Chinese practitioners of Tai Chi put on a show in the Qinhuangdao Economic Development Zone.

In the zone: Terrace’s connection to China’s Qinhuangdao Economic Development Zone

Special economic areas have changed China. And there could be one headed this way

On two large parcels of land outside of a city few people in northwestern B.C. have ever heard of is an example of industrial development that could affect Terrace and area for more than 50 years.

Named after the city of Qinhuangdao, a port city of almost three million on the east coast of China, the Qinhuangdao Economic Development Zone was visited by a delegation of Terrace and Kitselas politicians and officials last November.

Over the course of a week, the delegation was toured through the zone and elsewhere, resulting in an agreement that could see the Chinese purchasing up to 1,000 acres of the city’s Skeena Industrial Development Park located off of Hwy37 just south of the Northwest Regional Airport.

According to city councillor Lynne Christiansen, who with mayor Dave Pernarowski, councillor James Cordeiro and city corporate lands manager Herb Dusdal made up the Terrace portion of the delegation, potential development of the park will be a major issue in this November’s municipal elections.

“To me that is going to be the next council’s really big job is to make sure we do it right. A big opportunity is coming and we have to make sure we do it right,” said Christiansen.

The Qinhuangdao  Economic Development Zone is in two parts – one on the eastern end and the other on the western end of Qinhuangdao city.

Qinhuangdao itself is a two-and-a-half hour drive from the Chinese capital of Beijing on a similar latitude as Prince Rupert.

It is one of China’s largest ports and contains a major coal shipping terminal.

There are over 50 state-level economic and technological development zones in China with the purpose of encouraging a free enterprise approach to manufacturing and other businesses.

Tax incentives are offered to attract investors and rules and regulations in existence elsewhere in China are largely absent within the confines of a zone.

They’ve been credited with helping transform the Chinese economy, fuelling its growth to become the second largest economy in the world after the United States.

In 2006 alone, the Qinhuangdao zone brought in total investment of US$4.73 billion.

The western Qinhuangdao zone focuses on high-tech industries and manufacturing while the eastern zone concentrates on heavy industry.

The B.C. Ministry of Jobs, Tourism and Skills Training  said that when the government was first approached by Qinhuangdao it was with a request for land to use for heavy industrial development, and Terrace was one of the government’s suggestions.

According to Christiansen, Chinese housing and industry follows principles of Feng Shui in that harmony is sought between the human and the environment.

Kitselas chief councillor Joe Bevan, who made the trip along with Kitselas councillors Wilfred Bennett, Judy Gerow, and Kitselas chief executive officer Therese Hagen, spoke of specific examples.

“Instead of using fertilizer they are using seaweed and taking the protein out of the seaweed and using it to feed their crops. They have realized that typical fertilizer is damaging their soil. They have projects that are trying to make agriculture more sustainable,” said Bevan.

He referred to a cutting-edge quality to much of the technology the delegation witnessed.

Bevan said their group toured a medical design academy where hundreds of young Chinese engineers worked on medical technology that would allow remote diagnosis of illnesses.

Another experimental engineering firm is attempting to design a type of water molecule that will evaporate more slowly than normal water, thus providing better irrigation for crops in hot lands. They also toured companies that built aluminum wheels for car manufacture, as well as pipelines and advanced wood processing facilities.

“They showed us two different types of pipeline that they build,” Bevan said.

While tour provided the local delegation with showcases of technological innovation, Christiansen said there were also glimpses of more rudimentary operations.

“You’d see these groves of little poplars and tiny trucks bringing them along, and people milling them by hand,” said Christiansen of wood processing techniques.

According to Kenny Zhang, a senior research analyst at the Asia Pacific Foundation in Vancouver, the creation of special trade areas in China marked the beginning of capitalist policies in China following the pure Communist agenda of the government formed by Chairman Mao in the late 1940s.

“The special economic zone was an initiative under Deng Xiaoping’s reform policy,” said Zhang of the Chinese Communist leader most credited with liberalizing the Chinese economy.

“It started in the late 1970s in China when Xiaoping took power and started economic reform. One of his first reforms was to establish special economic zones to practise market economy. At the time China was purely a centrally planned economy. So they wanted to implement the practise of market economy … It turned out to be very successful, became a model for many development regions to follow,” he said.

Zhang added that the rapid economic growth which occurred in China and spurred on by the success of the zones has led to the problem of overcapacity.

It means there’s been more growth  than there is domestic demand within China.

State policy after 2001 has been to promote investment overseas as a remedy, he said.

“China is a powerhouse for manufacturing in the global market, but now it is turning out to be overcapacity in many sectors,” Zhang said.

The need to find more favourable investment environments closer to end markets overseas has also been caused by increases in shipping costs. Among economic analysts, the move to find those more amenable conditions is called “offshoring.”

It’s this reasoning which explains the interest the Qinhuangdao zone has in the 2,000-acre  Skeena Industrial Development Park.

Christiansen, who has been on council since the time when the deal to set up the Skeena Industrial Development Park was struck with the province, credits former mayor Jack Talstra with the foresight to tackle the project early on.

“This was Jack’s vision,” said Christiansen. “We worked hard to get that land incorporated into the municipality … We used to have delegations come here and have discussions with them and we’d get all excited but then it would fall flat. It was just one disappointment after another and Jack would always say, ‘if we could get that one big fish then everything will fall into place after that.’”

“We are in a really wonderful position right now where we are being approached,” said Christiansen.

Although the trip did result in a memorandum of understanding being signed by the local delegation and the Chinese, it has yet to be released.

A city press release did call the memorandum a first step in “exploring a promising economic development partnership with potential investors in Qinhuangdao, China.”

Bevan described the tour of the economic zone as laying a foundation for more specific negotiations.

They showed the group that “this is what we can do, this is how well we do it, and this is what could happen if we came to Terrace,” he said.

Pernarowski, in a recent edition of his monthly newsletter, has already begun exploring the implications of having a Chinese-managed factory on Terrace land in terms of the effects on local employment, pointing to various labour and immigration laws that guarantee a certain ratio of the labour force be Canadian citizens.

The trip to Qinhuangdao cost the city $6088.52 or $1,522.13 per person and included $1,200 for the flights and a layover night in a Richmond hotel.

A more expensive bill would be for hosting a possible return visit by the Chinese, said Christiansen.

The Kitselas covered their own expenses and the delegation’s Chinese hosts paid for everything else once the group was in China.

Next week, reporter Josh Massey takes a look at what could eventually be built at the Skeena Industrial Development Park should a deal with the Chinese go through.