The Binhai New Area, a major center for China's financial reform, is also emerging as an incubator for industries that adapt military products for civilian use.

Authorities said this week that several projects in various industries would be carried out in the region, which is located 120 km southeast of Beijing.

According to a strategic cooperation agreement signed on Tuesday between the Commission of Science Technology and Industry for National Defense (COSTIND) and the Tianjin municipal government, several projects are currently being considered in the aviation, aerospace, shipbuilding, electronics, new materials and new energy sectors.

COSTIND director Zhang Qingwei said the agreement charts out future cooperation and sets priorities. It also defines specific policies and measures.
The agreement encourages venture capital firms, investment companies and the Bohai Industry Investment Fund - China's first locally invested private fund - to invest in military firms that produce items for civilian purposes.

Local companies, including private firms, can participate in the shareholder reforms of military enterprises through equity investment, to diversify the shareholding of military firms, which remain largely State-owned, Zhang said.

At the same time, research and development (R&D) centers will be built to facilitate the development and application of technologies with civilian and military purposes, he said.

The COSTIND will provide subsidies and discounted loans to such projects.

Similarly, the Tianjin municipal government will offer a range of incentives that include capital support for R&D centers and service-sector firms. There will also be tax relief for these types of organizations on revenues generated from R&D, technical transfers and consulting.

Military companies, once designated by the local authorities as new hi-tech enterprises, will get a concession on corporate income tax, paying just 15 percent instead of the usual 25 percent for both domestic and foreign-invested companies.

The agreement formalized what had been the practice for some time in this port city.

The area is already home to a production base for China's new-generation heavy-lift launch vehicle, developed by the China Aerospace Science and Technology Corporation, and a shipbuilding and repair base built by the China Shipbuilding Industry Corporation.

COSTIND deputy director Sun Laiyan said that integrating military industries with regional economic development was a significant task of the commission. The COSTIND has signed cooperation agreements with Shaanxi and Hubei provinces, Beijing and Chongqing.

The Shaanxi provincial government and the COSTIND, for example, have already jointly developed industrial parks and production bases for aerospace, aviation and engineering projects and channeled over 100 million yuan ($13.6 million) to support 40 projects.

(Xinhua News Agency December 20, 2007)