BEIJING, Oct 15 (Reuter) - China will soon open more cities in its vast, undeveloped and landlocked interior to foreign investors but will not allow more special development zones, the director of the Office for Special Economic Zones (SEZs) said.

Hu Ping told the China Daily Business Weekly on Sunday that Beijing would soon authorise the opening of more inland cities as part of a strategy in its 1996-2000 Ninth Five Year Plan to narrow a yawning wealth gap between booming coastal areas in the east and the remote and poorer west.

The SEZ is deluged with applications from interior towns to win the "open city" label that carries preferential policies - such as 24 percent income tax for foreign-invested enterprises compared with 33 percent in other cities, Hu said.

More than 1,000 Chinese cities are open to tourists, but only 359 of those are open to foreign investment. The number of such cities in the 18 inland provinces and regions that make up two-thirds of China is only about 40, Hu said.

"Provinces and autonomous regions in the landlocked middle and western part of China are desperate for their turn to develop," the Business Weekly quoted Hu as saying.

Beijing has already decided to designate Baoji in northern Shaanxi province, Mianyang and steel town Panzhihua in southwestern Sichuan province along with Zunyi and Liupanshui in southwestern Guizhou as open cities, he said.

Mudanjiang and Jiamusi in northeastern Heilongjiang province on the border with Russia, Guilin in southwestern Guangxi province and Ili in westernmost Xinjiang that borders Kazakhstan will also become open cities.

However, the State Council, or cabinet, was not in a mood to approve new state-level economic and technological development zones, in which income tax for foreign-invested firms is slashed further to just 15 percent, Hu said.

He declined to say whether any exceptions would be made for applications from areas in China's hinterland.

China already has 32 such zones and 18 applications from inland provinces have been received.

The open city label was crucial for inland development, Hu said, citing examples of interior cities that had lost foreign investment to competitors with the open city tag. "It's time to make changes," he told the newspaper. He cited Shiyan in central Hubei province, headquarters of China's Second Automotive Works. Lack of open city status forced its French partner, Chevron, to select the provincial capital of Wuhan instead of Shiyan as the site for a joint venture.

However, poorer interior provinces could now benefit from the faster growth of their wealthier coastal cousins, Hu said.

For every 100 yuan ($12) injected into fixed assets in the east, 18 yuan ($2.2) came from abroad. However, the ratio in the interior is a paltry 2.0 yuan ($0.24) in foreign investment for every 100 yuan, Hu said.

Rumours have been widespread that Beijing plans to cut many preferential policies, including attractive tax breaks, in its five coastal SEZs and the Pudong area of Shanghai to lure foreign investment to the more backward interior and away from richer coastal areas.

Vice Premier Zhu Rongji said earlier this month China would not change fundamental policies governing the SEZs, but may make adjustments.

Officials say Beijing is reconsidering many preferential policies granted to the SEZs and have hinted that Beijing plans to withdraw many gradually to ensure greater parity with the rest of China.