A new section of Qionglai, a city in southwest China's Sichuan Province, has become the first-ever example in China of a city built and run by a private enterprise.

This move comes after a decision made by the Qionglai City government two years ago that permits the Qionglai-based Ruiyun Group to invest in building a new section of Qionglai.

A 50-year operating agreement was offered to the group to handle the city's public services, including handling water, electricity and gas, as well as operating the city's public transportation, taxis and advertising sectors, the China Youth Daily reports.

The group was chosen through a public bidding process, officials said.

Xie Zhidi, Party secretary of Qionglai, pointed out that the Ruiyun Group is only authorized with the right to build and run public services, but not with any governmental functions.

After two years of construction, a residential area of 70,000 square meters was completed in the new city for farmers who had relocated there.

Meanwhile, the main roads of the new city, Yudai Street and Fenghuang Avenue, were built.

It is expected that sports facilities, schools, department stores and other houses will be finished near the two main streets in five years.

Before the Ruiyun Group's involvement, the construction of Qionglai was at a standstill because of restrictions of its laggard economy.

"The disposable income of the city government is only 120 million yuan (US$15 million) per year," Xie said.

"So the current cooperation between government and private enterprises will help the government solve the problem of limited funds, as well as enhancing efficiency of construction," the mayor said.

But he said whether the enterprises will be successful is still an unknown, although officials will fulfill promises to them and create a favorable environment for them to do their work.

"To run a city as a whole is really a bold act," Li Yongkang, general manager of the Ruiyun Group, said.

He mentioned that the company needs at least three to five years before it can earn any money through the city's land, water and gas.

The project is expected to need investment of 1 billion yuan (US$120 million) and half of the investment must be made in the first five years.

But the group's plan to finance itself through being listed cannot be achieved in the near future because the central government would not allow that plan.

Nonetheless, the project has been given great importance by the Sichuan provincial government, and was listed as a key project last year, officials said.

With 15 companies, the Ruiyun Group has long been engaged in the natural gas and water sectors in Qionglai. The group's income was 300 million yuan (US$36 million) last year.

Wang Yiqian, a professor with Sichuan University, pointed out that whether relevant policy is stable is the biggest problem enterprises face. It needs to be more cautious as there are not enough laws to regulate the opening of the infrastructural facility construction sector.

(China Daily April 19, 2004)