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Hebei: The Economy

Al Guo
July 28,2008

  SCMP Graphic

June 30 this year was a big day for Hebei. The province's two big steel producers announced plans to merge into China's biggest steel group.

In a rare move, Hebei party secretary Zhang Yunchuan and acting governor Hu Chunhua joined the celebrations, promising support from the provincial government.

The consolidation could trigger further mergers in the industry as the central government sees big steel groups as a way to increase the industry's competitiveness, save energy and fight pollution – all goals small steel-makers do not have the resources to achieve.

End of scatter-gun approach?

But the move could mean much more for Hebei, an area that has long been plagued by a scatter-gun approach to industry.

As a region mostly known for agriculture and raw materials, Hebei could produce almost anything, but few of its enterprises are big enough to compete with the nation's best.

This was especially true in the steel industry. Hebei had more than 200 producers, but none ranked in the nation's top five in terms of capacity or market value.

A construction worker watchs as huge cranes put the finishing touches to a new steel factory Caofeidian, Tangshan.   Photo: Al Guo
The new group, Hebei Iron and Steel Group – a merger between Tangshan Iron and Steel Group and Handan Iron and Steel Group – changes things dramatically by overtaking Shanghai-based Baosteel as the nation's largest producer.

Turning focus to the coast

The merger is more important in terms of the province's plans to eventually boost its economy by turning its focus to the coast.

Most of the new steel group's imports and exports will be transported through new ports in the Tangshan area, a move that could reinforce the province's long-planned transfer of industrial bases from inland areas to the Bohai Sea.

Hebei also plans to plough more than 10 billion yuan between 2005 and 2010 into expanding the Qinhuangdao, Tangshan and Cangzhou harbours. Qinhuangdao will be a coal and container port, Cangzhou will focus on coal shipments and Tangshan will be a steel, crude oil and chemicals base.

The "going to the coast" strategy has been discussed by policymakers over the past decade after the province was told by the central government not to develop industries inland that could threaten Beijing's air, water or soil.

Harbour development lagging

Hebei has 487km of coastline, but it lacks harbours that could bring the province consistent profits and long-term development. Even while its three main harbours grew at a reasonable pace, they long lagged behind facilities in neighbouring Liaoning and Shandong provinces.

Mr Zhang decided to put the development of the coast at centre stage shortly after he took up his job in August last year. "The whole province has to have a strong sense of our coastal advantage and has to take advantage of our coastal advantage," he said.

Hebei authorities have since issued a harbour development guideline, setting out the three harbours' roles and development plans.

Yang Lianyun, a researcher with the Hebei Academy of Social Sciences, said the government's commitment to the coastal areas could make the difference for the revived "go to the coast" strategy.

Leaders committed to policy

"There has been too much talk and too little action. Luckily we have leaders who are fully committed to the strategy before it is too late," Mr Yang said.

The investment in the harbours has resulted in a big boost to the government's tax revenue in coastal areas.

In the Caofeidian industrial area alone, 423 million yuan in taxes were collected last year, more than triple the 2006 figure.

Property prices also are on the rise. Apartment buildings were selling for about 1,000 yuan per square metre before the Capital Steel Group started building factories in the area, but the price has jumped to about 3,000 yuan this year as more people arrive seeking business opportunities.

But Hebei's economic hopes are not pinned just on industry. Tourism has flourished in areas close to Beijing and Tianjin that are off-limits to industrial development due to environmental concerns.

Golden tourism circle

Hebei has spared no effort to promote its "golden tourism circle", a series of tourist spots that are less than two hours' drive from the capital.

About 60 per cent of the province's tourists and 70 per cent of its tourism income came from this circle last year, and the numbers are expected to increase this year due to the Olympics.

"Red tourism" is another area Hebei has tried hard to promote in recent years. Xibaipo, the Communist Party's former national headquarters, and Baoding, a guerilla base in the war against the Japanese, have attracted increasing interest.

Official data showed that Hebei had 101 million tourists last year, 10.7 per cent more than 2006, with a total income of 58 billion yuan.

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