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|Friday, December 08, 2000, updated at 22:37(GMT+8)|
Shanghai Aims to Be Nation's IT HubShanghai's economic leaders recently crafted an unprecedentedly strong financial incentive package for integrated circuits (IC) and software businesses to help the city realize ambitions of becoming a leading information technology production centre in the Asia-Pacific region.
The city has granted strong tax reductions on materials imports for global IC and software multinationals who either claim Shanghai as their regional headquarters or who transfer their key technology production lines to Shanghai.
IC and software makers also stand to benefit from a 500 million yuan (US$60.2 million) fund set up to support their technology research and export endeavours, the city announced Thursday.
Part of the money will be devoted to a seed fund, which will be farmed out to global venture capital firms, investment firms and listed enterprises to invest in start-up businesses, officials said.
Meanwhile, the government will also list some IC endeavours as key governmental projects and offer to pay 1 per cent of the interest rate on any bank loans which those IC companies use in order to run advanced production lines.
Analysts gave the package a thumbs-up, saying they saw it as a lifeline for the money-starved IC and software sector.
They also said it would help lift morale, as the announcement underscores the government's strong commitment to the industry.
"IC and software are the key businesses in the information technology industry. Shanghai will spare no efforts to offer such enterprises strong support," said Chen Liangyu, executive vice-mayor, in a major IT conference held in Shanghai recently.
Shanghai has earmarked 100 billion yuan (US$12 billion) - one-fourth of the total industrial fixed assets investment in the next five years - to prop up the information technology sector, already considered a pillar industry.
Chen expected the IT sector to take a 7 per cent piece of Shanghai's gross domestic product pie this year, from 6.1 per cent in 1999. The share will lift to about 15 per cent five years later, he predicted.
As the recent moves indicate, the focus will be on Shanghai's IC businesses, which right now lag far behind global giants like Intel, Microsoft and Sun because of a lack of key chip products and a sub-par capability for technology renovation.
The Shanghai IC design and renovation companies are at present too small to compete on a global level.
Shanghai has decided to build up a chain of IC businesses covering design, manufacturing, sealing and packaging, and even exports, said Chen, adding that the Zhangjiang High-tech Park and Caohejing Development Zone will be the centre of these efforts.
Eight to 10 new advanced IC plants will be opened in the next five years to strengthen the production capability, he revealed.
Chen is urging more global IT firms to join in the campaign. "Shanghai needs multinational firms to transfer key technology and advanced management expertise as well as capital," he said.
Shanghai has used foreign investment to set up two advanced IC production lines. The Grace Semiconductor Manufacturing Corporation Ltd, a US$1.63 billion operation launched this November, is the largest overseas investment project in Shanghai's Pudong.
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