China Regional Spotlight: Wuhan, Hubei Province
By Shirley Zhang
Aug. 27 – With the Yangtze River running through the city, Wuhan was once nicknamed the “River City.” In addition to that, Wuhan has been referred to as the “Chicago of China” due to its role as a transportation hub for central China. It was even, at one point, described by way of an ancient Chinese idiom from the Ming Dynasty as “九省通衢 (jiu sheng tong qu),” which means that Wuhan is easily accessible by water or land from nine provinces – Sichuan, Shanxi, Henan, Hunan, Guizhou, Jiangxi, Anhui, Jiangsu and Hubei.
Today, Wuhan is still the transportation hub of Central China. In addition, being the capital of China’s Hubei Province, Wuhan is also recognized as the third largest technological and educational center in China behind Beijing and Shanghai. It is also a key finance, commerce, logistics and cultural center of Central China, even being colloquially known as the “golden key” to the enormous markets located within China’s central areas.
In 2012, Wuhan’s GDP reached more than RMB800 billion and grew at an annual rate of 11.4 percent. Among which, RMB30.1 billion was contributed by the city’s primary industry, growing by 4.5 percent, and RMB387 billion was achieved by the city’s secondary industry, with a growth rate of 13.2 percent. The remaining RMB383.3 billion was earned by the city’s service sector which grew by 10 percent year-on-year.
Further, by the end of 2011, foreign investors from over 80 countries have made investments in Wuhan, among which 5,973 foreign-invested enterprises have been established in the city with actual foreign capital injections totaling US$22.45 billion. Also, by the end of 2011, there were a total of 84 Fortune 500 companies that have invested in Wuhan, including Wal-Mart, Shell, General Electric, General Motors, HSBC, Pepsi and IBM.
The average yearly disposable income in Wuhan is RMB23,738.09, which is expected to grow at an annual rate of about 14 percent. There are now 158 large and medium-sized supermarkets in the city in addition to a combined 4,128 convenience stores, department stores and specialty stores, making Wuhan an increasingly growing consumer market with great potential.
As a city with more than 3,500 years of history, Wuhan was previously broken up into three notable towns in Chinese history: Wuchang, Hankou and Hanyang.
Wuchang was the political, educational and cultural center; Hankou was the transportation hub and commerce and trade center; and Hanyang was the cradle of China’s modern industry. Nowadays, despite the administrative divisions having been changed, the major functions of each area basically remain the same.
Currently, Wuhan is divided into two main parts: the central town and the new town. According to statistics released by the government of Wuhan in 2012, the GDP growth rates of the districts in Wuhan’s new town were higher than those the central town across the board. It is estimated by the municipal office of the National Development and Reform Commission that the development zones and the six districts in Wuhan’s new town will generate at least an extra RMB120 billion in 2013 over what it achieved in 2012, leading it to become a major support network for the industrial development of the city.
- Central Town: Jiang’an District, Jianghan District, Qiaokou District, Hanyang District, Wuchang District, Hongshan District, and Qingshan Distrcit
- New Town: East and West Lake District, Caidian District, Jiangxia District, Huangpi District, Xinzhou District, and Hannan District
Note that the Jiang’an, Jianghan, Qiaokou and East and West Lake districts were all split from the old Hankou area of Wuhan.
Wuhan offers many preferential policies for foreign investors, including tax incentives, discounted loan interest rates and government subsidies. The preferential policies are generally offered to enterprises in the manufacturing and service outsourcing industries, and are offered to all companies that set up their headquarters within the city.
Further, financial incentives are provided to foreign-invested banks, and the local government also provides for more convenient guidelines for imported talent and their families with regard to visa formalities and obtaining the relevant permits.
The city of Wuhan was founded primarily on the iron and steel, petrochemical, food, automobile, optoelectronics and equipment manufacturing industries. In addition to these pillar industries, Wuhan has further determined to put the development of its strategic emerging industries at the top of the priority list over the next few years.
Strategic emerging industries refer to:
- New information technology;
- Energy saving and environmental protection;
- New energy;
- New materials;
- High-end equipment manufacturing; and
- New energy automobiles.
According to statistics released by the Wuhan Municipal Science and Technology Bureau, high-tech industries in the city have also realized annual growth rates of 26.2 percent during the “11th Five-Year Period (i.e., 2006-2011).” Further, approximately RMB11.37 billion has been granted to major scientific projects, and 329 patents have been awarded by 2012.
There are also over 400 enterprises that have been identified as high-tech enterprises in the city, among which 24 of them have realized annual outputs of over RMB1 billion.
Wuhan currently has three state-level development zones and three functional parks. They are as follows:
- East Lake High-Tech Zone: focus on optoelectronic technique, biopharmaceuticals, energy and environmental protection
- Wuhan Economic & Technology Development Zone: focus on automotive and electronics industries
- Wuhan Airport Proximity Economic & Technology Development Zone: focus on food import, logistics and high-tech electromechanical products
- Wuhan New Port: functions as a shipping hub in the middle reaches of the Yangtze River
- Wuhan Chemical Industry Park: functions as a base and supply center for petrochemical products as well as a logistical base for chemical products
- Wuhan East Lake Scenic Area: functions as an ecotourism destination
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
You can stay up to date with the latest business and investment trends across Asia by subscribing to Asia Briefing’s complimentary update service featuring news, commentary, guides, and multimedia resources.
Dezan Shira & Associates' founder Chris Devonshire-Ellis compares the cost of doing business in China, India and ASEAN. He talks about staying compliment in the Chinese and ASEAN markets and discusses recent regulatory changes, including financial and due diligence issues affecting US companies interested in expanding into China and ASEAN.
Dezan Shira & Associates alumni Manuela Reintgen from its Beijing office, divulges the integral information necessary to handle individual income tax in China. Manuela explores three main topics: First she explains who pays, when they pay, and what individual income tax is levied on.
Adam Livermore discusses the HR and Payroll situation in China. In this particular session, he took questions the audience had from the first podcast and provided clarifying, enlightening information.