So far, Kunshan Development Zone has persuaded 30 to 40 labor-intensive enterprises to leave when their contracts expire. To help them find a new location, in 2004 Kushan joined forces with Lianyungang, a city 500 kilometers away.

Even among the new investors, the ones Kunshan found inconsistent with its goals were persuaded to settle for Lianyugang. Ten such enterprises have set up shop in Lianyungang.

"We couldn't convince as many enterprises we thought we could because some of them came to us for the industrial advantages of the Yangtze River Delta," says the Kunshan official. "But we believe this is the way to go."

Regional balance

The restructuring in the advanced zones made imminent by the policy changes has had one very positive macroeconomic effect: it has benefited the less-developed regions, which have been lapping up the projects driven from or rejected by the advanced zones.

Finding no takers in the established industrial zones, foreign investors have been forced to locate in Central and Western China, says Liu.

The Ministry of Commerce has also been encouraging this redrawing of the industrial map. This month, it held a "project-matching event" in Guangzhou Province, in which each development zone in East China presented two to three enterprises ready to locate in the development zones of West and Central China.

The ministry and the China Development Bank have also lined up loans of up to 15 billion yuan to be distributed in the next five years on infrastructure of national and some key provincial development zones in the western and central regions respectively. The ministry has also pledged to support these zones with infrastructure and labor training.

As they say, every cloud has a silver lining.

Zhan Lisheng from Guangzhou contributed to the story£®

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