Industrial Parks in Chongqing
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China Knowledge Rating System and Year 2010 Rating Results
Rating China’s Industrial Parks
The culmination of years of research, surveys, interviews and site visits, the China Knowledge Rating System assigns ratings to industrial parks based on five broad factors subdivided into 21 attributes with a view to guiding foreign investors looking to set up in China.
The Rating System not only indicates the best industrial parks in China, but also serves as a guide to understanding China’s economy and future directions for development and to finding the hottest investment spots in a vast land of approximately 9.6 million sq km.
The rationale behind this large-scale research project, and the resulting Rating System, lies in the significance of industrial parks to China’s economic development and to the country’s ability to attract foreign investment.
However, the Rating System also offers more to investors; it allows existing and potential investors to gauge investment locations to find the one that will best suit their business needs. The Rating System is based on factors that include location, infrastructural development, contracted and utilized foreign direct investment (FDI), availability of human resources and administrative efficiency, giving investors a good sense for which industrial park is most suitable for their particular industry, product or service.
The importance of industrial parks to China’s economy cannot be underestimated. In 2008, the GDP of 54 state-level Economic and Technological Development Zones (ETDZs) reached RMB 1.53 trillion (US$220.3 billion), accounting for 5.1% of the nation’s total. Meanwhile, the 54 state-level High-tech Industrial Development Zones (HIDZs) contributed 9.7% of China’s total value-added industrial output.
Similarly, in terms of attracting FDI, these industrial parks have played a pivotal role. In 2008 the utilized FDI secured by state-level ETDZs reached US$19.5 billion. This translates to 21.1% of the national total. While data is not yet available for HIDZs and Free Trade Zones (FTZs), estimates based on past data indicate that state-level ETDZs, HIDZs and FTZs attracted an amount equivalent to nearly one-third of China’s total utilized FDI each year.
The ability of industrial parks to attract FDI is an important consideration for many foreign investors. Certainly, areas that attract the most foreign investment are the hottest destinations for subsequent capital inflows; they are also the areas that are developing faster and promising and delivering returns.
With hundreds of industrial parks to choose from, finding the ideal industrial park can be problematic for foreign investors unacquainted with the local context. An evaluation of industrial parks is thus particularly critical to aid such investment decisions. Additionally, as many major industrial players are based in industrial parks, in-depth, detailed descriptions of important industrial parks will guide investors in mapping out the industries they are most interested in.
Scope of Ratings
Industrial parks in China are of varying sizes and are at different levels and stages of development.
Some industrial parks are located within other industrial parks. For instance, Export Processing Zones (EPZs) are subsumed under ETDZs or HIDZs, in order that they may leverage the established facilities and resources of the enterprises in the ETDZ and HIDZ. Hence, some EPZs are not graded individually, but as a part of the larger ETDZ or HIDZ within which they are located.
Likewise, Software Development Parks (SDPs) and University Science Parks (USPs) are usually located within a High-tech Industrial Development Zone or High-tech Park (HIDZ). SDPs and USPs are thus also not given individual gradings. Rather, it is the respective HIDZs or HIDZs in which they are located that are rated, taking into consideration the contributions of these SDPs and USPs.
An even more unique case is that of Guangzhou Development District. It administers four state-level development zones: an ETDZ, an HIDZ, an FTZ and an EPZ. In this case, the district is graded as a whole, rather than as four different zones.
Border Economic Cooperation Zones are specifically designed for border trade and export-processing business. Because they are economically small and located in remote areas, they are excluded from our rating system.
Holiday Resorts are specifically designed for tourism. They are also excluded from our rating system.
The scope of the Rating System hence encompasses ETDZs, HIDZs, EPZs and FTZs.
Selection of Factors
The China Knowledge Rating System for China’s Industrial Parks (henceforth, CK Rating) is based on key factors that each have a significant impact on investment decisions. It asks the question: what are business people most concerned with vis-á-vis possible locations?
