Opportunities for Foreign Businesses and Forecast

In the eastern parts of China lots of overseas investors have started to successfully operate companies, most of them in processing- and export-oriented industries, and some of them in service industries. The western part of China, however, has not been able to attract much of the foreign direct investment (FDI) till now. Even though there are some geographical disadvantages, there are, however, some advantages, which should be beneficial to foreign entrepreneurs if anyone sees deep and far enough to make investment in the western part of China.

1. Oil and Gas
   China's western provinces can offer lower costs in the form of a big reservoir of both unskilled and skilled workers. By setting up a business in the western provinces overseas investors can be among the first to use western China's vast amounts of untapped natural resources. There are rich reservoirs especially of oil, gas and minerals in Xinjiang. Prospects for oil and gas production in Xinjiang are splendid, as resources are estimated to account for a third of China's oil and gas reserves. In addition to this, the eastern oilfields have matured and are now either at their peak of production or are in decline. Both oil and gas productions in the east are to be stabilized according to Chinese government. At the same time, western China's oil and gas production is to be increased as well as the infrastructure necessary to be developed to bring the resources to the eastern parts of the country, where there is a strong demand for energy. So it is quite probable that Xinjiang will become the main provider for China's oil and gas in the 21st century. Further oil and gas deposits have been discovered in Tibet and it is inevitable that the region will also be developed.
   Foreign investors have already entered the field of oil and gas production in western China. A joint venture between Petro China and Shell, Exxon Mobil and others is currently constructing a giant pipeline to connect oil fields in the west with consumers in the east. As exports of energy to neighboring markets are decided by the government as well, these companies will surely not remain the only foreigners in oil production in China.
   
2. Agriculture
   Beside oil and gas, agriculture has a good chance of becoming more important. Sichuan Province has -- in contrast to the more western Xinjiang and Tibet -- very fertile soil and is in fact China's main producer of rice. Grain and vegetable production in the agricultural sector could have good prospects.
   
3. Infrastructure, Telecommunications and Finance
   Chengdu, the capital of Sichuan Province, will open further sectors to private foreign investors as long as they are not forbidden by law and regulations. Key sectors like infrastructure, telecommunications, finance, electric power and gas should attract more overseas investors.
   
   Concerning infrastructure, foreign companies have already gained some experience. For instance, the expressway between Beijing and Tongzhou was built by the city of Beijing and an American company in form of a Build-Operate-Transfer agreement (BOT). The American company provided RMB 1.3 billion for investment in the project. They were also responsible for designing and building the highway. After completion of the project they are now in charge of operating, maintaining and managing it. They are allowed to operate the expressway for 20 years. Afterwards it will be transferred to the Chinese partner. Investment in services like telecommunication and finance could also be a very lucrative option. These economic fields do not have to be close to the customers so they are independent of their location in the country. Data processing, call centres and accounting services for companies all over China would be an obvious option to be established in the west.
   
4. Environment
   Various other fields of FDI are possible and economically interesting. Business in environmental protection and waste disposal will grow without doubt. The government has already poured lots of money into environment protection. But it may take several years to bring about change.
   
5. Tourism
   Tourism in China is becoming more and more interesting. A continuously increasing number of both Chinese and foreign tourists discover China's natural scenery and sights and are willing to spend their money. Infrastructure for all these people –for example transportation and hotel services –also needs financial inflows, either national or international.
   
   The Chinese government has chosen to pursue the economic development of its western provinces. It seeks to raise the standard of living there to bring the unbalanced to balance with more interaction between west and east. At the same time, it seeks to raise the level of development of the entire country. This environment provides good conditions for foreigners to invest their capital in western China. Although important improvements have to be made to ensure a secure and reliable investment environment, with a more transparent banking system, overseas enterprises have on a long-term basis good prospect to take part in the profitable opening of China's west.

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