(SINGAPORE) Of late, Singapore companies have been bypassing China's high-growth coastal region, the country's main attraction for foreign investment, and heading straight for the inner cities on the western front, which observers say are likely to open up with an even bigger bang than did their coastal counterparts.

Already among the top five foreign investors in Chongqing, Chengdu and Shaanxi, the main industrial and commercial hubs in western China, Singapore companies - many of them small and mid-size enterprises - have stepped up their presence there, especially in the past two years, according to Lim Meng Hui, regional director for western China at International Enterprise Singapore.

'The growth rate of Singapore's investments in Sichuan (of which Chengdu is the capital city) really took off in 2005 and 2006 when they increased 26 per cent and 40 per cent (respectively),' he told BT on a trip back from Chengdu, where he is based.

Figures compiled by IE Singapore show Singapore's cumulative contractual direct investment in Sichuan jumped 26.6 per cent in 2005 to US$633.8 million, and 39.8 per cent last year to US$886 million.

Cumulative contractual investments in Sichuan, Chongqing and Shaanxi rose 29 per cent in 2006 to US$1.51 billion, with more than half of these investments sunk into Sichuan.

According to Mr Lim, this sum accounts for about three-quarters of Singapore's investments in western China. In the past five years, Singapore investors have pumped US$786.3 million into Sichuan, Chongqing and Shaanxi, up 108.9 per cent.

Actual Singapore direct investments in the three western Chinese provinces increased 123.8 per cent, or US$556.7 million, over the same period to US$1.1 billion last year.

Sichuan accounts for more than two-fifths of the total. Annual growth in actual investments was 18.1 per cent in 2005, and 25.8 per cent in 2006. The number of Singaporeans in Sichuan, Chongqing and Shaanxi jumped by more than 55 per cent, from 408 in 2001 to 633 in 2006, according to IE Singapore.

China has recently named Chongqing and Chengdu as 'pilot reform cities' in a push for co-ordinated rural and urban development through reforms in all sectors.

The move, following in the footsteps of southern Shenzhen, comes after Shanghai's Pudong and the Tianjin Binhai New Area were similarly selected as pilot reform cities.

'We are looking at a very large land area because these two cities are much larger than Pudong and the Tianjin Binhai New Area,' Mr Lim noted.

Beijing, intent on closing the economic gap between the coastal and inner cities, is unhappy with the progress the inner cities have made so far.

It is giving local authorities in Chongqing and Chengdu free rein to draw up more investor-friendly policies and is pumping more money into infrastructure development.

In Chongqing alone - China's largest city with a population of 38 million - the central government has earmarked $120 billion to beef up infrastructure to accommodate the shift of more people from rural areas in the next five years. Many construction projects - including roads, bridges, railways and airports - will be up for bidding.

And the developers are not the only ones bypassing the coastal cities and heading straight for western China. UOB Bank and OCBC Bank have opened branches in Chengdu, while Great Eastern Life has established a presence in Chongqing.

Smaller Singapore players like BreadTalk, Ednovation, Eaton House, Crestar, Old Chang Kee are also making their mark in the food, retail and education businesses in western China.