Taking into account regional competitive advantage, economic performance, infrastructure and other factors, CK Rating evaluates the various industrial parks.
CK Rating Comprises Five Categories:
Macroeconomic Performance of Local Area;
Level of Development of the Industrial Park;
Local Investment and Operating Costs;
Local Skill Level and Availability of Human Resources;
Quality of Management and Administration.
Of course, the weightings for these categories are not the same for all types of investment. For example, land resources and transportation are more important for manufacturing than for research. CK Ratings allow for this difference.
Weightings tailored to production enterprises and R&D enterprises, the two major types of enterprises that invest in China’s industrial parks, yield ratings that enable a company of either type to find the most suitable park.
Sources of Data
The sources of data used in assessing industrial parks include on-site studies conducted by China Knowledge, surveys prepared by China Knowledge and completed by industrial parks, news related to industrial parks, data released by government agencies that include the National Information Center, the Ministry of Commerce, and the China Torch Program Committee, and the websites and brochures of industrial parks.
Rating Mechanism
A value is assigned to every attribute in each category according to standardized criteria. This value is a figure between 0 and 10 (0 for least desirable and 10 for most desirable). Based on the value assigned and the weighting of the attribute, a figure (e.g., X) is reached. Adding up these figures for every attribute in the same category, a new figure is derived (e.g., Y). Based on the weighting of that particular category, a percentage of Y (e.g., Z) is derived. The final figure, Z, is calculated for all categories, and an overall score is derived. This overall score is then matched against a set of grades, AAA, AA, A, BBB, BB, B and C, which are the possible ratings given for industrial parks.
It is a straightforward matter to assign values for attributes such as GDP and fixed asset investment. The values for attributes such as accessibility and efficiency, which are more difficult to evaluate, rely on China Knowledge’s on-site studies and interactions with the relevant administrative bodies. Media reports are also used as reference points.
Discussion
To determine the overall value in the first category, the most important aspects of the host city are its GDP and transportation system. Most investors invest in cities of high GDP, that have a large market, well-developed infrastructure, comprehensive upstream and downstream industrial chains, a good financial system and a rich talent pool. In addition, they consider the geographic location of the city, the throughput of ports and airports, the logistics volume of the city and the city’s infrastructure for transportation.
Other factors, such as fixed asset investment, are related to GDP. The ratio of fixed asset investment to GDP is used instead of the investment value to exclude the effect of the economic size. The evaluation of foreign trade is similar.
The evaluation of the financial services in a city considers the gross loan balance of its financial institutions and the presence of foreign banks in the city. The natural resource reserves factor is based on the availability of resources such as minerals, energy sources, agricultural products, forest products and marine products in the province in which the city is located.
The value-added industrial output of an industrial park and the amount of FDI attracted are the most important contributors to the overall value of the second category.
The third category, investment costs, recognizes the competitive advantage of cities where land, utility and labor costs are lower. Industrial parks in advanced regions such as Shanghai, Beijing, and Shenzhen have substantially higher costs than parks in other regions.
The value of the fourth category, the availability of university students and workers with high-level skills, can be estimated from enrollment in universities and technical schools. In this category, Beijing, Shanghai, Guangzhou, Wuhan, Nanjing and Tianjin ranked highest.
The last category, management and administration, generally known as the city’s “soft environment,” include four factors: administration, promotion of investment, IPR protection, and environmental protection. Industrial parks in coastal regions generally enjoy more open management styles and tend to be more efficient and transparent. Industrial parks in Shanghai, Shenzhen, Suzhou, Beijing, Tianjin, Guangzhou, Hangzhou and Dalian are among the best in terms of management and administrative factors.
Value-added industrial output, exports and transportation are the most important factors for manufacturing enterprises, but R&D companies have different priorities. The factors they are most interested in are the supply and cost of human resources, value-added output and IPR protection. The difference is reflected in the weights used in the rating system.
