What Makes Chengdu an Attractive Investment Destination in Southwest China
- 5th most populous urban agglomeration in China
- Sichuan province is 4th largest in China
- Area has become known for technology and innovation, industry transportation.
- Chengdu Shuangliu International Airport, one of the busiest airports in the world
- Chengdu is home to 49 universities and colleges
- The city has four industrial zones and presence of over 250 Fortune 500 companies
Following our recent article about Chongqing, our overview of China’s Southwest could not ignore another one of its crowning jewels, which like Chongqing has gained considerable importance, wealth, and media prominence in the past few years.
This time we are speaking about Chengdu, a sub-provincial city that is the capital of the province of Sichuan and one of the three most-populous cities in Western China, the other two being Chongqing and the city of Xi’ an.
Chengdu has a population of more than 20 million and at the end of 2020, had a GDP equal to RMB 1.7 trillion (almost US$267 billion) and a GDP per capita of RMB 106,850 (US$16,515), making it the seventh wealthiest city in China.
In terms of administrative divisions, Chengdu has direct jurisdiction over 12 districts, five county-level cities, and three counties.
Jinjiang district is Chengdu’s central business and shopping district, where most of the international companies and hotel chains are located. Jinjiang district will take the promotion of high-quality development, the creation of high-quality life, and the realization of high-efficiency governance as its development orientation. Its plans involve integrating with the construction of the Chengdu-Chongqing double-city economic circle and deepening the supply-side structural reform. The goal is that by 2025, the per capita GDP of this district will reach the level of moderately developed countries, and a more attractive, dynamic, and tasteful modern international city will be built. Jinjiang district is a “Sichuan Province Global Tourism Demonstration Zone”. There are 343 star-rated hotels and social hotels such as Jinjiang Hotel, Shangri-La, etc., with a total of 30,581 guest rooms and 43,607 beds.
The Qingyang district is also part of the central urban area of Chengdu municipality. It is named after the Qingyang Temple, and it serves as the political, economic, cultural, and financial centre of Chengdu municipality. It is also one the preferred zones for investment.
Jinniu district is the most densely populated area of Chengdu’s commercial market area and where scientific research institutes are located. It is home to the well-known “Western Apparel Fashion Base” lotus pond market and the only rail transit industrial park covering the entire industrial chain in the country. It also has the largest comprehensive commodity trading platform in the west, Chengdu International Trade City, the first geographic information industrial park with the theme of “Beidou” in the west; the province’s first “China Industry Award” and two “national indexes” of Chinese medicine and machine electricity hardware.
Chenghua was once a well-known old industrial base in Chengdu and its popularity made it at a time “No. 1 in the country” in cable production and optical glass production. “Made in Chengdu” products, such as Shuangyan refrigerators and Qianfeng water heaters sell well throughout the country. Chenghua is also one of the main technological innovation centres in the city; there are more than 40 colleges and research institutes based here.
Wuhou district is a “high-tech cultural zone” named by the State Council. It has successively been awarded as “National Sports Industry Demonstration Base”, “Tianfu Famous Tourist Counties”, “2020 China’s Top 100 Most Scholarly Counties and Cities”, and “100 Counties with Prosperous Night Economy in China”, “City” and “China’s Best City for International Business Environment” and other honors. In 2020, Wuhou district achieved a regional GDP of RMB 123.23 billion, an increase of 2.3 percent, an added value of RMB 104.9 billion in the service industry, an increase of 1.9 percent, a fixed asset investment growth of 8.9 percent, a general public budget income of RMB 9.524 billion, and the per capita urban residents disposable income increased by 5.8 percent.
Talking in length about other districts will be beyond the scope of this article. However, key areas in Chengdu are mentioned below due to their economic importance and relevance for foreign direct investment.
