Yingkou port set to play larger role in Northeast China’s development

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Sept. 1 – Yingkou is a third-tier Chinese city located on the northeastern edge of the Bohai gulf, just a few hours drive from the regional powerhouses of Shenyang and Dalian. An otherwise fairly ordinary provincial Chinese city, Yingkou is set to capitalize on the increasing exporting power wielded by enterprises in Liaoning, Jilin and Heilongjiang provinces.

Most people associate Liaoning province with the port city of Dalian. Indeed Dalian is a thriving, cosmopolitan city that possesses one of the largest ports in China. The city of Yingkou has been left in the shadow of its big brother further down the peninsula and has not attracted the levels of foreign investment seen around many other ports in China. In particular, export processing has not flourished in the area, leaving Yingkou lagging behind many other ports in China in terms of its degree of internationalization. Recently however, the volume of traffic through the ports – Yingkou Old Port and Bayuquan New Port – has risen dramatically, with over 100 million tons of cargo expected to be handled in 2007. This expansion is attracting the attention of foreign investors due to the proximity of the inland manufacturing giant that is Shenyang, China’s fourth largest city by population.

Yingkou is, and will remain, primarily a port responsible for the processing and transportation of products manufactured in the heartland of Liaoning (the cities of Shenyang, Fushun, Benxi, Haicheng, Liaoyang etc.). However, it is also strategically important for the distribution of oil, grain and fertilizer around China. Two pipelines connect Yingkou with the Daqing oilfields of Heilongjiang province, and Bayuquan port is expanding its capacity for oil storage in anticipation of further future growth. The surrounding area is also rich in mineral deposits – primarily magnesite, boron, talcum and even gold. In China, foreign corporations are not permitted to own mining companies, however there is no such restriction on the purchase and subsequent processing of most types of minerals for export. It is this business that is currently attracting foreign investment into Yingkou. One significant presence is Astron Chemicals of Australia with a RMB50 million investment in the Metallurgical and Chemical Industrial Park.

Yingkou presents quite a contrast to Dalian, which has built up a huge variety of companies processing and exporting high value-added produce mainly to Japan and Korea. As land and labor become increasingly expensive in the Dalian area expect to see factories for low value-added products increasingly shifting towards Yingkou. In this respect the cities complement each other, however there are signs that competition in some boom sectors is emerging. One of these sectors is automobile components, currently thriving in China’s northeast as foreign automakers line up to partner with First Auto Works in Changchun. While Dalian has taken a lot of the investment in this area, Yingkou is also getting some of the action – Germany based Mahle has a production facility for engine components and bearings in the city’s New & High Tech Economic Development Zone.

In summary, if you are currently manufacturing in the northeast of China, it may be possible to cut your transportation costs and time to market by using Yingkou port. On the other hand if you are looking to invest it may be a cost-effective, strategically sound location for a relatively simple operation.

For business advisory services, assistance establishing, structuring or operating a business and contract drafting in Northeast China, please contact Adam Livermore in the Dalian office of Dezan Shira & Associates, tel. [411] 8255 9061.