What’s a company to do if it finds itself priced out of China’s premium cities? For firms looking to set up manufacturing operations in Shanghai, the solution is to find a niche in the increasingly fertile Yangtze River Delta surrounding the financial capital.
A case in point is Changzhou, a quiet and quaint city of 3.4 million people about an hour outside of Shanghai by train. It has been luring small- and medium-sized enterprises (SMEs) to set up shop in the city with tax incentives and cheap labor, particularly firms with light manufacturing operations.
An example is Wolco, a German company, which wanted to set up a medium-sized production facility in Shanghai for its labeling solutions business. However, the property market in the city was overcrowded, and what property was left was poorly managed and too expensive. Changzhou was different.
“[Changzhou’s] infrastructure, government support and, most importantly, communication within the zone really set the city apart,” said Tomi Olujic, Wolco’s product manager.
Wolco chose a space in Wujin Industrial Zone, one of the city’s six economic development areas. As part of the deal, the Wujin authorities gave their new tenant consultation on everything from internal design to investment options in setting up their facilities – which is essential for SMEs often lacking the financial resources of larger corporations.
Logistically, the city is also well-connected, with access to two airports with daily flights to the major cities like Shanghai and Beijing in addition to accessible trains, railways and ports to major cities. Forty-six Fortune 500 companies have operations in Changzhou, including big names like Toshiba, Kohler and Belkin.
The city’s human resources pipeline is also well stocked. The Changzhou Science and Education Town located 70,000 university and technical institute students and graduates 20,000 a year. These graduates, trained in machine operation, textiles manufacturing and information technology, go on to find jobs in the city’s industrial zones.
The four-year-old Wujin Industrial Zone leads the way among Changzhou’s industrial zones. Last year it contributed 15% of the US$2.4 billion in foreign direct investment the city raked in. Tenants, mainly with light manufacturing operations, currently occupy about 24 square kilometers of Wujin’s 105 sq km. Clients include General Electric and Goodyear.
In 10 years, the Wujin municipal government, which operates the zone, intends to create sections with sections of luxury villas, malls and even an 18-hole golf course.
“[Cities like] Suzhou and Wuxi only want to attract big-name companies, but we don’t care about that,” said Allan Hu, project manager of the America section from the Investment Promotion Department for the zone.
“For a small company with US$500,000 or US$1 million, it may be impossible to get into an industrial zone, but we always open our gates to lease land or provide workshops. [What sets us apart] is our professionalism, and our staff is [multilingual and] fluent in English.”
On the other side of town, US company Apitera Group is building Changzhou’s sole privately-owned business park, across 200,000 sq m, in Qishuyan district. The California Technology Park faces fierce competition from state-owned business parks like Wujin, who can offer tenants up to two years rent-free. But, according to Ross Curtin, Apitera’s international business director, the local government has been very supportive. Part of the reason for that support is the fact that foreign firms like Apitera can educate potential investors more effectively than state-led efforts.
“What we’re trying to do is promote Changzhou,” Curtin said. “We don’t want to get into a price [competition].”
Compared to satellite cities Suzhou and thriving first-tier city Shanghai, Changzhou still has a lot of catching up to do, but the rapid growth of the city and its thriving foreign investor base are indicators that the city is in a league of their own.