Exploring Wenzhou, Zhejiang – A Thriving Business Hub for Foreign Investors

Wenzhou in the coastal part of China’s Zhejiang offers an array of opportunities for trade and investment, and has rapidly become a key hub in the Yangtze River Delta’s economic zone. We discuss the city’s economy, industries, and competitiveness and provide an overview of the preferential policies available which makes investing in Wenzhou a wise choice for foreign businesses and individuals.

Wenzhou (in Chinese 温州), formerly known as Wenchow, is a prefecture-level city in China’s Zhejiang province. Specifically, Wenzhou is located in the extreme southeast corner of Zhejiang, bordering Lishui to the west, Taizhou to the north, and Fujian to the south.

Wenzhou is a significant port city on China’s southeast coast and one of the three most economically developed districts in the province. The city holds a significant role on China’s southeast coast and hinterland due to its strategic position in the Yangtze River Delta’s economic zone and its close connections to Shanghai.

From an economic point of view, Wenzhou is often considered the cradle of China’s private economy because of its extensive private capital reserves and vibrant private finance industry.

Wenzhou is also the birthplace of several emigrants to Europe and the United States, many of whom are entrepreneurs who started restaurants, retail, and wholesale businesses abroad. Wenzhou people make up a significant number of ethnic Chinese residents of Italy where, in some regions like Tuscany, they account for 90 percent of all Chinese residents.

For this reason, Wenzhou is among the earlier promoters of the sister city project in China, representing one of the most exciting and innovative aspects of municipal foreign policy. Being one of China’s fourteen open coastal cities, Wenzhou established sister city relationships with Ishinomaki, Japan, as early as 1984.

By the end of April 2020, Wenzhou established sister city relations or friendly exchanges with 32 cities across 22 countries, including Japan, Italy, the United States, the Netherlands, Australia, Austria, India, and the United Kingdom.

This allows Wenzhou to create comprehensive interactions in the fields of business and commerce, science and technology, culture, education, and sports while exploring new avenues for the city’s economic development.

Economic overview

In 2022, Wenzhou’s GDP reached RMB 802.98 billion (US$112.72 billion), a 3.7 percent increase from the previous year, while the per capita disposable income of the city’s residents was RMB 63,033 (US$12,983.15).

The city qualified third province-wise in terms of GDP growth, behind Hangzhou, the capital of Zhejiang province, which reached US$284.67 billion, and Ningbo.

Wenzhou is striving to become an industry-driven economy: currently, the city’s secondary sector accounts for 32 percent of the provincial GDP.

Foreign trade and investment

In 2022, Wenzhou’s trade in goods reached a total value of RMB 294.96 billion (US$35.79 billion), a solid year-on-year increase of 22.4 percent. Exports accounted for RMB 25.02 billion (US$3.68 billion) exports, and imports reached RMB 44.75 billion (US$6.6 billion).

In 2022, exports from Wenzhou to the United States, Russia, and South America increased by 44.6 percent, 26.5 percent, and 39.6 percent, respectively, from the previous year.

Province-wise, Wenzhou classifies as the fifth largest exporter, behind Ningbo, Hangzhou, Jiaxing, and Shaoxing. In 2022, Ningbo’s foreign trade hit RMB 2.5 trillion (US$357.14 billion), while Hangzhou’s reached RMB 756.48 billion (US$112.11 billion).

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The city counted 2637 new enterprises with import and export rights in the city, including 714 enterprises with self-operated exports exceeding US$10 million in 2022, an increase of 153 over the previous year, and 71 enterprises with exports exceeding US$50 million.

Actual use of foreign capital grew dramatically by 66.4 percent in the first eleven months of 2022, reaching US$545 million. A total of 5,788 new FDI projects were signed throughout the year. In particular, the actual use of foreign capital in high-tech industries reached US$175 million, an annual increase of 41.5 percent.

Industry development

Aside from its robust commercial activity and private economy, Wenzhou has promoted the transformation and upgrading of traditional industries like electronics, footwear, clothing, cars components, pumps, and valves, as well as the development of strategic emerging industries like the digital economy, intelligent equipment, healthcare, new energy, and new materials.

In 2022, the added value of industries above the designated size reached RMB 146.78 billion (US$21.66 billion), an increase of 4.7 percent over the previous year.

