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The long-discussed relocation of Beijing-based steel giant Shougang took concrete shape with a new manufacturing base to be set up in neighbouring Hebei Province.

According to an agreement signed on Saturday, the country's fourth largest steelmaker and Hebei-based Tangshan Iron and Steel Corp (Tanggang), China's sixth largest steelmaker by output, will set up a new joint venture.

Shougang holds 51 percent of the shares, and the construction of the plant's first stage at an estimated cost of 67 billion yuan (US$8.3 billion) is expected to be finished by 2008, according to sources at Shougang.

The joint venture marks the official start of a complicated relocation procedure for 86-year-old Shougang and involves the resettlement of more than 120,000 employees.

The new factory will be located on a tiny island, Caofeidian, in the northern part of the Bohai Sea. Construction workers are reclaiming about 12 square kilometres of land from the sea about three times the original size of the island.

According to a local company in charge of land reclamation, the project started in February, shortly after the State Council approved the relocation plan, and will be complete by August next year.

Caofeidian is a natural harbour that can accommodate cargo ships with a capacity of nearly 300,000 tons, which would relieve raw-material transport bottlenecks and reduce costs.

Vice-Premier Zeng Peiyan attended the founding ceremony of the new company, named Shougang Jingtang Iron and Steel Corp, on Saturday.

Zeng said the relocation was an important effort by the central government to restructure the steel industry both in Beijing and Hebei.

As a cross-regional project, the new factory will also boost economic development around the Bohai Sea Rim, Zeng added.

The relocation of Shougang, long blamed as the capital's worst polluter with chimneys belching out thick clouds of smoke, is a major step towards solving the city's chronic air pollution problems.

According to the Beijing Municipal Bureau of Environmental Protection, the shifting of Shougang, located 17 kilometres west of Tian'anmen, can reduce emissions of more than 18,000 tons of inhalable particles annually.

Zhu Jimin, board chairman of Shougang, said in an earlier interview with local media that the relocation would not mean transferring Shougang's pollution to Hebei Province.

Zhu said his group was committed to operating the new plant in an environmentally-friendly manner with new equipment and technology to improve efficiency and cut waste.

(China Daily October 24, 2005)