IT takes 30 minutes to drive from Qingdao City's central Xianggang Road M. to the Qingdao High-tech Industrial Development Zone founded in 1992 in the north of Jiaozhou Bay.

Qingdao is now planning to expand the city-level zone and upgrade the 63.4-square-kilometer region on the Shandong Peninsula with innovative development, pioneering technology, energy-efficient infrastructure and investment-friendly policies. Seven core industries are expected to develop in the zone, including electronic information, marine science and technology, medicine and biotechnology, advanced equipment manufacturing, modern services, new materials and new energy, and energy-efficiency.

"The high-tech industrial zone is a core aim of Qingdao municipality to build a third-generation new city and it will become a major attribute of Qingdao apart from sailing and beer," says Zhao Shiyu, deputy director-general of the zone's administrative committee.

Through the development of the high-tech zone near Jiaozhou Bay, Qingdao will create and boost industries with high added value, improve industry structure, and strengthen local technology and innovation, Zhao says.

The committee is working on three expansion aspects: building infrastructure, attracting investment and drafting innovative policy.

In 2009, Qingdao invested 5.03 billion yuan (US$739 million) in building infrastructure. It covered an area of 11.63 square kilometers, 18 roads, 3 million square meters of lakes, and major buildings like an innovation center and apartments for talented workers.

Technology chain

One of the new investments to start-up in the zone has been an LED (light emitting diode) factory making sapphire chipsets, a key component used in energy-efficient solid lighting.

The LED project, which cost 400 million yuan, may upgrade technology levels on the production line later this year, according to Istarwafer Technology Co Ltd.

"The LED industry chain is close to complete in Qingdao and other places in Shandong Province like Weifang. That's why we set up facilities here," says an official from Istarwafer.

A 300-million-yuan plant manufacturing antenna for telecommunications base stations is expected to start operation next month.

"Transportation and logistics services are unique here. It does matter to me," says Fang Yongqiang, general manager of antenna manufacturing for Qingdao Utone Communication Equipment Co.

The Qingdao High-tech Industrial Development Zone is located in the north of Jiaozhou Bay, only 10 minutes drive to Qingdao Liuting Airport and 30 minutes to downtown. Qingdao Railway Station and harbor are also nearby. Transport will improve with construction of the Jiaozhou Bay Bridge, which connects the high-tech zone, downtown and Yellow Island (Huangdao).

In 2009, other new projects in the zone included a 2-billion-yuan special vehicle project, a US$90 million LCD (liquid crystal display) facility and a money management center in the Shandong Peninsula.

Zhao says the zone is not interested in heavy polluting or non-technology labor-intensive industries, despite the value level of investment.

The advantage of Qingdao's geographic location is its point on the Golden Triangle formed by China, Japan and South Korea, making it attractive to investors from the other two nations. Investors from Taiwan, Hong Kong and other overseas regions are also expected to increase, as well as domestic firms, like China CNR Corp and Hisence, Zhao says.

By 2012, Qingdao plans to invest 20 billion yuan in the zone. It's expected to attract 50 high-tech projects with employee levels of 20,000 to 30,000. The high-tech output will reach 220 billion yuan, which will account for 20 percent of the city's GDP.

The economic jurisdiction of Qingdao High-Tech Zone is at city-level, which means investors benefit from service tracking at every stage of a development's progress, through production, assessment, finance and approvals systems, in a government administration offering efficiency and transparency.

Preferential policies include tax incentives, subsidy support and finance support.

Special benefits

For example, certificated high-tech enterprises in the zone can benefit from an income tax rate of 15 percent. When levying tax, 50 percent of total expenses arising from research and development of new technologies, new products and new techniques can be deducted from taxable income.

Qualified science and technology business incubators and national university technology parks providing incubator clients can get land free of charge or can be exempt from property tax and urban land use tax. New software companies can enjoy exemption from corporate income tax in the first and second profit-making years and can reduce corporate income tax by half from the third to the fifth profit-making year.

Integrated circuit design enterprises can be regarded as software businesses and enjoy the same policy. IC manufacturing enterprises with investment of more than 8 billion yuan or manufacturing integrated circuit lines less than 0.25-microns wide can be levied tax at a rate of 15 percent.

Foreign staff who work for regional headquarters in the zone and need multiple entry and exit permits may apply for one-year visit visas. Senior management and R&D staff of regional headquarters, R&D centers and the world's top 500 enterprises will be offered subsidy incentives to purchase cars and homes.

Health benefit programs will be offered to highly qualified staff. Foreign staff relocating to the zone can settle the formalities in Qingdao and their children can study in schools in accordance with the Regulations on Children of Foreign Technical Staff Enrolling in Schools in Qingdao.

The zone committee, in cooperation with local banks, also plans to issue combined bills for small-and-medium enterprises which may need money during the initial development period, Zhao says.

The zone is constructed in sync with the natural environment, which includes numerous natural water systems, bays, estuaries and wetlands, thus providing residents and staff with a superb living environment. The zone committee is seeking projects mainly in the following seven sectors: 1. Electronic Information

Engaged in introducing and developing core and key technologies and manufacturing components and products with high added value and strong inter-industrial linkage by relying on current industrial and technological strengths in Qingdao's home appliance field. They need to dovetail with planned development into networking, end-product intellectualization and innovation. The focus should be on producing medium- to high-end products. The aim is to develop world-quality research and design in the electronics information industry.

2. Marine Science and Technology

Bring Qingdao's inherent advantages in marine technology and biological resources into practice: promote marine technology, develop marine biological products and materials. Also employ comprehensive use of seawater and deep-sea equipment manufacture. The target: a world-class base in marine science and technology.

3. Medicine and Biotechnology

Develop key bio-engineering industrial technology such as biological products and biological pharmaceuticals. Also engage in high-value utilization of other biological resources and development and manufacture of biological products and varieties of medicine. The target: to become a national development and manufacturing base for biological products.

4. Advanced Equipment Manufacturing

Introduce digital design and manufacture, environmentally friendly manufacturing technology and product manufacturing for large-scale industry. Introduce equipment and component projects essential to technology advancement/upgrade. The target: an advanced research and manufacturing base for the equipment manufacturing industry.

5. Modern Service Industry

Establish and introduce intermediary agencies in fields such as law, consultation, intellectual property, design, logistics, accountancy, finance and insurance. Introduce service facilities such as hotels and offices and set up support services in the zone.

6. New Materials

Enhance R&D of new material technology and products. Introduce projects, such as photoelectric information materials, environmentally friendly and high-performance rubbers and plastics, and chemical fibers. Expand industrial scale and aim to become a national materials research, development and manufacturing base.

7. New Energy and Energy-Efficiency

Accelerate the innovation and development of renewable and energy-efficient technology. Focus on R&D of efficient and low-cost renewable energy and energy-efficient technology packages. Promote energy-efficient industrialization and become a base for the research, development and manufacture of renewable and energy-efficient products.