Two of the three district governments involved in the project have no plans to offer tax breaks or preferential policies to companies investing in the project, which is expected to cost more than 100 billion yuan (US$12.195 billion).

But unlike the well-developed districts of Pudong and Huangpu, Hongkou District will continue to offer old-style incentives to help lure 500 million yuan in investment, Acting Hongkou Governor Cheng Guang said.

While the city has created an overview of what the 20-kilometer riverside -- from Fuxing Island to the Lupu Bridge -- should look like when development is complete, the district governments will work separately to design their own areas of the project.

Lu Jian, a property adviser with Debenham Tie Leung, questions Hongkou's decision to use preferential policies to attract investors.

"In terms of attracting foreign investment to develop the Huangpu River, it is more important for the local governments to properly plan their allocated areas than to offer preferential policies," Lu said.

That is the line of thinking adopted by Pudong and Huangpu, two of the city's most well-developed, and well-known districts, but it is a tough sale to a mediocre district like Hongkou, even though it was the first jurisdiction to express interest in developing the riverside, back in 1992.

Last year, Pudong's exports rose 20 percent over 2000 to US$11.5 billion, accounting for 42 percent of the city's total, according to Zhou Hanmin, deputy governor of Pudong District.

"The successful opening-up of Pudong is the key reason why Shanghai has been recently ranked as the country's No 1 city in terms of competitiveness," said Zhou.

Xu Jianguo, governor of Huangpu District, said his jurisdiction boasts well-preserved Western-style buildings along the Bund and is home to one out of every four expatriates living in Shanghai. Both factors are luring foreign cash.

"China is now a WTO member and we should do business according to its norms instead of relying on special policies," Xu said.

Hongkou hopes to transform its run-down image by building an international shipping terminal and environmentally friendly residential areas along the Huangpu River over the next decade.

"Any investment in Hongkou's part of the project near the northern section of the Bund will be paid off in five years at most," Cheng said during the annual meeting of Shanghai People's Congress.

Cheng has promised that foreign investors will make substantial profits from the project and has already published a list of preferential policies to lure investors, including tax exemptions.

The Hongkou District government is in charge of a 364-hectare area -- enclosed by Zhoujiazui Road and Haining Road to the north and the Huangpu River to the south -- which runs along the river for 2.6 kilometers.

Currently, approximately 80 percent of the banks along the 113-kilometer river are packed with old warehouses, docks and rundown factories.

( February 27, 2002)