Seth Jacobs is vice director and lead consultant for the Wujin High-Tech Industrial Zone’s (WIZ) investment promotion bureau. WIZ is located in the southern part of Changzhou in Jiangsu province, and has investment from companies such as Bosch, Goodyear and Amphenol. Jacobs spoke to China Economic Review about how the industrial zone is targeting renewable energy industries to safeguard its future growth.
Q: How has business been at WIZ?
A: For 2009, foreign direct investment was US$1.2 billion and our growth rate was 105%. The reason for the jump was that, as China was experiencing a quick recovery, there were both Chinese and foreign companies with large projects and new manufacturing capacities that they needed to get started in 2009.
Q: With so much new business, how did this change the make-up of tenants at WIZ?
A: We experienced growth in agricultural machinery in 2009 and also in the high-tech sector, LED lighting, manufacturing for wind energy – like wind turbines and wind blades. Also, in the renewable energy field, we’ve had expansion in solar businesses investing in our zone. And these renewable energy industries are now our target industries.
Q: Why are you targeting them?
A: As China is booming in manufacturing, and low-cost manufacturing is shifting to other countries, China wants to go up the manufacturing chain. High-tech manufacturing is a natural progression. We’ve had local solar companies, local wind power companies, and Taiwanese LED companies (such as Lite-On and Epistar) that made initial investments in our zone and that is creating an industrial base and supply chain for other related manufacturers. When other related companies come to our zone, they already have a lot of these parts and things that they need to manufacture their goods. Also, the labor and HR is easier when you have similar companies invest. It’s creating an industrial base when other companies around you are producing similar goods and working in the supply chain.
Q: What kind of impact did the downturn have on WIZ exactly?
A: There was a decrease in foreign direct investment and in overall investment. If we look at the numbers, we usually average a 50% growth rate, and in 2008 we only had a 30% growth rate. We were only in recession for a year at Wujin.
Q: But through your own observations, what kinds of things did you see at Wujin that made you feel the effects of the downturn?
A: A lot of the projects from European and American companies were put on hold. We had a lot of feedback from them, though – that they were still interested in expanding capacity but they would have to put it on hold for some time. Now we’re starting to see them talking about these expansion projects again.
Q: What stage of recovery is Wujin currently at?
A: I would say we’ve already recovered. Just from the amount of investment – we were up 105% in 2009, and for 2010 we’ve targeted income at US$1.4 billion.
Q: How well connected is WIZ in terms of infrastructure?
A: I would say it’s one of the best. We’re 160 kilometers from Hongqiao Airport and the new Huning high-speed railway which connects Shanghai to Changzhou started running on July 1. There’s another highway and new rail line that’s set to be completed in one year, also linking Shanghai to Changzhou.
Q: Is there a sufficient supply of local labor to support WIZ’s tenants?
A: We have a local Jiangsu pool of labor as well as workers from nearby provinces. We have all levels of skills, from unskilled to college-educated. There are six universities in Wujin district with 80,000 students in total. Every year we have 20,000 graduates and they have the option of participating in a training program for different types of manufacturing jobs.
Q: There’s been a lot of labor unrest in China recently. What kind of impact has this had on your industrial zone?
A: We haven’t seen any impact. We believe that the recent labor unrest is just an example of the natural process of an economy growing. As an economy grows, labor costs need to go up.
Q: Has there been any talk at WIZ to increase wages or to provide more support to workers?
A: No, but we have facilities set up for our local laborers’ living and dining, as well as hospitals and shops. We control things so stores cannot come in and inflate prices to a level that makes everyone uncomfortable. We control the cost of goods, the cost of food and control the zone so we won’t have any issues. That’s just one example of the way we try to prevent [labor unrest] from happening in our zone.
Q: For you, the vice director of the promotion bureau, what’s the next goal for Wujin?
A: To become a manufacturing base for the wind, solar and LED industries, as well as to bring in more industries like rail, communications and engineering machinery. It’s important that we target renewable energy industries that are just coming into China.