The rising western China region is on its way to becoming a new market for steel enterprises. Western China is attracting more and more manufacturing enterprises to locate in the region on account of its comparative cost advantage and due to the rapid development of the local consumer market. The movement of downriver industries is also encouraging steelmakers to follow them.
It is a recognized fact that China's overall cost advantage is gradually disappearing in the world market. With the Chinese state starting to give more importance to people's living standards, environmental protection and the sustainable development of the national economy, all domestic enterprises have to increase wages, pay much more for land they purchase and for natural resources, and they have to spend more in efforts to reduce pollution.
The remarkable rising costs in the eastern and southern regions of China are providing an incentive for bosses to move to or build new plants in the comparatively rural western part of the country. In the west they find a plentiful labor supply at low cost, and also easily obtain favorable conditions from local government as industry growth in the region is in accordance with China's national development strategy.
As key markets in western China, the province of Sichuan and the city of Chongqing - both in the southwest - are setting examples. With the increase in average local family incomes in recent years, the purchasing power of people in this area has risen remarkably. Meanwhile, this area is also a traditional major labor export base in China.
So far, many local and eminent foreign enterprises have been building manufacturing plants here, including Toyota, Ford, Shanghai Automobile Group, Jialin motor, Changhong, and others. According to the latest plans of the local governments, Sichuan and Chongqing are expected to constitute the biggest manufacturing base for automobiles and automotive engines of the western area. Currently, the local production and sales of motorbikes occupy almost 50 percent of the national total. In addition, many local household appliance makers, including manufacturers of washing machines, refrigerators and air conditioning systems are transferring their plants to western China. Sichuan is now the second biggest manufacturing base for washing machines in China.
Following the abovementioned steel consumers, big steelmakers have also entered the region. From 2005, Baosteel, Wuhan steel, and POSCO have built steel processing and logistical centers here. To meet the steel demand in the region, the biggest local steelmaker Panzhihua steel is expanding its capacity and making efforts to go public. It is expected that more steelmakers will be giving greater attention to this regional market in the future.