If China is becoming the factory of the world, then Suzhou is now one of its top workshops. The city has come from almost nowhere to challenge even Shanghai as the most productive city in the country.
Suzhou recently became the world's top manufacturing point for laptop computers, it is a major center of semi-conductor production, and now has an enviable roster of resident multi-national companies.
The garden-like industrial parks, in which Siemens, L'Oreal, Hitachi, Philips, Samsung and dozens of other major firms have established their low-lying usually white factory complexes, are a million miles away from the delicate traditional Chinese gardens for which Suzhou was most noted for only 20 years ago. In fact, Suzhou was not an obvious place to become a key link in the world hi-tech economy. About 70km west of Shanghai, it is not a coastal city, it has no industrial traditions (unless you count silk production), and its labor costs, while reasonable compared to Shanghai, are no longer as low as they were, or as low as many other provincial Chinese cities.
But the city continues to suck manufacturing capacity out of other parts of the world, including even Guangdong province.
Success breeds success
Companies come, it would seem, because other companies have made a success of it, and success breeds success. So the genesis of the Suzhou manufacturing boom is a deal the city did with Singapore in the early 1990s, when Suzhou was probably in a worse position in terms of attracting foreign investment than, say, Ningbo. At least Ningbo has a port.
There are two main zones in Suzhou and thereby hangs a tale, but the end of the story is that Singapore's involvement in the first zone – the China-Singapore Suzhou Industrial Zone opened nine years ago – has dropped from 65 percent to 35 percent equity. The Chinese took over majority control with the Singaporeans getting a price based on an "international audit" of the asset value, Chinese officials say. The bottom line is that the Singaporean involvement allowed the zone to establish itself.
"The original reason for the success of the zone undoubtedly was the Singapore cooperation," said Xu Ming, Director of the Economic and Trade development Bureau of the China-Singapore Suzhou Industrial Park. "It gave a sense of confidence to investors, due to the credibility of the Singapore Government. But now they come because they can see how successful other companies that are here are."
The zone now boasts a growth rate of more than 50 percent per year.
The continuing success of the zone in attracting top multinationals, Xu said, is based on good infrastructure (no electricity blackouts this year at all in spite of the high temperatures, said Xu), reasonable costs, and efficient, streamlined administration. "Every commitment we make, we keep," Xu Ming added.
The China-Singapore zone is growing at more than 50 percent a year, with semiconductors, laptop computers and other hi-tech products leading the way. Zone officials say they believe that rate can be maintained for some years to come.
To meet the challenge of 21st century hi-tech manufacturing, Suzhou is reconstructing itself even faster than the frenetic average across China. It was once one of the most attractive old cities of East China with a depth of culture almost unmatched beyond Beijing. The old gardens were once the homes of rich mandarins and silk merchants, and the city was a major stop on the Grand Canal, an important economic artery in old China. While he almost certainly never came to China, Marco Polo mentioned Suzhou as being the Venice of the East, a measure of its fame and importance as a source of the Silk that made the Road.
The city has seen fast change before – it was a focal point of the Taiping Rebellion in the 1850s and 1860s, and it changed hands four times during the war, each time with horrific loss of life. But it was rebuilt, and by the early 20th century was renowned for the beauty of its streets and canals and the distinctive curved rooves of its buildings. By the 1970s, the old rectangular city wall was mostly gone, but the city itself was largely untouched, and delightful.
Then came the economic development of the 1980s and the old Suzhou was largely swept away. Singapore was the model of the future and urban renewal the order of the day. The key principles include regimented greenery and a conspicuous absence of older buildings. More effort is being put into the industrial parks than into preserving old Suzhou, which is probably not surprising. Let's face it, there is less money in tourist sites than in semi-conductors.
With new businesses moving in all the time, there is money to be made in the infrastructure to support them. The Japanese and Taiwanese particularly seem to be moving in to Suzhou to stay, and whole entertainment districts have been created to cater to the needs of Japanese businessmen – Downtown Street is a veritable Little Tokyo.