New energy

Being a coastal city Wenzhou has rich wind, solar, and energy-efficient resource potential. As a result, the new energy sector in Wenzhou has been gaining momentum in recent years.

The city’s new energy enterprises above the designated size earned RMB 113 billion (US$16.37 billion) in total in 2021. Retail sales of new energy vehicles rose by 155.8 percent in the first six months of 2022.

Wenzhou’s traditional manufacturers of pumps, valves, and instruments have established themselves in the market by producing essential components for new energy equipment.

Chint Group, for instance, has established itself in the production of solar and photovoltaic energy, while TTN Power has accelerated research and development, production, and sales of solar modules, solar inverters, and voltage regulators, as well as market expansion into foreign countries.

According to the local government, Wenzhou’s prospects for the new energy sector will become even more promising with the launch of several projects with significant investment, cutting-edge content, and strong industrial initiative.

Digital economy

On February 22, 2022, Wenzhou released the 14th Five-Year Plan (2021-25) on the development of its digital economy.

According to the plan, the city’s digital economy will generate a total value of RMB 650 billion (US$102.83 billion) by 2025, accounting for 65 percent of its GDP. By the same year, the key sectors of the digital economy’s added value would total RMB 100 billion (US$15.78 billion), or 10 percent of its GDP.

To accomplish this, the city will have a leading role in the development of the East Wenzhou Digital Economy Corridor and build two related industrial clusters, one between northern Yueqing city and southern Rui’an city, and the second in Pingyang county.

The plan also focuses on the construction of three industrial chains for digital security, network communications, and intelligent computing. In doing so, the local government will attract 150 new digital economy projects, each worth over RMB 100 million (US$14.84). These projects will concentrate in specific segments of the industry, namely, the Internet of Things (IoT), digital security, network communications, industrial Internet, and blockchains.

Wenzhou was selected among the cities hosting the launch of the digital yuan app and ranked 27^th among the top 100 cities for the development of the digital economy in China. In April 2022, Wenzhou became the first city in Zhejiang province to accept tax payments in digital yuan. The move came after the announcement by the People’s Bank of China (PBOC) about the expansion of the nationwide digital yuan experiments to eleven new locations, including six cities in Zhejiang.

New materials

With a focus on creating an “industrial base for new materials in China,” Wenzhou is developing this sector by focusing on specific segments such as advanced polymers and premium metals.

In the past 10 years, the city has drawn several advanced polymer material production enterprises and projects, like new engineering plastics and special rubber, or metal material production enterprises and projects, such as various steel profiles.

The most relevant projects in the sector are concentrated in some development areas, such as Wenzhou New Materials Industry Science Park, Pingyang Advanced Polymer Materials Industrial Park, Yueqing High-end Metal New Materials Industrial Park, Longwan High-quality Special Steel Industrial Base, and Ouhai High-end Metal New Materials Base.

Wenzhou’s key development areas

Wenzhou is home to some national-level, provincial-level, and municipal-level key development areas, as well as 17 industrial parks, as per the official list released by the Zhejiang Provincial Department of Economy and Information Technology.

Wenzhou Economic and Technological Development Zone

The State Council established the Wenzhou Economic and Technological Development Zone (WETDZ) in 1992.

WETDZ has specific geographical advantages. It is situated 16 kilometers from Zhuangyuan’ao Deep Water Wharf and 25 kilometers from the Ningbo-Taizhou-Wenzhou Railway near the boundary of the provinces of Zhejiang and Fujian. The area is traversed by Binghai Avenue, Shenhai Expressway, and Subway S2.

With a population of more than 20,000, WETDZ is connected to three other nearby industrial parks and spans 140.18 square kilometers.

After 20 years of construction, WETDZ has evolved into a cutting-edge industrial park, combining traditional sectors like footwear and clothing with high-tech ones like biopharmaceuticals, equipment and electronics, IT, and new materials.

Wenzhou National High-Tech Industrial Development Zone

The State Council approved the development of the Wenzhou National High-tech Industrial Development Zone (also known as Wenzhou Zhenan Technology City) in August 2012.

