Multinationals eye China's Northeast despite global downturn

Special Report:Global Financial Crisis

By Wang Fengfeng, Wang Zhenhong and Wang Jun

SHENYANG, March 18 (Chinese media) -- Multinational corporations are closing factories and pulling back investment amid the global economic downturn, but not in China's Northeast.

Business executives attribute their optimism and initiatives there to the region's reliable supplies of power, raw materials and cheap labor and the business opportunities in the Chinese market.

"We want to be able to take advantage of the strong market when the crisis is behind us," said Kirby Jefferson, general manager of Intel's Fab 68 .

Fab 68, in Dalian, a coastal boomtown of northeast China's Liaoning Province, is Intel's first wafer fabrication plant (FB) in Asia. It broke ground in 2007 and is due to be in operational in 2010.

In spite of the tough market conditions, Jefferson said the global chip giant had no plans to delay the operation of the 2.5-billion-U.S.-dollar facility.

"Business will come back, business will get strong again. It's important that Intel has a very strong presence with manufacturing in China," Jefferson said.

Intel has made it clear that it wanted to produce computer chips locally to cut costs as China has emerged as a major consumer of the products.

China, also a huge market for many other products, has helped a number of foreign businesses to partially offset trouble in other major markets amid the global recession.

In addition, China would be the first major economy to recover from the global financial crisis with the help of the 4-trillion-yuan (585-billion-U.S.-dollar) stimulus package, economists estimated.

Multinationals considered China as the most attractive destination for investment, because of market size, higher market growth rates and cheaper labor, according to the World Investment Prospects Survey 2008-2010 by the United Nations Conference on Trade and Development.

General Electric (GE), the U.S. technology and services conglomerate, also is planning expansion in the Northeast, reaffirming the strategic importance of Chinese market.

GE has four factories in Shenyang, capital of Liaoning, with two newly opened last year. The plants produce wind turbines, gas turbines and A/C motorized drive systems for mining operations.

Jack Wen, president and chief executive officer of GE Energy China, said the company planned to add more investment and staff members to its two joint ventures in Shenyang this year.

The Northeast, including provinces of Liaoning, Jilin and Heilongjiang, was "an important area in GE's future," as it had advanced heavy industries and more government support, he added.

To help revive the old industrial base, the central government unveiled in 2003 a series of policies, including tax cuts and subsidies for technology innovation, industry restructuring and infrastructure construction.

The region also has trained a huge army of cheap technicians and engineers, compared with the often low-skilled rural migrant workers in the South, Lin Muxi, professor of economics at Liaoning University, told Chinese media.

In the financial crisis, factors including low cost and advanced industry base put the Northeast in a better position to attract foreign capital than the southern coastal regions, Lin said.

The region actually used 17.58 billion U.S. dollars of foreign investment last year, a 30.7 percent increase from 2007, according to the National Development and Reform Commission. The rate was much higher than the 10 percent for the high-cost Shenzhen, a southern boom city bordering Hong Kong.

Among the optimistic multinationals is ITT Corporation, the world's largest supplier of pumps and systems for transporting and treating water.

Dong Ruiping, external affairs director for ITT China, said the company was planning to increase investment and expand operations in the Northeast. In 2007, ITT Corporation set up a 25-million-U.S.-dollar plant in Shenyang.

The optimism was echoed by Heino Dannemann, executive president of Wuerth (China) Holdings Co., who was busy helping to attract foreign firms to its 40-million-U.S.-dollar industrial park in Shenyang.

Dannemann said Wuerth Group, a German wholesaler of fasteners, screws and construction fittings, among other foreign investors, had confidence in the Chinese market as the massive stimulus package would bring business opportunities.