Chengdu Hi-tech Industrial Development Zone
Chengdu High-tech Industrial Development Zone (“CDHT”) was set up in 1988, and in 1991, it was approved as one of the first national high-tech zones. Following this, in 2006, it was listed as a pilot zone by the Ministry of Science and Technology. Finally, in 2015, it was approved by the State Council as the first national independent innovation demonstration zone in West China. CDHT is a comprehensive innovation reform pilot zone and the hub of pilot free trade zones in Sichuan. In 2019, CDHT contributed RMB 228.56 billion yuan (US$36 billion) to the GDP with a year-on-year growth of 8.4 percent, becoming the first industrial zone with a regional GDP of over 200 billion yuan (us$31 billion) in Sichuan. In the first half of 2020, the industrial added value of CDHT reached 119.14 billion yuan (US$19 billion), with a year-on-year growth of seven percent. This growth is higher than that of Sichuan and Chengdu in the same period. Also, on a side note, in the first half of 2020, Chengdu Hi-tech Zone registered total trade (import and export) volume worth RMB 240.35 billion, with a year-on-year increase by 26.2 percent.
CDHT focuses on three leading industries, which are electronic information, biomedicine and new economy, to build the “3+2” modern and open industrial system that covers the modern service industry and the industries of the future. It relies on the idea of an industrial functional zone and changes the organizational form of the economy with the industrial ecosystem and innovative ecological chain to promote the integration of industrial chain, value chain, supply chain and innovation chain, and update the industrial structure. By the end of 2019, CDHT had gathered 192,700 market entities, including 138,700 enterprises. There were 45,000 scientific and technological enterprises, nearly 40 listed companies, and 2,193 approved high-tech enterprises. The number of patents in CDHT granted reached 12,229, and the number of valid patents per ten thousand people reached 165.4.
CDHT ‘S mission is to develop high technology and achieve industrialization development. From 2020 to 2035, CDHT will be one of the world-class high-tech parks and become an important hub of the national innovation network. From 2035 to the mid-21st century, CDHT will become one of the world’s leading high-tech parks and one of the main sources of innovation in science and technology and industries all over the world.
Chengdu Economic & Technological Development Zone
Chengdu Economic & Technological Development Zone was approved as a state-level economic and technological development zone in 2000. In 2005, it was approved as a state-level industrial park for electronic components, and finally in 2010, it was approved by the Ministry of Industry and Information Technology as a National New Industrialization Demonstration Base of automobile industry. It is located in Longquanyi District in the eastern outskirts of Chengdu, and it represents a key area for the opening-up and industrial development of Chengdu, and even Sichuan. It is also regarded as a modern manufacturing base and a new city for scientific and technological innovation and industrial restructuring. Besides, it is the main part of Comprehensive Function Zone of Chengdu’s automobile industry. Chengdu Economic & Technological Development Zone is building a modern industrial ecosystem. While automobile manufacturing industry is its pillar industry, the zone is also keen to pilot high and new technologies industries. Finally, it considers the modern service industry and headquarters economy as its core.
Planned area: 160 sq. km.
Pillar industries: Automobile (engineering machinery)
Major investors: 364 industrial projects have been introduced accumulatively, including 30 Fortune 500 enterprises, over 40 listed companies and branches; 240 of them have been established and put into production. Important projects concerning auto (machine) production like those of FAW-Volkswagen, Sichuan FAW TOYOTA Motor (SFTM), Geely Gaoyuan, Volvo, Dayun Auto, FAW Special Auto, FAW Passenger Car, FAW Commercial Car, Ruihuate Pure Electric Automobile, Kobelco Group, Caterpillar, Push Heavy Machinery, CSRGC have gathered there; as well as over 180 automobile parts projects including those of Magna, Faway Johnson, FAWFW, Toyota Boshoku, Tianxing-Mita etc.
Chengdu Pilot Free Trade Zone
Chengdu Area of China (Sichuan) Pilot Free Trade Zone (CDFTZ) is a regional free trade zone, which was established in Chengdu by the Central Committee of the Communist Party of China. CDFTZ covers a total area of 100 km2 and consists of two areas, Tianfu New Area (90.32 km2) and Chengdu Qingbaijiang Railway Port Area (9.68 km2). Tianfu New Area is the core functional zone of modern services, high-end manufacturing, high-tech Industries, air-transportation related economy and port services, which will be built into a national clustered high-end industrial zone, innovation driven development leading area, open financial reform and innovation center, business logistics center, and international aviation hub. In accomplishing the core task, Tianfu New Area works to be leading areas of opening-up in the inland regions.