Eton House, a Singapore school operation, opened in Suzhou in September and expects to have 50 students by the end of the year, and 100 by the middle of 2004.
"Compared to Shanghai, which is already well-developed, Suzhou offers companies a fresh approach," said Geraldine Garland, Eton House Suzhou's principal. "It's burst and ready to go. And it's a pleasant city to live in as well as to do business."
The general manager of the city's top hotel, the Suzhou Sheraton, Robert Hogenstijn, said he had been surprised at the steady growth he had seen in the range and number of foreign companies operating in the city since he first came here in 2000. The Sheraton plans to add another wing next year to cope with business growth, with the number of rooms rising from 328 to 415.
"New companies are coming in all the time," he said. "From the hotel perspective, I can see a lot of activity. It's one-stop shopping. The land permits, and approval process? companies get a lot of pro-active help to set up businesses. Plus the costs are low. Cost is an important factor." Hogenstijn said the city had a clear long-term vision to make itself into "a world center for electronics manufacturing."
It is succeeding. The reported numbers vary, but something close to 100 Fortune 500 companies now have operations in Suzhou of some kind. Hitachi now has eight separate factories in the Singapore zone, and Suzhou is currently seeing a huge influx of medium-sized Taiwanese and Japanese companies, many shifting operations from Taiwan and Guangdong to take advantage of Suzhou's efficiency, low costs and attractive terms as well as the city's more central location from the perspective of the Chinese domestic market. Semi-conductors feature prominently in the influx.
And the Singapore zone is not alone in the process. The second major zone in the city, Suzhou New District, has manufacturing facilities from such multinationals as Dupont, Motorola, Sony, Siemens and Philips. There are at least a dozen projects with investments of more than US$100 million each.
Here is a statistic which highlights the progress being made: Suzhou reported a year-on-year foreign trade growth of 75 percent, or US$21.5 billion, in the first five months of 2003. That's a lot of semi-conductors.
HK-Shanghai flights increase
China Eastern Airlines and Dragon Airlines both added flights to the Shanghai- Hong Kong route in anticipation of increased demand. China Eastern increased its daily flights from Shanghai to Hong Kong from 11 to 15 and Dragon Air increased its weekly flights between the two cities from 60 to 74.
Chinese taking to North Korea
As many as 40,000 Chinese tourists now visit North Korea every year, with many of them saying they want to see what China looked like during the Cultural Revolution. Aside from the country's anachronistic feel, Chinese-run casinos are also a major draw. Gambling is illegal in China.
Chinese currently travel to North Korea via a 90-minute flight from Beijing, or a train from Jilin province.
EU approved for tourists
China and the European Union (EU) signed a tourism agreement allowing Chinese tour groups to travel to Europe. The 'authorized destination status' (ADS) agreement will simplify visa procedures for Chinese tour groups to Europe and also sets up a mechanism for repatriating illegal immigrants, officials said. Last year some 1.3 million European tourists came to China but only 650,000 Chinese tourists went to Europe.
Hotel expansions show optimism
France's Accor group opened a Sofitel in Hangzhou, launched its budget Ibis chain in Tianjin in November and will also operate Novotels in Beijing and Nanjing. A Crowne Plaza Hotel opened in Beijing and another will open in Shanghai's Pudong district next year. Kempinski will manage a 492-room hotel in Chengdu which will open next spring and Shangri-la will operate a 40-story hotel in Haikou scheduled to open in 2005. Ramada International recently opened a new hotel at Shanghai's Pudong Airport.
Hyatt to quadruple presence Hyatt International announced that it plans to quadruple its presence in China by 2008 with the aim of making China its biggest market outside of the US. The USbased luxury hotel chain aims to have around 16 hotels in China in the next four years. Hyatt hotels will open in Beijing, Chongqing, Hangzhou, Shanghai, Sanya, Ningbo and Nanjing.
Negotiations are under way for hotels in Guangzhou, Shenzhen, Changsha, Chengdu, Xiamen, Shenyang and another in Beijing.