China Firms Agree to $45 Billion Projects in Guizhou

Dec. 27 （Bloomberg） -- China’s southwestern province of Guizhou signed almost 300 billion yuan （$45 billion） of contracts with state-owned companies as part of government efforts to spur economic growth in poorer inland regions.

China Petrochemical Corp., Aluminum Corporation of China Ltd. and China Railway Group Ltd. were among companies that signed the 47 contracts, according to a statement published in the People’s Daily newspaper today. All of the projects are slated to begin before 2012, it said.

Premier Wen Jiabao has pledged to increase growth in the nation’s central and western provinces as part of the government’s bid to spur domestic consumption and to narrow the income gap between inland regions and coastal cities such as Shanghai and Guangzhou. Guizhou’s per capital gross domestic product last year was one eighth that of Shanghai’s.

“Guizhou is very rich in coal, bauxite resources,” said Heng Kun, a Shanghai-based analyst at Essence Securities Co. “Companies can enjoy much cheaper labor costs building plants in the western provinces.”

Projects announced for Guizhou include a 52 billion yuan petrochemical and coal chemical complex to be constructed by China Petrochemical Corp., the parent of Hong Kong and Shanghai- listed China Petroleum & Chemical Corp.

Aluminum Base

Aluminum Corp of China Ltd. also agreed to build a 17.5 billion yuan base that includes alumina and aluminum smelting plants and a bauxite mine, according to the statement.

Bauxite is the ore refined to make alumina, a semi-finished material to make aluminum, which is used in cars, aircrafts and window frames.

The alumina plant is capable of producing 1 million tons a year, the aluminum smelter has an output capacity of 400,000 tons a year, and the bauxite mine can produce 2 million tons, according to the statement. The facilities will be located in the city of Qingzhen, it said.

Chalco, as the company is also known, has another 1 million ton alumina plant in production in the city of Zunyi, also in Guizhou province.

Shen Hui, a spokesman from Beijing-based Chalco, couldn’t confirm the project immediately when reached by Bloomberg.

--Baizhen Chua, Xiao Yu. Editors: John Liu, Stephanie Wong