The Xiamen Special Economic Zone, one of China's first four special economic zones opened to the outside world in 1980, has undergone tremendous changes over the past ten years. This article is one of a series on future development prospects for the zone.
Xiamen had been a remote but beautiful small seashore city before it was opened to the outside world as a special economic zone in October 1980 with the approval of the State Council. Since then, the city has undergone almost unbelievable changes, forming an export-oriented economic foundation for comprehensive development of industry, tourism, commerce and real estate. The emphasis of the zone's development has been on industry.
Driving along the streets, one immediately feels the vitality of this bustling city. The high-rises contrast dramatically with the older, lower buildings, the sound of machinery booms out of newly built workshops and new industrial areas have taken shape or are being outfitted with the required infrastructure facilities. Huge billboards line the streets. These are only the first of many changes a visitor to the city encounters.
Information provided by the Xiamen City Statistical Bureau demonstrates the great progress made by the city in its economic construction.
Xiamen's gross national product (GNP) (based on current prices) amounted to 5.016 billion yuan, a 4.9-fold increase over 1980 when the zone was first established. The per-capita GNP increased from 689 yuan in 1980 to 4,535 yuan. The national income (again, calculated on current prices) totalled 4.114 billion yuan, a 4.6-fold rise over 1980. The per-capita national income rose from 631 yuan in 1980 to 3,720 yuan. The total industrial and agricultural output value reached 7.118 billion yuan, a 6.3-fold increase over 1980.
Jiang Zemin gives a speech at a meeting in late 1991 to celebrate the Xiamen Special Economic Zone's tenth anniversary (WANG WEIZHONG)
The progress in economic and foreign trade has also been inspiring. By the end of 1990, the city approved 980 direct foreign investment projects with a contractual investment of US$2.926 billion. Of this, some US$2.121 billion was in foreign capital. By the end of 1990, a total of 506 foreign-funded enterprises were in operation. These enterprises produced 3.677 billion yuan of industrial output value, or 54 percent of the city's total. In the first half of last year, the city approved the establishment of 72 foreign-funded enterprises with a registered capital of US$59.12 million. These enterprises used a total investment of US$83.04 million, including US$52.86 million in foreign funds. More than 90 percent of these enterprises in the city are making a profit. By the end of 1990, a total of 136 foreign-funded enterprises had increased their investment by US$160 million and thus become an important part of the city's economy.
At present, Xiamen boasts 192 specialized corporations with import and export rights; there were only five a decade ago. A foreign trade management and sales system has also been formed, such as industry and trade import and export corporations, foreign trade corporations of the central, provincial and city levels and foreign-funded enterprises. The 1990 import and export value of goods passing through Xiamen reached US$1.152 billion, an 8.2-fold increase over 1980. The city has established trade relations with more than 140 countries and regions compared with 30 ten years ago. The export market has been expanded from Hong Kong, Macao and Southeast Asia to the United States, Japan and European countries.
The city has used joint venture and co-operative forms to establish 18 production enterprises in seven countries and regions including the United States, Thailand and the Philippines and developed labour service and contracted projects abroad.
In the early stage of construction, the Xiamen Special Economic Zone had a backward infrastructure. When the Yinhua Tile Factory, the first solely foreign-owned enterprise in Xiamen (controlled by overseas Chinese Chen Ying-deng who lived in Singapore), was being built in 1982, equipment had to be moved onto the site from the harbour by the use of logs. The foreign experts who had arrived to install the machines could not find a suitable place to stay. At the time, the infrastructure facilities in the city were very poor.
The Xiamen municipal government has made a great deal of effort, financial and material, to improve the investment environment. By the end of 1990, the city set aside 8.752 billion yuan for investment in fixed assets, 12.12 times that provided in the 31 years from 1949 when New China was founded to 1980 when the Xiamen Special Economic Zone was established. Of this, some 1.157 billion yuan was allocated for infrastructure construction.
At present, such infrastructure facilities as telecommunications, energy and water supplies are in good shape. The Xiamen Bridge, the first to connect the island with the mainland, opened to traffic in December 1991 and can handle 25,000 motor vehicles a day. The bridge provides easy transport communication between the island and the mainland. Air service has been developed from scratch and continues to be improved. Xiamen International Airport has opened 35 air routes to domestic and international cities including Los Angeles (USA), Singapore, Pinang (Malaysia), Manila (the Philippines), Djakarta (Indonesia) and Hong Kong. The air passenger transport volume reached 1.15 million people in 1990. Completion of the first-phase of construction of four 10,000-ton-class berths in the Dongdu Harbour has greatly increased the handling capacity of Xiamen harbours from 1.9 million tons in 1980 to 5.29 million tons. The urban telephone exchange capacity has reached 43,000 lines and the city is now connected with more than 400 large and medium-sized cities in 186 countries and regions via a direct dialing system. Xiamen has one of the best telecommunications facilities in the country. By the end of 1990, the daily supply capacity of running water was 301,000 tons, 201,000 tons more than in 1980. In addition, a 110-kv and a 220-kv sea-bed power line, 220-kv Lilin, Banlanshan and Dongdu transformer substations and a 96,000-kw gas turbine reserve power station were built. Ten years of effort to create modern sea, air and land communications networks, an advanced telecommunications system, a reliable energy supply system and other related public facilities have resulted in a good foreign investment environment.
