In a vast muddy cornfield scarred with the tracks of heavy vehicles, two young engineers pore over a construction blueprint showing a grid of 100 rectangular factory blocks. Here on the outskirts of Zhengzhou, the provincial capital of Henan in China's interior, Foxconn, the largest company and exporter in "the workshop of the world" has staked its future on a mammoth new industrial complex.
New powerlines are being erected and roads built to the site under the watchful eye of local farmers who daydream about the entrepreneurial opportunities that up to 200,000 new workers in the area might present.
Taiwan-based Foxconn Technology Group, which includes its flagship Hon Hai Precision Industry, makes gadgets for a constellation of global brands including Apple, Dell, Nokia and Hewlett Packard.
Most of that production comes from its plants in Shenzhen, in the Pearl River Delta area, one of the three major Chinese coastal manufacturing hubs, along with the Yangtze River area around Shanghai and Bohai Bay north of Beijing.
With this leap into Henan province, 1,600 km (1,000 miles) from Shenzhen, Foxconn is expanding aggressively inland, where wages are lower and workers more plentiful, keeping mostly higher-value, engineering, and R&D work in China's coastal areas. It will have as many as 1.3 million workers in China by the end of 2011, up from 920,000 now, company officials say.
Foxconn is by no means alone. Intel, the world's biggest chip maker, opened a $600 million plant this year in Chengdu and Hewlett-Packard built a laptop factory in Chongqing, both cities in the western province of Sichuan.
Cheaper labour is not the only attraction. The worker has become the consumer in China, with the government determined to raise household incomes and reduce wealth disparities. Locating factories nearer to markets makes dollars and sense. "Most of the villagers here think it's a good thing," said Meng, Xiangting, 46, a farmer prying stones from a wall with a crowbar for use on his own crumbling home. "They've guaranteed jobs for anyone in the area between 18 to 50 years of age. I'm not interested. I'd like to open a small shop for the workers instead."
With factories closer to home, children of farmers like Meng won't have to make the annual trek to distant coastal regions and live desultory lives as migrant workers in factory towns.
A rash of suicides at Foxconn's Shenzhen plant which the company said weren't work-related but which victims' families blamed on tough conditions, helped fuel a wave of labour unrest - and has become yet another motivation to move operations into the less volatile interior.
Foxconn's move will touch off a mini-boom in an ancient Chinese capital perhaps best known for the 5th-century Shaolin temple that is home to its famous brand of Kung Fu.
Foxconn's suppliers will have to relocate as well. The workers will need housing and places to shop. Some may even be able to afford cars to commute to work on the new highways being built to Foxconn's mega-factory and its satellites.
A foreman supervising a team of men in straw hats working on a road linking to Zhengzhou's highways and the international airport said they had paved 4 km in three weeks. "Foxconn is amazing," he said. "They work extremely fast."
A lot of people are working fast in China's rapidly developing interior.
Manufacturers are building huge factories in the provinces to escape rising costs in the coastal zones that helped China become the world's largest exporter. Big customers such as Wal-Mart are buying more goods from the new inland factories in a relentless quest to find low-cost suppliers.
New high-speed rail links are shrinking distances for shuttling goods in and out of China's heartland.
The move inland by manufacturers coincides with a parallel trend in urbanisation. Local governments are competing ferociously to build and expand cities on farmland to lure back millions of migrants from the coast in a project that could absorb more residents than the entire population of the United States in the coming decades.
The drive is part of a strategic economic shift to rebalance China's economy - and by extension the rest of the world's - to rely less on exports for future growth and more on domestic consumption. The Obama administration has been pressing China to do just that.
"Our lives will completely change," said Meng, the farmer. "Next August, they'll be able to bring in over 100,000 workers. With more people, there'll be more businesses."
While a smaller percentage of Chinese coastal manufacturers are moving operations offshore - garments to Bangladesh, shoes to Vietnam, some experts see a more pronounced move inland.
A recent survey by Hong Kong's Trade Development Council of 2,400 manufacturers found a quarter would choose to set up new factories in inland China, twice that of those who would opt for cheaper alternatives in Asia. Around half said they would stay in China's coastal hubs.
China's industrial model has relied on efficient and nearby supply chains along with good transportation infrastructure that make it more efficient to keep operations onshore.
