NEW HOME: Of the seven industrial parks for businesses that transferred from the Pearl River Delta, Zhongshan Park is one that serves as a new home for mobile phone makers (COURTESY OF HEYUAN MUNICIPAL GOVERNMENT)

Two hours drive northeast from Guangzhou, the provincial seat of China's export-oriented manufacturing base, makes a huge difference. Here in Heyuan, a Hakkanese town in a mountainous area of south China, poverty is a label of shame for officials.

Heyuan, which literally means "the origin of rivers," is located on the upper reaches of the Dongjiang and Xinfengjiang rivers, which provide drinking water for more than 40 million people in Hong Kong and other cities. Entrusted with guarding the mother rivers from pollution, Heyuan was late to industrial development.

As one of the poorest cities in China's richest province, Heyuan's per-capita GDP stands at only one fourth of Guangdong's average and half the national average.

After years of seeking an appropriate development model, the local government decided to adopt an eco-friendly policy in 2003.

"The unpolluted environment is our only comparative advantage now," Heyuan Mayor Liu Xiaohua said in an exclusive interview. "We cannot feed the more than 3 million local residents without developing industries, but it will lead to a dead end if we pollute the environment in the process."

Environment first

Thanks to this understanding among local officials, Heyuan was Guangdong's only prefecture-level city free from acid rain last year, according to the province's annual communiqué on environmental status released on March 23. The city hasn't received acid rain for the past four years in a row. Of the province's eight large reservoirs, only the water of the two in Heyuan is classified "quality I."

While ensuring local residents a better living environment, environmental protection brings the city economic benefits as well. Heyuan earns several billion yuan a year selling drinking water to other cities.

The city runs Evergreen Lake, one of its two reservoirs, differently from another manmade lake formed in 1958, Zhejiang's Qiandao Lake. While the latter is now a famous tourist resort with luxury hotels, Evergreen Lake remains more a source of drinking water, excluding tourist services such as catering and hospitality.

That explains why the municipal government gave the local environment watchdog veto power over industries and businesses that, squeezed by soaring costs, are looking to move out of the Pearl River Delta and settle down in Heyuan. According to Liu, they have rejected more than 300 projects so far.

"We have to create a win-win situation for local economic growth and environment protection because we have more than one reason to do so," Liu said.

Drawing lessons from coastal cities such as Foshan and Dongguan, which secured high growth at great cost to the environment, Heyuan has closed down 463 illegal mines and 19 small iron and steel plants in the past two years.

As part of its war on pollution, the municipal government has ramped up efforts to plant trees, allowing no more forest processing plants. Since state-owned forest-plants rely on logging to support their employees, the municipal government spent 600 million yuan ($88 million) dismissing 4,911 workers last year, keeping only 2,000 employees for daily maintenance. Now the forest coverage in Heyuan takes up 77.7 percent.

The Heyuan model

In selecting industries and businesses, Heyuan has pledged to follow its own course, one that is quite different from those of Shenzhen and Dongguan, the province's second and fourth largest cities in terms of GDP last year.

Shenzhen is an innovation-oriented city featuring hi-tech industries, the electronic information industry in particular, while Dongguan is China's largest export-oriented manufacturing hub that makes everything from toys to computer products.

After more than two decades of development, companies and factories in the two cities have to either upgrade their production or relocate to save on soaring land and labor costs.

This has offered less developed cities in northeast Guangdong, such as Heyuan and Meizhou, an unprecedented opportunity for development.

"We will greenlight only businesses in industries that have limited pollution or pollution that can be easily treated, such as mobile phone and mold base manufacturing, garments and beverages," Liu said.

According to the mayor, companies in Heyuan will be within an hour's ride from their suppliers and retailers in the Pearl River Delta by 2015, when six expressways and the inter-city light rail that spans the delta and stops in Heyuan will be in service and further cut their transportation costs.

But the global financial crisis has created woes for local companies. Manufacturers with operations in Heyuan have witnessed a 15-percent decrease in orders, and 40 percent of them are running losses.

"We will cast off the shackles and win freedom in working out a blueprint for Heyuan during the financial crisis," said Chen Jianhua, Secretary of the Heyuan Municipal Committee of the Communist Party of China.

With its focus on the future, Heyuan is in a good position to pursue its dream of green growth. The municipal government has made huge investments in vocational training schools. They plan to increase the high school enrollment rate from the current 54 percent to 85 percent and make vocational graduates account for 40 percent of the total by 2010.