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Guangzhou, China, Nov. 9 (Bloomberg) -- Guangdong will this
weekend woo foreign investors by pitching itself as the gateway to
China, as Shanghai and its hinterland capture more direct
investment.

     The southern province, still struggling with the fallout from
the collapse of its biggest investment company, has invited 25
foreign advisers to discuss its economic development. The meeting
comes less than a month after Shanghai hosted world leaders at the
Asia-Pacific Economic Cooperation summit.

     ``We'll talk about the world economy, primarily focusing on
China, the World Trade Organization and the Summer Olympics in
Beijing,'' said William Kimsey, chief executive of Ernst & Young
LP and one of the meeting's advisers.

     China, the most populous nation, is this weekend expected to
gain permission to join the WTO next month. With economic growth
likely to expand 7.2 percent this year, from 8 percent last year,
foreign companies are queuing up to do business.

     ``China has such a strong domestic economy,'' Kimsey said.
``When that's blended with an infusion of capital that WTO will
undoubtedly attract, it's going to be quite an exciting time.''

     Guangdong needs to lure investors and shake the stigma of
recent bankruptcies in the province at a time when Beijing and
Shanghai have been expanding.

                         Defaults

     The collapse of Guangdong International Trust & Investment
Corp. and Guangdong Enterprises (Holdings) Ltd. in 1998 and 1999 -
- when the province's main fund-raising and investment arm
defaulted on 21 billion yuan ($2.5 billion) of debt -- sparked an
exodus of foreign investors.

     Loans to Chinese companies by Hong Kong banks dropped 28
percent in the 18 months from the end of 1998, according to the
Hong Kong Monetary Authority.

     ``Guangdong's in for a period of transition,'' said Kenneth
Courtis, vice chairman for Asia at Goldman Sachs Group Inc.
``Guangdong is not going to run away from its obligations.''

     Others aren't so sure. ``They have reacted very slowly to the
GITIC problems,'' said Gordon Chang, author of `The Coming
Collapse of China.' ``We've had a long series of supposed reforms,
but we haven't seen that much change.''

     Guangdong has other problems. It invested in technology parks
to help it rival the Silicon Valley, but has had to cope with
plunging global demand for computer-related products, exacerbated
after the Sept. 11 terrorist attacks in the U.S. that dented
consumer confidence.

     In Guangdong's favor is its location. Bordering Hong Kong, it
has an edge over other Chinese cities in the race for foreign
capital.

                         Rise Of Shanghai

     Foreign companies establishing regional headquarters in Hong
Kong reached a record in the first half of the year as insurers,
including Axa Asia Pacific Holdings Ltd., and other service
providers bet business prospects will increase after China joins
the WTO. The number of companies with regional headquarters in the
city rose to 944 as of June 1, passing the previous high of 903,
in 1997, said Invest Hong Kong Director-General Mike Rowse.

     Still, Guangdong, like Hong Kong, is concerned about the rise
of Shanghai, which has attracted increasing numbers of companies
and investors. HSBC Holdings Plc, founded in Hong Kong and
Shanghai 136 years ago, plans to open a new service center in
Shanghai to handle account processing in the first quarter of
2002, employing 250 staff.

     Hong Kong and Guangdong are joining forces to meet the
challenge presented by Shanghai. The two governments are talking
about extending the opening hours of the border crossing between
Hong Kong and Shenzhen to allow easier access.

     Another concern for both Hong Kong and Guangdong is improving
ties between Taiwan and the mainland. Taiwan is considering
allowing its civilian aircraft to fly over China for the first
time in more than 50 years, paving the way for direct trading and
travel links across the Taiwan Strait.

                         Other Challenges

     Direct flights would tap much of the market of more than 3.6
million passengers who now travel between the two economies every
year through third countries, mainly Hong Kong.

     And other provinces, like Fujian, are expanding faster than
Guangdong. China National Offshore Oil Corp., the country's No. 3
oil producer, said in September it's in talks with Fujian province
-- which borders Guangdong to the east -- to build China's second
natural gas import terminal to boost sales in coastal cities such
as Shanghai.

     The parent of Hong Kong-listed CNOOC Ltd. plans to build the
$1 billion liquefied natural gas plant in China's fastest-growing
province and link it via a 2,000-kilometer pipeline to markets
along the coast and to its other planned LNG terminal in Guangdong
in the south.

editor: 张春华

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