Chengdu Qingbaijiang Railway Port Area will prioritize developing port services, such as international commodity distribution, de-consolidation exhibition, bonded logistics, vehicle import, financial services, etc. and modern services, such as information services, technology services, exhibition services, aims to be built into a strategic fulcrum of international trade corridor which connects the inland with the Belt and Road Area. As of today, many international companies are present here, such as Intel, Amazon, Dell, amongst many others.
The investment environment and the current situation
On August 30, the ‘2020 Assessment Report on Business Environmental Investment Chinese Cities’ was released, and Chengdu was awarded the 2020 Benchmark City for International Business Environment. In 2019, Chengdu bagged the award for the Most Competitive City for Attracting Business and Investment and the Most Attractive City for Investment. Also, according to the local Bureau of statistics, in the first quarter of 2021, the local Chengdu economy started off well and steadily consolidated to a good trend as the city’s economy grew by 17.3 percent in the first quarter of 2021.
The city achieved a GDP of RMB 455.284 billion (US$71 billion) in the first quarter of 2021, and an average growth rate of 6.7 percent in two years. By industry – the value added of primary industry was RMB9.491 billion (US$1.5 billion), up 10.3 percent YoY, with an average growth rate of four percent in two years; the value added of secondary industry was RMB 133.003 billion (US$20 billion), up 16.9 percent YoY; and the value added of the tertiary industry was 6.2 percent YoY to reach RMB 312.790 billion (US$48 billion), up 17.7 percent YoY, with an average growth rate of seven percent over the two years.
Industrial development has increased efficiency and most industries continue to recover, with the city’s 30 industries growing at an 81.1 percent growth rate. Production accelerated, with the value added of 30 leading industrial enterprises increasing by 18.4 percent, driving industrial growth above the city’s scale by seven percentage points, of which seven enterprises almost doubled their worth.
In what concerns the services sector, recovery has been accelerated, with the continued consolidation of epidemic prevention and control, market confidence has increased significantly, and the potential of key areas has been released at an accelerated pace, achieving an increase of RMB 312.789 billion in the service industry by value in the first quarter, up 17.7 percent YoY. The modern service industry remained active, with the value added of information transmission software and information technology services and the financial industry increasing by 29.1 percent and seven percent, respectively, driving up the value added of the service industry by 3.8 percentage points.
Competition and coordination
Located in the upper reaches of the Yangtze River, the Chengdu-Chongqing Economic Circle is the most densely populated area with the highest concentration of industries and the most cities in west China. Statistics showed that the Chengdu-Chongqing area registered a total GDP of close to RMB 7 trillion (US$1 trillion) in 2019, making it another regional economic powerhouse following the Yangtze River Delta region, Guangdong-Hong Kong-Macao Greater Bay Area, and the Beijing-Tianjin-Hebei region
The master plan for the Chengdu-Chongqing Economic Circle was reviewed at a meeting of Communist Party of China leaders in mid-October. The meeting proposed to build the Chengdu-Chongqing area into an important economic hub of nationwide influence, a center for science and technology innovation, a new spearhead for reform and opening up, and a location for a high-quality lifestyle, Xinhua News Agency reported.
The cities of Chengdu and Chongqing have similar development levels and industries and, in the past, have competed with each other. However, with the Chengdu-Chongqing Economic Circle, the two cities’ pillar industries will move from competition to coordination.
“The overlapping of the two cities’ industries is also the foundation for them to cooperate and achieve integration,” Zheng Bei, head of the Sichuan Provincial Development and Reform Commission, told People’s Daily.
He also said the two cities will improve the quality and level of urbanization and continue to upgrade urban infrastructure and public services. More attention will be paid to raising the primary-level capacity of governance and making the region better able to support the concentration of industries and population. Rural-to-urban migration will be facilitated to advance economic restructuring and improve people’s well-being
As stated in our Chongqing article, it seems that the Southwest of China is clearly the new frontier, and companies and investors, both big and small, have been increasing their interest and investments in the area.
This intertest is complemented by a policy of subsidies and tax benefits that each of the local districts’ governments is allowed to provide to foreign companies, should they meet certain conditions and negotiated on a case-by-case basis.
The economic data speaks for itself, which in addition to the local economic policy of expansion, should attract new companies and investors. All eyes are on Chengdu and its ability to achieve inclusive growth that can compete with other developed regions in the country in the years to come.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at email@example.com.
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