Factory production in China will continue to move to the interior, said Bruce Rockowitz, president of Li & Fung, one of the world's leading sourcing firms that caters to clients such as Wal-Mart. "That's the future, and maybe we'll get another 20 years out of that."
Workers in Foxconn T-shirts, clocking in for the night shift along unlit paths at Foxconn's temporary plant near Zhengzhou, say they are part of the advance guard of what is expected to be a massive redeployment of the company's workforce.
The official Xinhua news agency reported recently that the Foxconn plant under construction would produce mainly Apple iPhones, generate more than $13 billion in annual exports and have a production capacity of 200,000 handsets a day.
Wei Wei, deputy director at Personnel Exchange Centre, a major job recruitment centre in Zhengzhou, said Foxconn had asked his firm to help recruit 100,000 workers within three months time in preparation for the first phase of the giant factory's expected opening next year.
Factories in coastal China, such as Foxconn's sprawling operations in Shenzen, have been powered by an army of 130 million or so migrant workers streaming in annually from inland Chinese provinces. They are not given permanent resident rights, however, and they often move on.
Labour shortages have begun to be a problem for these traditional export centres as the growth of the working-age population slows. Moreover, a younger generation of migrant workers, better educated, more tech-savvy, and less accepting than their parents were of life in the factories - low pay, gruelling hours and sometimes martial workplace rules - have launched wildcat strikes and protests.
"To be very frank and open, I think we were caught by surprise by the structural changes in the worker composition," Louis Woo, special assistant to Terry Gou - Foxconn's reclusive and enigmatic Taiwanese chief executive - told reporters at a company-sponsored rally last week at its Shenzen plant.
"We haven't changed fast enough to meet the changing needs and new aspirations of this new generation of workers," said the silver-haired and rake-thin Woo, wearing blue suspenders and Prada glasses.
"China is changing and that's why Foxconn is also changing." Recent strikes at Japanese car assembly plants in China, which resulted in a doubling of wages in some cases, have prompted other multinationals with intensive labour needs to seek a more stable and plentiful workforce inland.
"China has had a very unusual situation for a number of years with just this incredible supply of workers. That is now coming to an end," said Arthur Kroeber of Beijing-based consultancy Dragonomics, who says the number of young Chinese workers aged 15-24 years of age will likely fall by a third in the next 12 years, giving more bargaining power to this younger blue-collar generation.
Labour is plentiful in provinces such as Henan, China's most populous with over 100 million people - more than the population of Germany.
At a recent Foxconn recruitment fair in Zhengzhou, thousands of hopefuls clamoured for places, excited at the prospect of working for the Fortune 500 firm.
Already, a fifth of Foxconn's workers hail from Henan. By moving workers closer to their families it might help ease a problem that plagued the company during the first half of the year - the dozen suicides mostly involving young workers leaping off buildings at its Shenzhen complex.
Zeng Jundan, one of the workers at Foxconn's temporary plant who previously worked for the company in Shenzhen, said he was happier. "It's not bad here - my mom and dad can come see me every day if they want to," he said.
Like all manufacturers, Foxconn depends on a network of suppliers. Unlike others, Foxconn is big enough to force a new ecosystem to develop around it.
Jackie Ho, a Taiwanese industrialist making TV screens and mobile phone accessories in Luohe town, an hour's drive from Zhengzhou, said the new Foxconn facility would help foster fresh industrial clusters in Henan.
He is hoping to capitalise on what he terms the "Foxconn effect", along with other downstream suppliers that will likely migrate up from the Pearl River Delta.
"Most suppliers to Foxconn have no choice," Ho said. If Foxconn moves they have to follow or it will just buy from another factory. I believe that after two years Foxconn may not have to purchase and transport (its components) from the south anymore. Many firms will be here."
Foxconn is what some supply chain experts describe as a "dragon head" industry. It can nurture and sustain small- and medium-sized firms that otherwise wouldn't have the economies of scale or management mindset to move inland themselves.
"The key manufacturer is the dragon head, and there's always a supply ecosystem that goes along with it," said Edward Tse, the Greater China chairman of consultancy Booz & Co. and author of a book "The China Strategy" detailing the country's business landscape and how multinationals might capitalise.
"Without a dragonhead like Foxconn it's hard to get that kick-start," Tse said.
In several villages ringing Foxconn's Zhengzhou sites, red banners with pithy slogans were hung over roads and painted onto brick walls by local propaganda authorities, hailing the manufacturing giant as an economic saviour.
