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More Transnational Companies Turn to China's West

The US-based Applied Materials Inc. clinched a deal this week with the high-tech development zone in Xi'an to build a global R&D center in this capital city of northwest China's Shaanxi Province.


The American company will invest US$255 million into the project, designed to be another global tech center outside its headquarters in the United States, according to the contract.


The project is of great significance for the company's future, Michael R. Splinter, chairman and CEO of the Applied Materials, said at the signing ceremony.


The contract also means great news to Xi'an, the bridgehead of China's vast western part.


Currently, 83 companies of the Fortune 500s have established their presence in the city, up from 24 a year earlier.


"The influx of more leading global businesses showed the western region is becoming a more attracting destination for foreign investments," Wang Xuedong, head of the Xi'an Development and Reform Commission, told Xinhua.


China launched the western development program in 2000 to narrow the economic gap between the region and the country's east.


Preferential policies, abundant energy supply, and cheap land and labor in the region all meant luring opportunities to overseas investors, but for quite a long period of time, transnational corporations took a wait-and-see attitude towards the development drive.


Now, however, the situation is changing, Wang said.


More than 3,000 business people from 45 countries and regions attended an investment and trade fair between China's west and east held in Xi'an from April 6 to 10.


They brought with investment contracts worth US$2.43 billion to the fair. Most of the investment will go to the west.


Statistics from the Ministry of Commerce showed in the first two months of this year, the western region approved the establishment of more than 200 overseas-funded enterprises, and actually used US$276 million of overseas capital, up 51 percent year-on-year.


A latest poll found that 65 percent of foreign companies surveyed intended to expand presence at a normal pace in western China in the coming five years, while 22 percent chose to expand faster. None said they would withdraw from the region.


According to an official from the Ministry of Commerce, Industry and Energy of the Republic of Korea (ROK), the country has encouraged enterprises to invest in China's western region since 2002 by way of organizing inspection tours and attending trade fairs in the region.


A number of prestigious ROK companies, including SK Teletech and Korea Resources Corporation, have set foothold in the region.


The consumption market in the west, which used to be neglected, is also attracting interest of foreign investors. After such retail giants as Metro and Carrefour entered Xi'an, Wal-Mart, which has opened seven malls in Yunnan, Guangxi, Guizhou, Chongqing and other western areas, is planning to open two stores in the city within the year.


Wei Houkai, an economist with the Chinese Academy of Social Sciences, said that an investment boom by transnational corporations is predictable in the western region as the huge market weighs a lot in the overall consideration for their further development in China.


(Xinhua News Agency April 12, 2006)

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