RESEARCH FOR MARKET ENTRY AND DIRECT FOREIGN INVESTMENT PER CHINA "GO WEST" POLICY (October 2008)

Urumqi:
Highlights, Opportunities:
As the province capital, center of Xinjiang`s economic development and technological activities. The wealthiest city of Central Asia. Luxury brands including LV already have presence in the city. Three State-level development zones with highly attractive incentives for foreign investment. Special support of the China`s West Development of the State Council. Air, rail and highway hubs connecting China to Central Asia, Russia , Southeast Asia and many other regions. With the new railways planned to begin construction soon, Xinjiang will be connected to Central and Southeast Asia faster. Most concentrated area of modern manufacturing, new&high-tech industries and foreign investment in Xinjiang. Relatively skilled and inexpensive labor.  Relying on huge long-staple cotton capacity, a growing textile-garment industry including yarn spinning, dyeing, finishing and sewing facilities. Abundant natural resources including oil, natural gas, coal, minerals. Very attractive tourist spots, natural landscapes and cultural relics. Bordering eight countries, Urumqi provides a strategic location to connect China to the West . Manufacturing and trading hub, especially for exports to Central Asia and Southeast Asia. Very cost-efficient advertising with the regional media sources. Halal food & beverage sales the domestic market, as well as export to the neighboring Muslim countries has a great potential . Industries with high potential for manufacturing and sales/export from the development zones including Urumqi Economic and Technological Development Zone, Urumqi New & High-Tech Industry and Development Zone and Shihezi Economic and Technological Development Zone:

Food & Beverage (Coca Cola soon to start production in the zone)
Plastics and Chemicals
Textile-Garment
Building Materials
Marble..Turkish marble is well known in the region. Shipping block marble from Turkey to be processed in the zone seems to be an attractive approach.
Furniture
Agriculture, Farming
Wine
Machinery
Fertilizer
Dairy
Hotel (Five Star)
Energy (wind, solar)
Logistics
Electronics

Also, efforts are being made to encourage investment in energy saving technology, information technology and bioengineering.

Challenges:
Lack of experience in FDI practice. Lack of presence of international banking. Logistic-transportation...Government influence in bookings. Polluted air in winter and extreme weather conditions.

Overall Urumqi:
Provides huge opportunities for foreign investors in manufacturing and service industries to penetrate to the rapidly growing China domestic market, Central Asian and Southeast Asian markets.

Current challenges in the logistic field can be turned into value as long as creative solutions are provided.  Also, for exports via China`s east and south coastal ports, it is worth to study feasibility of air+ocean shipping route to Europe and U.S.

Kashgar:
Highlights, Opportunities:
As China`s far West city, enjoys the "Go West" policy. With its 3 million ton annual long-staple cotton output (2007) , provides great opportunities for investors in the textile industry, to realize yarn and fabric sales to China`s garment manufacturing hubs, as well as export to the textile-garment manufacturers in the neighboring countries for reprocessing. Cotton produced in Kashgar enjoys remarkably high quality fiber which enables yarn spinners to provide high quality cotton yarn from 80/1 to 350/1.  Very fine shirt fabrics are made out of these yarns. Investment in Food & Beverage is also highly welcomed . Kashgar has a big production capacity of pomegranate and apricot that provides a good raw material base for juice makers. Tourism is Kashgar`s pillar industry although winter is off season. Oil fields in Taklimakandesert, while abundant mineral fields makes Kashgar extra important for China`s development . Kashgar`s only Industrial Park is making big efforts to realize the first foreign investment in the zone. Railway project from Kashgar to Pakistan is in talk as both China and Pakistan keep pushing to start construction.  During recent visit by Pakistani president Zardari to Beijing, the project has been discussed to extend the railway to the Pakistani capital, Islamabad. The new railway will link Kashgar to Pakistan and other neighboring countries to provide alternative transport route in addition to the current land transportation for Kashgar`s exports to Pakistan, Tajikistan, Afghanistan.. Kashgar is also well connected to inland China by railways and city`s airport operates direct flights to Islamabad of Pakistan. With its 92% of Uyghur population and neighboring Muslim countries, Kashgar provides great opportunity for investors in the halal food industry.

Challenges:
Lack of experience in FDI practice. Being considered China`s most remote region . Relatively conservative life style. Lack of international business practice and presence of international banking. Lack of decent accommodation and services for businessmen. Extreme weather conditions.

Overall Kashgar:
While the city is improving in and modernizing slowly, recently opened its doors to foreign investors and local authorities are very eager to attract FDI.  Great opportunities are provided especially in halal food, beverage and textile-garment industries.  Industrial Park authorities also stress that reasonable-quality cell phone manufacturers will get great benefits by being based in the zone and export to the neighboring countries.

Turpan:
Known for grapes and wine.. As well as for tourism with its historical sites and natural landscape. City`s Industrial Park hosts Chinese firms in the oil fields in addition to the coal mines. Currently, China`s best wines are produced in the region with a French-Chinese JV.

Overall Xinjiang based on the research conducted in Urumqi, Kashgar and Turpan:

Very attractive incentives are provided as a part of China`s "Go West" Policy while FDI related matters and incentives claimed by local authorities need to be clarified and verified.

Halal Food, Beverage, Textile-Garment, Building Materials, Marble Processing, Hotel Building&Operating , Textile Chemicals, Energy (wind, solar) are among the highlighted industries by local authorities. Xinjiang enjoys a strategic location for trading with Central Asia, Russia and Southeast Asia as well as inland China..

Logistics issues can be turned into great opportunities by providing creative solutions.

Despite challenges exist due to history and nature of the region,  there are many untouched resources and great business opportunities for those who study the region carefully, understand the facts and act faster.

With China`s recent land reforms and extensive farmlands in Xinjiang, endless opportunities now exist for foreign investors in irrigation systems, fertilizers, seed and crop technology, agricultural machinery, warehousing/logistics, fruit processing and high quality long-staple cotton based textile.  Also, wine brewing, dairy and leather processing are among the promising industries.

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