similar issues.

At the construction site for an office building, workers from neighboring Sichuan and Shaanxi provinces were trying to make their last monthly salaries before the Spring Festival.

Local real estate developer Lanzhou Yatai Industrial (Group) Co is investing 3 billion yuan to build its headquarters in the center of the new zone. Construction work was delayed because power and water supplies were not stable.

Yatai said it has completed 70 percent of the construction work and that it will finish the rest in 2014.

Zhang from the economic development bureau said that a 330-kilovolt power substation is being built to address similar situations and that administrative departments are trying their best to solve similar problems.

The first completed project in the new zone was the administration complex, home to the local administrators. The 16-story building looks gigantic against the vacant land surrounding it. At night, the illuminated building is visible from kilometers away even on hazy days.

The local government said the project is a showcase of its resolution to build Lanzhou New Zone from scratch. To further make the case, another landmark of the new zone - a massive artificial lake - was added next to the building. Before that, the zone was known to Lanzhou residents as one of the most arid areas in the city.

Positive moves

In August 2012, the State Council, China's cabinet, approved plans to build the country's fifth State-level development zone in Lanzhou.

Previous approvals included Shanghai's Pudong New Zone and Tianjin's Binhai New Zone. Both projects were established in the 1990s.

The government speeded up the approval of economic zones amid an economic slowdown that started in 2008. Less than a month after the approval of the Lanzhou New Zone, the central government green-lighted another State-level zone in Guangzhou, the capital of affluent Guangdong province.

Analysts said building industrial zones will boost domestic consumption and innovation, both critical for China's transformation of its economic model.

Meanwhile, while major projects in the Lanzhou New Zone are still under construction, some smaller sites are already open for business.

Gansu Joy Agriculture Tech Co, a sunflower oil maker, has built a packaging and storage factory in months and is already producing bottled oil for retail.

The company opened its first production line in September and is waiting for more sunflower seeds so it can run its two packaging lines at full speed. Each line is capable of bottling 200 tons of oil per day.

Wei Mingguang, founder and chief executive officer of the company, said he plans to build a sunflower field near the edge of the new zone next year to feed his production lines.

"Local farmers will be able to lease their land to my company for sunflower planting and agricultural tourism. Farmers will receive a stable income each year, and my company will make sure the land is put into good use," said the 46-year-old entrepreneur.

Wei said local officials are "extremely interested" in his idea and promised to support his plan.

Yet cooking oil refineries and sightseeing businesses may not be the officials' first choices for the new zone.

And whether future projects such as the petrochemical plants, which may cause high pollution, will have an impact on Wei's business is also a pending question.

During the initial planning stage, local officials focused on machinery, petrochemical, new energy, new materials and biotech industries.

However, because investments in those industries are more difficult and require a longer time, the new zone needs a number of companies with shorter investment cycles.

"The Lanzhou New Zone should focus on industries that will play up to its advantages such as the rich natural resources and convenient transportation routes from western regions to the eastern parts of China," said Zhang Shixian, a researcher at the Institute of Industrial Economics of the Chinese Academy of Social Sciences.

The researcher added that companies in similar industries should work together to lower risks when exploring new markets.

More investment and continuous construction will be the key words for the new zone next year. And investors seem willing to give up short-term profits for the long-term returns the new zone has promised.