CONFIDENTIAL
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railways. Both cities said they had an adequate supply of electricity, and claimed to be able to provide electricity for industries seven days a week. No doubt their closeness to North China's coalfields gives them an advantage over many other cities in this respect, but
economic development has also progressed far more slowly than in dynamic Guangdong, where industrial enterprises are being set up faster than their demand for electricity can be
satisfied.
87.
We were more impressed with Dalian's ETDZ, which has attracted a large
number of Japanese investors, including Canon, Marubeni, and Toshiba. The Canon factory
which we visited was the company's largest investment in the world and possibly larger than
Canon's own operation in Japan. On the other hand, like most other Japanese investments
we had seen in our previous visits to China, this one was a wholly-owned operations rather
than joint venture with local interest, and it was basically an assembly operation. This suggests that there will be little or no technology transfer to local Chinese companies, and
that North China is regarded by the Japanese investor as merely a convenient source of cheap land and labour close to Japan. In Hong Kong, on the other hand, companies like Mita and their suppliers were happy to enter into sub-contracting arrangements with local companies and had passed on their technology to these companies.
88.
Besides Dalian's Canon factory, we also visited one of the four breweries in Qingdao producing Tsingtao beer, probably the city's chief claim to fame outside China, and two state-owned factories in Dalian, one producing garments and the other refrigerator equipment. The brewery, a joint venture between a number of Chinese partners, is doing reasonably well, but we felt that some of its policies were unenterprising. It should be having its cans produced locally, instead of ordering them from Guangzhou, and should be collecting used bottles as well as producing new bottles. The garment factory we visited in Dalian was a showcase factory, with numerous awards, but again, in our opinion, was unimaginatively run. Production and sales were fixed by the state, and the factory had no discretion to develop or market its own products. The refrigerator equipment factory, although also a state-run enterprise, was more impressive. It has been freed from state
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