Located in the middle of the Wenzhou Eastward Strategy, it covers an area of 28 square kilometers. The region has a cutting-edge, multi-level network of roadways, ports, railroads, and airports. The whole region is traversed by expressways, such as Airport Avenue, Ouhai Avenue, and the S1 line of the city railway.

The development zone focuses on four industries: laser technology, photoelectric energy, semiconductor lighting, and optical communications.

In 2022, the zone was home to 230 enterprises with output value greater than RMB 100 million (US$14,78 million), an increase of 27 units over the previous year. These businesses made up 78.1 percent of all businesses, a 2.1 percentage point increase. The zone will encourage more businesses to get listed as the number of operations grows.

Moving forward, the zone’s Economic Development Bureau will further update its incentives and rewards, including:

• RMB 10 million (US$1.48 million) to enterprises listed on the Shanghai-Shenzhen Main Board, the Growth Enterprise Market, and the Science and Technology Innovation Board;
• RMB 8 million (US$1.18 million) to enterprises listed on Hong Kong, overseas, and Beijing Stock Exchange;
• RMB 2 million (US$296,876) to the first enterprise successfully listed on the Beijing Stock Exchange and the Science and Technology Innovation Board;
• RMB 300,000 (US$44,531) to enterprises listed on the Zhejiang Equity Exchange Center Growing Enterprise Market; and
• RMB 200,000 (US$29,687) to Class A and B enterprises that have completed the shareholding system reform with a revenue of more than RMB 10 million (US$15.78 billion) in the previous year.

Ningbo-Wenzhou National Independent Innovation Demonstration Zone

Ningbo and Wenzhou are two major cities in southeast Zhejiang, located just about 200 kilometers apart. In February 2018, the State Council approved the establishment of a National Independent Innovation Demonstration Zone in the Ningbo High-tech Industrial Development Zone and Wenzhou High-tech Industrial Development Zone.

The zone aims to become a world-class new material and intelligent manufacturing innovation center based in Ningbo and a national-level life health and smart-equipment hub with Wenzhou as its core.

In addition, the government is working on transforming the area in an incubator for national private economy innovation and entrepreneurship. By 2022, the research and development (R&D) investment accounted for about five percent of the total GDP of the two cities combined.

The zone has welcomed a series of innovation centers, such as the Ningbo Joint Academy of New Materials, the Beihang University Ningbo Innovation Research Institute, and the Fudan University Life Science Innovation Center.

Several noteworthy projects of national relevance are also being implemented, including the Beidou Information Industry Base and the Digital Economy Industrial Center.

China Gene Medicine Valley

Wenzhou aims to raise the value of its health industry to RMB 100 billion (US$15.78 billion) by 2025. Thus, the city has accelerated the construction of the China Gene Medicine Valley (the valley), which is expected to play a pivotal role in the city’s health industry.

Established in 2019, the valley spans five square kilometers and represents an investment of RMB 15 billion (US$13.85 billion). It has already attracted several cutting-edge life science projects and teams of professionals and academics.

Uren Biotech, for example, is an innovative biotech company with a focus on providing services, such as storage, preparation, R&D of stem cells and immune cells, and R&D of gene technology and biopharmaceuticals. The company is currently working with the Hematology Department of the First Affiliated Hospital of Wenzhou Medical University. The latter is using the CAR-T technology created by Uren Biotech to treat patients with multiple myeloma.

In 2022, the valley hosted a total of 6,053 professionals, including two academicians, 69 national or provincial leading talents, and 187 doctoral and 589 master’s graduates.

Ouhai Eyewear Cross-border E-commerce Park

The Eyewear Cross-border E-commerce Park in Wenzhou’s Ouhai district is projected to provide the park with additional economic impetus in the coming years.

With a total area of 21,000 square meters, the Ouhai eyewear park is the only one producing professional glasses in Wenzhou. It began to attract investments in February 2018, and as of 2022, it is home to over 109 online stores on both Chinese and international e-commerce platforms, including numerous multinational companies.

The Park is home to more than 500 eyeglasses businesses that collectively employ 60,000 people and offers a seamless industrial chain that combines R&D, design, production, and sales.

It has received multiple honorary titles, such as the ‘National Professional Demonstration Base of Foreign Trade Transformation and Upgrading’ and ‘China Eyewear Production Base’.