Rating Definitions
After all of the industrial parks were evaluated, the results were sorted. Industrial parks are given standard ratings, as follows:
AAA
This is CK Rating’s highest rating. Industrial parks with an AAA rating are the most established and have the best investment environment. These industrial parks are strongly recommended.
AA
Industrial parks rated AA are highly attractive and are highly recommended. However, in comparison with industrial parks given the AAA rating, these industrial parks still lag behind in some areas. The most typical types of disadvantage are small economic size as reflected in the GDP or FDI, high investment costs and limited land resources.
Together with AAA-rated industrial parks, these industrial parks are considered first-tier industrial parks.
A
Industrial parks rated A have above-average investor appeal. Basic conditions are adequate, but improvements are still needed in some areas.
BBB
Industrial parks rated BBB are considered attractive at an average level. They have less-than-adequate investment conditions and may have some flaws. They may be promising industrial parks but there are uncertainties regarding future development.
BB
Industrial parks rated BB are considered attractive at a below-average level. Industrial parks with this rating are typically either in the development stage or are lacking certain important elements.
B
Industrial parks rated B are viewed as poorly established. Much effort is necessary for the creation of an attractive investment environment in these parks.
C
Industrial parks rated C are viewed as least attractive. These industrial parks are not recommended for investment.
Western Regions
Chongqing
Major Economic Indicators (2008)
Source: Chongqing Economic and Social Development Report 2008
Introduction
Chongqing was approved and established by the State Council as one of China’s four provincial-level municipalities in 1997 after Beijing, Tianjin and Shanghai.
It is situated in the upper reaches of the Yangtze River, at the confluence of the Yangtze River and the Jialing River adjacent to Sichuan, Guizhou, Hunan, Hubei and Shaanxi.
Chongqing is situated within the humid sub-tropical monsoon climate belt. It has an average temperature of 18°C to 20°C. Famous for its hot summers, it is known as one of the “three furnace cities” along with Nanjing and Wuhan.
Chongqing’s transportation system has developed in recent years. The city is one of the important transportation hubs connecting East China and West China. Chongqing Jiangbei International Airport realized an 11.1 million-passenger throughput in 2008, ranking tenth in China.
The city is also a major rail hub in South Central China. The Chongqing-Chengdu Railway, the Chongqing-Guiyang Railway, the Chongqing-Xiangfan Railway, the Chongqing-Huaihua Railway and the Chongqing-Suining Express Railway have starting points within the city. In addition, other railways, including the Chongqing-Yichang Railway and the Chongqing-Changsha Railway, connect Chongqing with neighboring cities.
In 2008, Chongqing, the biggest inland river port in West China, saw its cargo throughput increase 22.7% year on year to 78.9 million tons.
Chongqing is rich in advanced human resources. It has 57 colleges and universities that produced 108,600 graduates in 2008. Four key national-level laboratories and five state-level engineering research centers are also located in the city. Famous universities in Chongqing include Chongqing University and Southwest University.
Economic Features
In 2008, Chongqing’s GDP grew 14.3% to RMB 509.7 billion. It has the largest economy in Central and West China.
Automobiles, motorcycles and equipment manufacturing, information technology, new materials, natural gas and petrochemicals are Chongqing’s pillar industries. In 2008, these industries realized a gross value-added industrial output of RMB 113.9 billion, accounting for 62.3% of the city’s total.
The manufacture of transportation equipment, including automobiles, motorcycles, aircraft and ships, is the most important pillar of Chongqing’s industry sector. In 2008, its value-added industrial output rose 31.7% year on year to RMB 49.8 billion and accounted for 27.2% of the city’s total. The same year, the export value of transportation equipment was US$2.1 billion, up 31.9% year on year, and accounted for 37.1% of Chongqing’s total export value.