The Huli Industrial District (WANC HUIBIN)
A survey of foreign-funded enterprise personnel in September 1990 showed that 80 percent were satisfied with the investment environment.
The beautiful seaport in Xiamen (CHEN ZONGLIE)
Compared with other special economic zones, the Xiamen Special Economic Zone still has a long way to go in its investment environment. Local government efforts to provide convenient services, however, have greatly impressed foreign businessmen. Xu Wen-ti, chairman of the board of the Hong Kong Jinbinshi Stock Co. Ltd. and chairman of the preparatory section of the Hong Kong-funded Dongfang Village, said, "We have made good progress with our Xiamen investment because of the support of the local government and related departments." The Dongfang Village is being built jointly by the Hong Kong Jinbinshi Stock Co. Ltd. and the Xiamen Yulu Construction and Development Co. Ltd. under a contact signed in March 1990. The project was registered in late May and approved in early July of the same year. In May 1991, the overall design of the village was approved and construction of the first villa begun in early July of 1991. At present, five villas stand among the Indian banyan, coconut and oil palm trees on the Dongfang Mountains. Additional villas are under construction. The road leading to the village has been built and the local street design has taken initial shape. Of the village's 86 elegant villas, 24 have been sold.
Huli Industrial District
The Huli Industrial District is a sea of light every evening. The high-rises, hotels, dancing balls and bars sparkle under a flood of neon lights against the scene of builders and welders hurrying about on scaffolds.
The Huli Industrial District, the birthplace of the Xiamen Special Economic Zone, is a model of success in the zone.
In October 1981, the State Council decided to develop a 2.5-square-km area in Huli into an industrial development district and on October 15, 1981 the sound of bulldozers echoed through the land of undulating hills and footpaths. Within a year, rows of industrial buildings had been erected. Ten years later, the Huli Industrial District has become a complete industrialized zone with the capacity to provide strong economic returns. The district now boasts more than 50 factory buildings with a floor space of 700,000 square metres. Some 200,000 square metres more of factory buildings will be constructed in the second and third phases of construction. Water, electricity and telecommunications facilities have been constructed and more than 60 km of pipes have been laid in the district. At present, the district has an electricity supply capacity of 32,000 kva and a daily water supply capacity of 20,000 tons, sufficient for production and residential use.
In the north of the district, there is a residential area for foreign businessmen centred on the Yuehua Hotel. The villas are surrounded by trees and flowers. In the southern part, there are workers' apartment buildings and commercial housing, a hospital, schools, post and telecommunications offices, open markets, shopping centres, theatres, ball rooms, cafes, video viewing rooms and other recreational sites.
The foreign-funded Yuehua Hotel boasts residential villas, a tennis court, a swimming pool, a ballroom and other facilities (LI KAIYUAN)
In February 1982, the Yinhua Tile Co. Ltd., the first foreign-invested enterprise, was established in the district. Since then, enterprises with both Chinese and foreign capital have developed rapidly. As of now, some 200 foreign-funded projects have been approved with a contractual investment of US$301 million, including US$180 million in foreign capital. Of this, more than 130 have gone into operation. These projects involve electronics, machinery, light industry, chemicals, foods, building materials, textiles, real estate and tourism. Among these, the electronics industry is the leader with computers, software, colour TV sets, household electrical appliances, electronic components and parts produced in large numbers. The Xiamen Overseas Chinese Electronic Co. Ltd. is one of the few major electronic enterprises in the country to have an annual output value of 1.5 billion yuan. Its products have received quality approval licenses from ten countries and are now exported to 30 countries and regions.
Overseas investors in the district have earned good returns and many enterprises have developed rapidly. The Sandexing Industry Co. Ltd., a producer of silicon conductive rubber, has reinvested its profits each year since it began production. At present, its production capacity is 11 times that of its second year of operation. Another enterprise, a sports equipment manufacturer, has trebled its production scale in just over two years. Some 70 percent of the foreign-funded enterprises in the Hull Industrial District have increased their investment by a total of US$100 million.
He Chunlin, chairman of the Special Economic Zone Office under the State Council, inspected the district in 1990, "Of the many industrial districts and development zones I've visited in the country," he commented, "the Huli Industrial District has the best facilities and a strong capacity for producing auxiliary equipment and good economic results."