"Welcome Foxconn. Swiftly move towards a well-off society" read one.
The government is clearly hoping that as companies and their "ecosystems" move to the countryside, more of China's 1.3 billion residents will progress from a life of subsistence to one of greater domestic and consumerist comforts in landlocked provinces, perhaps better described as mid-sized nations rather than regions.
"Manufacturing is something that a lot of local cities and regions can relate to because it's hard; people can see that in terms of the plants, the labourers, the products and so on," said Tse, who has advised multinationals on their China production and sourcing strategies.
"So a lot of inland areas see this as a natural area of growth. You need to find jobs for these people who've been urbanised, instead of them continuing to be peasants working on paddy fields. This is usually the first starting point like Shenzhen had done 20 years ago."
Government statistics show industrialisation in inland provinces has outpaced established manufacturing hubs such as Guangdong in recent years.
The number of enterprises with annual revenues of over five million yuan ($736,000) in Guangdong province near Hong Kong grew by an average of some 24 percent in 2008 to 52,574 firms. The same figures for Henan were 38 percent and 18, 700 firms. The year before it had only been 13.6 percent.
On the green northern rim of Guangdong, beyond the mountains and into the land-locked region of Ganzhou in Jiangxi province, LED factory owner Kong Xiangzhong is one of the new breed of industrialists who have staked a future away from the cluttered expensive coastal manufacturing regions of China.
A minnow compared with Foxconn with around 100 workers, Kong has nevertheless positioned his inland factory as a potential gateway to the mainland China market, spurning the usual export track. Almost all his energy-efficient LED lighting products will be trucked and sold entirely within China from Ganzhou.
"For us factories doing domestic demand, we hope that we can expand everywhere in China, to the west, the centre and the east," said Kong, a self-made businessman who started out as a production line worker in a Guangdong factory nearly 20 years ago.
Around 400 km (250 miles) north of the Pearl River Delta, Ganzhou sits at the crossroads of three of southern China's most economically vibrant provinces; Guangdong, Fujian and Hunan. Besides its relative coastal proximity, Ganzhou's surrounding counties are home to nearly 8 million residents with minimum wage levels around 40 percent cheaper than in Guangdong, making it a natural manufacturing spillover region for factories from the Pearl River Delta.
"The geographic location is good here," said Kong, who recently set up his LED lights factory in Ganzhou. "We can get to the Yantian port (in Shenzhen) for shipping in about four hours. It's also quite close to Shanghai," added Kong, speaking slightly accented Mandarin Chinese in a sign of his provincial roots.
Like many ambitious inland areas, Ganzhou has invested millions in new infrastructure, including a new airport, highways and railways to bolster the transport and logistics infrastructure so crucial to businesses.
This region, too, has attracted a dragon head company - Nasdaq-listed contract manufacturer Flextronics. It will soon open a factory employing 11,000 in one of Ganzhou's new industrial estates to make transformers and power adaptors.
Rob Roohparvar, president of the Flextronics unit running the plant, estimates costs will be at least 10 to 15 percent cheaper in Ganzhou than the southern coast where the conglomerate and key rival of Foxconn runs its flagship China facility.
In the next five years, Zeng Weilin, vice director of the Ganzhou Development Zone, expects the region's GDP to quadruple and the number of factories to rise from 300 to over a thousand. Focusing on domestic buyers can help producers mitigate another risk: the appreciating yuan.
"The exchange rate has no effect on us, because our main market is 100 percent focused in mainland China," said Simon Lu Xingping, the head of Maniform, a fast-growing Chinese lingerie manufacturer headquartered in Shenzhen, which is building a 6,000-worker factory in Ganzhou.
Maniform is one of a batch of emerging Chinese manufacturers that started off as exporters or producers for overseas brands, picking up skills and know-how until they reached a point where they felt they could develop a brand themselves.
These Chinese competitors, often nimbler, highly entrepreneurial and more flexible than multinationals, have almost all targeted their lucrative home markets and have begun to set up vast retail networks and factories across the country.
Notable examples include those in the sportswear industry including Li Ning, Anta and Hongxing Sports. Global brands like Spanish clothing giant Zara - famed for the success of its rapid product development cycles - and sportswear firm Puma are reportedly planning huge expansion plans to target China's future middle class consumers.
