Japanese firms find remote Sichuan a profitable haven+

By Geoffrey Murray

CHENGDU, China (Kyodo): Locals in the western part of China's remote Sichuan Province have long consumed matsutake mushrooms without realizing that a highly profitable export item for the Japanese market was growing under noses.

It took an enterprising private Japanese businessman to stumble onto the possibility and create a highly profitable business at US$ 50 a kilogram for an initial investment of only $ 100,000.

The matsutake processing plant is only one of a number of Japanese business ventures that have "mushroomed" in the economic development zones surrounding the provincial capital of Chengdu.

With central government approval, Chengdu is now bent on becoming the economic hub of the previously backward inland areas of the Chinese southwest.

There are five development zones in Chengdu, each offering special privileges and competing fiercely for foreign investment. Some are out for the latest "cutting edge" technology, others are more intent on creating jobs.

The Longguan Development Zone, in a prime agricultural district alongside the Chengdu-Chongqing expressway now under construction, is in the latter category. Longguan plays host to the successful matsutake business, one of 50 foreign enterprises now in the area.

On a more ambitious scale, the giant motorcycle manufacturer Yamaha Motor Co., whose main operation is the Jianshe Manufacturing Plant Chongqing, produces various engine components in the Longguan zone.

Another Japanese company, which Chinese officials did not name, was said to be holding talks with a local military factory converted to civilian use about a project to produce car and motorcycle engines.

It is part of the potential development of Chengdu as an "automobile city," an idea floated by General Motors of the United States, whose officials have visited the area several times for discussions and a feasibility study.

Longguan, meanwhile, will see former military manufacturers set up shop to work on civilian aerospace projects and produce agricultural machinery such as tractors and car engines.

The central government has set aside 500 million yuan to move in a number of factories. Some 10,000 workers will transfer to Longguan this year, and the figure will eventually climb to 100,000, creating a vast satellite city only a few kilometers from Chengdu.

The nearby expressway, due for completion in the second half of the year, will give the growing industrial zone easy access to Chengdu International Airport 35 kilometers away in one direction and Chongqing, a Yangtze River port, some 360 kilometers in the other.

District officials are running a major sales drive to fill the vacant spots in the 9.94 square kilometer development zone, and the surrounding countryside. Incentives for businesses to relocate there include "fast track" processing of their applications by the bureaucracy, no interference by the state as long as no laws are broken and generous tax reductions.

In line with the central government's new "open policy," district officials are relaxed and pragmatic. Nothing is impossible, they suggest, for the potential foreign investor.

For example, involvement in real estate operations is theoretically forbidden to foreigners to prevent them from buying and selling Chinese land.

But, hint officials, why not come in and register as something else -- say a tourism business -- and then ask the local planning commission to extend the area of business into real estate?

Nothing could be simpler in the new capital-oriented Chinese society.

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