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An export processing zone (EPZ) designed to accommodate the 2.5-billion-dollar chip plant proposed by US computer chip giant Intel Corp. in Northeast China's port city Dalian officially went into operation Thursday, after passing authentication by the Chinese government.

The move shall pay the way for the formal beginning of the construction of the chip plant, which has been schemed for August, company and government sources here said.

The EPZ, covering 600,000 square meters, passed inspection by a panel of experts from 10 ministries and departments of the central government, including the General Administration of Customs, the National Development and Reform Commission, and the Ministry of Land and Resources.

An EPZ is an industrial development area specifically designed to facilitate the manufacture of export products and services. Tariffs and quotas are eliminated and bureaucratic requirements are lowered in order to attract companies.

"Intel can enjoy preferential taxation policies and lower its costs in importing raw materials and exporting products, as its new plant will be built in the EPZ," said Zhang Zhinan, head of Dalian Customs.

Intel announced on March 26 in Beijing that it would build a 2.5-billion-dollar semiconductor plant in Dalian, Liaoning Province, making the company one of the largest foreign investors in China and raising its total investment in the country to nearly four billion US dollars.

"Intel had proposed establishing an EPZ for the plant while negotiating with the government at the very beginning, and the government agreed," said Tang Zhongde, an expert on semiconductor integrated circuits and Chinese negotiator for Intel's Dalian project.

Chinese regulations stipulate that an EPZ should be set up in a State-level development zone, its annual turnover of processing trade should exceed 100 million US dollars, and it should be abolished if there is no investment within three years.

The EPZ project had been advancing on schedule with the support of the Dalian municipal government, which indicated the Chinese government had honored its commitment, said Zhang Yifan, a spokeswoman for Intel (China).

Intel's new chip project will be located in a high-tech zone north of Dalian city proper with an area of more than 160,000 square meters.

The company's first factory in Asia, it will become part of Intel's network of eight factories worldwide that produce 300-millimetre integrated wafers after it starts operations in the first half of 2010.