Sunday, November 1, 2009

Chinese Infrastructure And Logistics Bases Expand But Not Without Concerns

Aviation and Other Industries Flock to the Provinces as “Father of Space” dies
Shipping News Feature

CHINA – In the same week news comes in that China’s “Father of Space Technology” Qian Xuesen has died on Saturday aged 98, Airbus Industries have announced they are to switch the installation of wing parts for their A320 aircraft from the UK to Tianjin province. This is seen as a tightening of the grip the province is beginning to have on logistics in the country. Recently a number of Western countries have been attracted to this area, tempted by its proximity to Beijing, since the Olympics less than half an hour by train, and to the deep water harbour facilities.

The latest move by Airbus is a logical step, over half of their aircraft contain Chinese made parts and their budget for purchases in the country is set to quadruple in the next few years to approach half a billion dollars. This will be the first time anything as complex as a wing will be produced for the company outside its European bases. The handling of components and product will be via a new logistics centre in the province but the fight for Western investment and industry is continuing right across China and voices in the government itself have expressed some misgivings lately with the outright competition as provinces vie for prime targets.

Aerospace industry is a good example of this. After the state owned Aviation Industry Corporation of China (AVIC) was formed in 2008 from the two former major sector Chinese companies, they commenced construction this year in Beijing on a new 1.6 million square metre aviation industrial park to develop, amongst other things, China’s first jumbo jet aircraft.

Nanchang lying inland halfway between Shanghai and Hong Kong has plans to develop it’s own air oriented industrial facilities as does Shenyang to the North East of Beijing, a province where the largest US/Chinese cooperation on renewable energy was signed just last week, a $1.5 billion project to erect a 600 mega watt wind farm on 36,000 acres of Texas.

Two more central provinces are also in the race. Xi’an is developing its aviation industry base with the Xi’an Aircraft Industry Group buying out Austrian supplier FACC AG earlier this month and a local official announcing that the province will be home to “the largest conglomeration of privately owned air based interests in China”. Chengdu’s development has already featured here earlier this month and is home to another major Airbus supplier.

Not to be left out Shanghai is developing a nationalised facility to rival any others with the Lingang Industrial Zone, a 200 square kilometre area including a bonded deepwater port, heavy industry facilities and four towns for employees and families within its boundaries. The local authorities have declared aviation industry development to be amongst their main targets.

All this development however comes with a downside. The sheer size of the country and the enterprises and budgets involved are beginning to produce friction between competing provinces. The Government have expressed concerns that, in their anxiety to attract new investment, provincial authorities may simply end up in a price war which will mean the foreign investors profiting to the detriment of local people. In addition the vast sums poured into regional development will only prove worthwhile if the industries concerned continue to expand and prosper. If this is not the case it will lead to the oversupply problems of the type associated with the shipping and transport industries we are currently witnessing world wide.

The other problem which t