"The internal business of consumption is competing now with the export business for space, for people, and it's driving the costs up in China. So that party (of cheap labour and exports) that we've had in the last 15 years is going away," said Rockowitz of Li & Fung.
But challenges loom for those moving to inland China.
Yifan Hu, chief global economist at Citic Securities, said the inland business environment is hampered by poor infrastructure, high transportation costs and a lack of developed free markets.
Ho, the Henan factory owner is critical of inconsistent and discretionary government policies that make it difficult for businessmen to map out longer term strategies and commit investment to the region, particularly smaller firms without the clout of a Foxconn.
"The legal environment isn't so good and everything is decided face to face with officials. You don't really know what you're getting. Their (preferential) policies need more clarity," Ho said.
Ho's transportation costs are almost double those in the Pearl River Delta, with the nearest port being the Lianyun port in Jiangsu province, almost 600 km (375 miles) away. Still, he says, transportation costs now only make up around 3.5 percent of his overall production costs so it's still manageable.
"There will be some shifting of products away from southern China to both the interior of China and outside of China," said Henry Tan, the CEO of Luen Thai Holdings, one of Hong Kong's largest listed textiles groups.
"However there will still be a portion of products that stay in the Pearl River Delta and the Yangtze River Delta, purely because of the convenience of supply chains, because all the fabrics, all the trims, all the development are there."
The waning of government stimulus efforts, which have done much to spur growth in China's rural areas over the past year or so, could also hamper the move inland. Local governments with shrinking budgets have less scope to scatter sweeteners to attract industry, Hu said.
Zhengzhou like other cities borrowed heavily to bankroll a blitz of marquee infrastructure projects, such as a new convention centre, renovation of the business district and high-end property developments.
China's switch to a domestic consumption model will take time, even as exports contribute less and less to China's GDP - now around 10 percent, Hu estimates.
"Some people think exports will not be the driver of China's economy in the future. I agree," Hu said. "But China's exports are still very strong, accounting for 20 percent of the world's exports. The share may remain the same but the growth may decline." She said the export sector's real contribution was to employment, rather than economic growth.
"No matter if it's high value-added or low-value-added they have to recruit more people ... so as exports slow down I think the employment issue will really become quite intensive, maybe in the next one to three years, before they really transform to a domestic consumption-oriented economy."
Back at Foxconn's headquarters in the Shenzhen district of Longhua on a late sunny afternoon last week, tens of thousands of young workers cast off their uniforms and inhibitions, put on costumes, glitzy bikinis and bright wigs for the company-sponsored "Treasure Life" celebration.
At the rally, aimed at mending the company's image and improving worker morale after the suicides, Foxconn unveiled the "transformation" of its human resources management and new industrial strategy in China.
Hosting reporters for a rare visit inside the factory, Woo said the usually secretive Foxconn would now "open up". As China's largest employer, Woo said he hoped this new approach to Chinese industrial management would influence other firms.
Besides pledging to improve the lives of its workers through measures including wage hikes, capping overtime work at 36 hours a month from 80 and setting up 24-hour counselling services, Woo said the future for Foxconn lay in moving its factories closer to China's workers.
"We want to take out the 'migrant' from migrant worker," he said. Besides its Henan plant, Foxconn is also building new factories in Chengdu and Chongqing in Sichuan province, while it is negotiating with several other Chinese provinces about building other industrial campuses.
As the workers wended their way through the 3.3 square kilometer Longhua industrial fortress that pioneered the manufacture of some of Apple's iPhones and iPods, there was the sense of an era coming to an end.
The self-contained industrial city with its banks, bakeries, post offices, restaurants, shops, parks and dormitories catering to more than a quarter of a million workers, will eventually evolve into a higher-end research and development campus.
"Shenzhen will have more engineers than (production) line workers" in the future, said Woo, a development resonating with Shenzhen's overall economic blueprint to upgrade its industrial base and move up the value-added chain.
Some workers in the crowd that gathered for an open-air concert on a large artificial grass sports ground spoke of new hope for the future - away from the coast.
"Everyone's talking about the new factories. If they move, I definitely want to move with them," said Yang Ning, a chirpy 22-year-old factory girl from Chongqing, one of the sites of a new Foxconn factory.
"Life here in the Pearl River Delta has been tough," she added as workers chanted effusively behind her. "I'll be glad to leave".
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