Chongqing is the largest automobile and motorcycle manufacturing base in West China. There are a large number of automobile and motorcycle manufacturing enterprises in the city. Listed companies Chongqing Chang’an Automobile and Chongqing Dima Industry, along with Chang’an Ford Mazda Automobile, Chongqing Lifan Motors, Chongqing Heavy Automobile Group, Chongqing Dima Industry, Chongqing Tiema Industrial Group and Chongqing Hengtong Bus are among them.
In 2008, the total import and export value of Chongqing rose 28.0% year on year to US$9.5 billion. In addition to transportation equipment, the main exports of the city include mechanical and electronic products. They realized an export value of US$1.6 billion, 36.0% higher than in 2007, and accounted for 28.6% of the city’s total. The EU, the U.S., Japan, Brazil and South Korea are the city’s most important trading partners.
In the same year, 101 million tourists visited Chongqing. The city’s tourist revenue was RMB 56.2 billion, up 26.4% year on year. Revenue generated by foreign travelers was US$450 million, up 17.8% year on year.
Cultural Highlights
Chongqing, a historical and cultural city with more than 3,000 years of history, is located at the center of the ancient Bayu Area, the birthplace of Bayu Culture.
Because of its steep terrain, Chongqing is called “mountain city.” Locals may be paid to help others transport heavy loads on a stick called a Bangbang. As a result, the Bangbang has become a symbol of the city to a certain extent.
The people of Chongqing are said to be straightforward, enthusiastic, humorous and generous and have a reputation for defending the weak and helpless.
Tourist Attractions
Chongqing attracts visitors who wish to enjoy its cultural heritage and scenery. Popular tourist stops include the Chongqing China Three Gorges Museum, which has over 40 exhibition halls and houses 100,000 relics, the Dazu Rock Carvings, the Northern and Southern Hot Springs Park, Wulong Karst and Ci Qi Kou, which is the Porcelain Village.
Chongqing Cuisine is considered part of Sichuan Cuisine. It is famed for its distinctive spicy and pungent flavors. The city is the birthplace of the hot pot in China. Chongqing is also renowned for local snacks such as Xiangshan Honey Cake, which is made of flour and honey balsam, and Shancheng Small Glutinous Rice Balls.
Chongqing Airport Industrial Park
Facts and Figures (2008)
Source: Chongqing Airport IP
Introduction
Chongqing Airport Industrial Park (Chongqing Airport IP) was approved and established by the Chongqing municipal government in January 2002 as a municipal-level development park.
Chongqing Airport IP has a favorable geographic location. It is only 1 km from Chongqing Jiangbei International Airport, which ranked tenth in terms of passenger throughput in China in 2008. Cuntan Deep-water Port, the largest container port in the upper reaches of the Yangtze River, is 13 km from Chongqing Airport IP. Longtousi Railway Station, which is engaged in both passenger and cargo transportation, is 11 km from the park. In addition, Chongqing Light Rail’s Line 3 runs through the park from north to south, while the Second Ring Freeway runs across the park from east to west.
Chongqing is rich in advanced human resources. It has 57 colleges and universities that produced 108,600 graduates in 2008. Four key national-level laboratories and five state-level engineering research centers are also located in the city. Well-known universities in the area include Chongqing University and Southwest University.
Investment Climate
Chongqing Airport IP’s pillar industries include automobile and motorcycle manufacturing, equipment manufacturing and textiles.
Automobile and motorcycle manufacturing bases have been formed within the park. Approximately 80 enterprises engaged in auto, motorcycle and machinery parts manufacturing have been established. Two such enterprises, Anhui Ankai Automobile and Zhengzhou Yutong Group, are both engaged in bus manufacturing. Chongqing Chang’an Automobile (Group), listed on the Shenzhen stock exchange, is a major commercial vehicle manufacturer. In 2008, the group sold 862,000 vehicles. Chongqing Hengtong Bus is a natural gas vehicle manufacturer, while Chongqing Yinxiang Motorcycle (group) mainly produces motorcycle.
