China Seeks Cheaper Labor Within Its Borders

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China's economic boom has benefited its coastal areas the most. The government is now trying to hasten economic development in the country's midwest, which has traditionally been an agricultural area. Hefei, a nondescript city of four million, is illustrative of the drive for development.

ROBERT SIEGEL, host:

Another story about China now. This one has to do with the country's economy. Most of China's phenomenal growth has taken place in regions along the coast. Further inland many people have been left behind. Well, now China's west and midwest are starting to catch up. NPR's Rob Gifford takes us to the central city of Hefei.

ROB GIFFORD reporting:

You've probably never heard of Hefei, but if the leaders of this city of nearly four million people have their way, within a few years you'll know all about it. Hefei is about 300 miles west of Shanghai. It's a rather nondescript city, the capital of Anhui province in the rice belt of central China. But Hefei has several things going for it. It has, for some reason, among the best technical universities in the country. It has increasingly fast links to the coast and has something of a visionary local government.

On the edge of town, on what used to be a state-owned pig farm, the vision of Hefei's government is being put into practice.

(Soundbite of car horn)

GIFFORD: Earthmoving equipment clears the land for new buildings, some of which are already under construction nearby. This will eventually be the site of Science City, a high-tech park covering nearly 20 square miles, where the Hefei government is offering massive financial incentives to high-tech companies, both local and foreign. It's already attracted one and three-quarter billion dollars of investment, says manager of the park Gin Ray(ph).

Mr. GIN RAY (Manager, Science City): (Through Translator) We want Hefei to become a top-level, high-tech city. It can become such a place. Through working hard over the next 15 years, we want Hefei to be the Silicon Valley of China.

GIFFORD: The move from incubating pigs to incubating high-tech companies is highly symbolic as some cities in central China with central government support try to leapfrog from the agricultural age to the technological. There is still plenty of the industrial revolution going on here, though, and officials admit that their high-tech ambitions will take time. But the city already has a smaller high-tech park which has been incubating small companies for several years and is now attracting big hitters like Microsoft, which has opened a research center here, and US videoconferencing company WebEx.

(Soundbite of commercial)

Unidentified Announcer: With millions of online meetings, WebEx is taking the conference call to a whole new level.

GIFFORD: Grace Gao(ph) in WebEx's human resources department gives a guided tour of the company's Hefei headquarters. She says they have more than 300 software engineers here linking up daily with their offices in the US and elsewhere in China. Gao says they were attracted to Hefei for many reasons.

Ms. GRACE GAO (Human Resources Department, WebEx): (Through Translator) Hefei has many high-quality engineers from very good universities, so it's a very attractive city. The government gives us good incentives, too. We could never afford such massive office space without local government policies to help us.

GIFFORD: Some other companies are clearly feeling the same. British conglomerate Unilever just moved its Chinese production operations to Hefei from Shanghai. It's now only four and a half hours from Hefei to Shanghai on the newly built highway and less than three by the new high-speed rail link.

Hefei offers a well-educated work force, sometimes for about a third of the cost of hiring in Shanghai. The government is also working overtime to make Hefei a more livable city.

(Soundbite of concert)

GIFFORD: A recent concert by the youth orchestra of Hefei's sister city, Columbus, Ohio, was just one event this summer aimed at promoting the arts and showing that Hefei is more than just an industrial or high-tech production base. Foreign students who lived in Hefei as recently as the mid-1990s say it was a desperate place, nothing to do, no good infrastructure and nothing to see. There's still a long way to go before Hefei becomes the international city it wants to be, but when you look at what else China has achieved in 25 years, you might not want to bet against it. Rob Gifford, NPR News, Hefei, central China.

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