As per official data, the Park achieved RMB 1.4 billion (US$207.76 million) in sales in the first half of 2022 alone, an increase of 54.37 percent over the same period in 2021.

Policies supporting foreign investment in Wenzhou

On September 19, 2022, Wenzhou’s Municipal Government released a document titled Implementation Opinions on Expanding the Opening up and Promoting the High-quality Development of Foreign Investment (Opinions) highlighting all the major policy initiatives toward attracting foreign investment.

Encourage foreign investment in key industries

Wenzhou’s government aims at encouraging foreign investment in strategic emerging industries, such as the digital economy, intelligent equipment, life health, new energy, new materials, as well as productive services, such as scientific and technological information, research and development, and design.

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To attract investment in these sectors, the government will support such projects with a mechanism of rewards and incentives, including:

• A reward of RMB 1 million (US$147,316) for every US$10 million of foreign capital used within one year period for projects in the service industry; and
• A reward of RMB 1 million for every US$5 million of foreign capital used in the span of one year for manufacturing projects, headquarters or regional headquarters projects of multinational companies, and industrial projects invested by Fortune 500 companies.

The maximum reward for a single project is RMB 30 million (US$4.4 million). If the same project meets the conditions of two or more rewards in the list mentioned above, only one reward will apply, but the applicant can opt for whichever is higher.

Extra guarantees available to major foreign-invested projects

Wenzhou is seeking to attract foreign investment in larger projects through a series of concrete guarantees. For example, major foreign-invested projects, companies’ headquarters, and R&D centers are eligible for comprehensive policy support in the areas of financial subsidies, land security, and energy consumption indicators. In particular:

• Foreign-funded projects with a total investment of more than US$1 billion will be listed as national major foreign-funded special projects, and become eligible for land use according to national indicators.
• Wenzhou’s local government will arrange for land use plans for foreign-funded projects with a total investment of more than US$100 million, investment projects of the Fortune 500, and self-built office property for the headquarters or regional headquarters of multinational companies.
• Foreign industrial projects with flexible land transfer demand will be granted with flexible years, allowing qualified industrial project land to be granted with a maximum term of 50 years, and enterprises will pay the land price in installments according to the contract.

Promotion of open platform and overseas collaboration

The Opinions call for key platforms, such as WEDZ and the Wenzhou National High-Tech Industrial Zone, to cultivate international industrial cooperation parks, and attract foreign investment establishing collaborative projects with countries like Germany, Italy, and Singapore.

With this objective in mind, Wenzhou has established overseas investment attraction offices in Beijing, Shanghai, Shenzhen, Hangzhou, Wuhan, and other places.

Promotion of foreign investment through intermediaries

The government aims at encouraging the creation of intermediate investment incentive mechanisms by counties, county-level cities, districts, and municipal functional regions.

The following criteria are implemented to reward intermediaries (aside from government agencies and civil officials) who successfully bring significant foreign investment into local projects:

• Those who bring in foreign investment in line with the city’s policy priorities, and if the actual utilized foreign investment is beyond US$10 million, can receive a reward of 0.5 percent of actual foreign investment in the year.
• Where the incoming projects are invested by Fortune 500 companies, an additional one-time reward of RMB 500,000 will be allocated.

Attraction of foreign talents

Foreign high-level talents who start their businesses in Wenzhou and their foreign spouses and children can enjoy certain privileges for their residence in China. Foreign high-end talents (Class A) who apply for work in China can be granted a Foreigner’s Work Permit with a maximum term of five years.

Investing in Wenzhou

Wenzhou, along with Suzhou and Dongguan, is regarded as one of the three model cities of post-reform China since it is the cradle of China’s private sector. Over the past four decades, the city has seen tremendous development and is frequently used as an example for China’s private-sector success story.

In recent years, however, Wenzhou has had to face a slowing economic growth and difficulty in industrial upgrading. To respond to these challenges, the municipal government has enabled a series of initiatives, by facilitating foreign investment and taking advantage of the city’s connection with Asia, Europe, and the US.

As Wenzhou continues to promote key sectors, such as the digital economy, high-end manufacturing, and new materials, foreign businesses and investors can take full advantage of its favorable environment to upscale their projects.

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