In 2005, Bosch, one of the park’s Fortune 500 companies and a leading global industrial technology manufacturer, launched a joint venture company called United Automotive Electronic Systems in Chongqing Airport IP. The JV is mainly engaged in researching and manufacturing engine management systems. The program commenced operations in July 2006.
In addition, Chongqing Airport High-tech Textile Industrial Park, which has a land area of 7 sq km, is located in Chongqing Airport IP. Industrial chains of chemical fibers, cotton spinning, wool spinning, weaving and garments have been formed.
Strengths
The park has well-developed industrial chains for automobiles, motorcycles and parts.
Chongqing Airport High-tech Textile Industrial Park is located in Chongqing Airport IP.
Chongqing has a very convenient transportation system.
Labor is abundant.
Labor and land costs are low.
Weaknesses
The park faces strong competition from development zones in Chongqing and Chengdu, the capital city of Sichuan Province.
Contact Information
Address: Shuangfeng Bridge, Yubei District, Chongqing, P.R. China 401120
Tel: +86-23-67171111
Fax: +86-23-67838325
Website: www.kggy.com
Chongqing Bishan Industrial Park
Facts and Figures (2008)
Source: Chongqing Bishan IP
Introduction
Chongqing Bishan Industrial Park (Chongqing Bishan IP) was approved and established by the Chongqing municipal government in 2002 as a municipal-level development park.
Chongqing Bishan IP is located in Bishan County, which is situated in the western part of Chongqing. Bishan County is 37 km from Chongqing’s downtown area approximately 15 km from Xiyong Freight Railway Station, 30 km from Jiulongpo Container Port and 50 km from Jiangbei International Airport. The Chengdu-Chongqing Freeway and the Chongqing-Suining Freeway traverse the county. Highways, railways, waterways and airports are conveniently located near the park.
Investment Climate
Bishan’s GDP was RMB 11.3 billion in 2008. The GDP of this district accounted for 2.2% of Chongqing’s total.
There are two subsidiary zones under the administration of Chongqing Bishan IP. They are Chongqing Bishan IP: A Zone and Chongqing Bishan IP: B Zone. China Western Footwear Industrial Park and Mechanical Industrial Park are located in the A Zone while enterprises in the B Zone are mainly engaged in new building materials, furniture manufacturing, textiles and microelectronics.
Chongqing Bishan IP was rated as one of Chongqing’s Top Ten Municipal-level Industrial Parks for six consecutive years starting in 2003. In 2008, the gross industrial output and value-added industrial output of the park amounted to RMB 10.0 billion and RMB 2.5 billion, respectively.
By the end of 2008, over 180 enterprises with utilized investment totaling RMB 5.0 billion had settled in Chongqing Bishan IP. Enterprises that have invested in the park include international companies Danone Group and TRW Automotive as well as domestic companies such as Guangdong Robust Group, Aokang Group, Double Star
Group,Guangdong Welsun Group, Chongqing Hongy Precise Industry, Chongqing Hongqi Cylinder Head Manufacture, Chongqing Lifan Group and Chongqing Jialing Group.
Aokang Group, which deals mainly in footwear, invested RMB 1 billion in 2003 to build China Western Footwear Industrial Park in Chongqing Bishan IP: A Zone. A footwear industrial chain has been established within Chongqing Bishan IP.
Additionally, in 2008, Chongqing Lifan Group, a leading manufacturer of automobiles, motorcycles and mechanical parts in China, launched two investment programs worth a total of RMB 2 billion in Chongqing Bishan IP: A Zone. The two programs focus on micro-car and motorcycle manufacturing, respectively. Industrial chains for micro-cars and motorcycle manufacturing have also been established.
Strengths
Chongqing Bishan IP was rated as one of Chongqing’s Top Ten Municipal-level Industrial Parks for six consecutive years.