Xiamen which faces Taiwan across the Taiwan Strait has a similar culture and language. Xiamen's good investment environment and cheap labour force thus easily attract Taiwan investment.
The first Taiwan-funded enterprise was established in 1984. By the end of December 1990, Xiamen had approved 410 Taiwan-funded projects, or 41.8 percent of the 980 foreign-funded projects approved in the city during the same period. Taiwan-funded contractual investment amounted to US$987.6 million, accounting for 45.34 percent of the city's US$2.182 billion in contracted foreign investment. The Taiwanese projects in Xiamen accounted for one-fifth of the 2,080 Taiwan-funded projects nationwide and their contracted investment accounted for half of the national total of US$2 billion. Xiamen has put to use some US$897.7 million of the contracted Taiwan investment, about 53.78 percent of the US$1.669 billion in operational foreign funds. Today, there are more than 200 Taiwan-funded enterprises in operation. The industrial output value created by the foreign-funded enterprises in the city accounted for 54 percent of the city's total and that produced by the Taiwan-funded enterprises made up 10 percent.
The Donggang container berth (CHEN ZONGLIE)
According to Wu Jie, Taiwan investment in Xiamen has the following features:
- Solely Taiwan-owned enterprises. By the end of 1990, there were 309 solely Taiwan-owned enterprises, accounting for 78 percent of the total. Investment amounted to US$813.6 million, or 90 percent of the total.
- Labour-intensive enterprises as the main form. Such industries as clothing, shoes, umbrellas, sports equipment and handicrafts account for 31 percent of all Taiwan-funded enterprises, some 12 percent of all Taiwan investment.
- Some 90 percent enterprises are productive.
- Some 89 percent of the products are exported.
Taiwan investment has followed a set pattern.
1. The investment scale has expanded from individual, small projects to large, medium-sized items and to land development. By the end of 1990, a total of 11 Taiwan-invested projects worth US$10 million investment each were undertaken, with the largest investment worth US$200 million. The Sandexing Industry Co. Ltd. established in 1985 has expanded its production capacity 11 times in the last few years and plans to develop a 0.5-square-km Taiwan industrial garden district for 16 Taiwan-funded ventures. At the same time, the company has built a Taiwan village by the industrial garden district. The village is the largest in Xiamen and was built at a cost of US$38 million.
2. Investment terms have been extended to longer periods. In the early stage, Taiwan investors rented factory buildings and, later, they bought or built workshops and even constructed industrial garden districts. They have built production bases in Xiamen, foregoing simple assembly lines. For instance, the Cankun Electrical Appliance Co. Ltd. produces two-thirds of the output value of its general corporation. Investment terms for most Taiwan-funded enterprises have been extended from 15-25 years to 20-50 years, some even as long as 70 years. Some of the more profitable enterprises have reinvested their earnings or updated their technical level.
3. Imports of single items have given way to imports of whole machinery units or major equipment together with auxiliary parts and supplies. In the past, Taiwan businessmen invested in single items or in processing single products but, since 1989, imports of complete equipment units and related parts have increased. With an investment of US$200 million, the Xianglu Chemical Fibre Co. Ltd. mainly produces polyester fibre and slices. Taiwan investors have asked to set up factories to produce related high-pressure and packaging containers. In addition, setting up weaving projects is under discussion.
4. Of all Taiwan-funded enterprises, the chemical projects and real estate business have become the main focus of Taiwan investment. At present, investment in mainland real estate has reached US$100 million. Some 86 percent of all Taiwan-funded projects in the city are in the secondary industry, the investment for which accounts for 78 percent of all Taiwanese funds in the city. Taiwan-funded projects in the primary and tertiary industrial fields, using 2 percent and 20 percent of Taiwan funds, make up just 2 percent and 12 percent of all Taiwanese ventures. Chemical projects using Taiwan funds account for 40 percent of all secondary industrial projects.
In 1989, Xiamen established Taiwan investment areas in Xinglin and Hailun. These two areas enjoy special economic zone policies and, at present, capital construction is in full swing. The area in Xinglin has imported 80 foreign-funded projects and used US$200 million in foreign investment. About 30 Taiwan-funded enterprises have gone into operation and now generate 300 million yuan in output value. Estimates show that by 1993 the Xinglin area will have imported more than 100 items using Taiwan capital and that it will have attracted US$500 million in Taiwan investment. The industrial output value will reach 1.1 billion yuan. The Taiwan-funded Yifang Shoes Co. Ltd. on the Maluan Road, for example, had only two production lines in 1990. The company put another two lines into operation last year and now produces 250,000 pairs of shoes each month for export. The products are in great demand abroad and the board of directors decided to reinvest US$800,000 to build new production lines. The owner of the company said, "I was worried when I first invested in the Xinglin area. Today, however, I know I was correct." The first phase of this project cost US$2 million and the same amount of funds will be pooled for the second phase of the project.