Chongqing and West China – Still Like Shanghai in the 90’s. By Hans Halskov, Consul, The Royal Danish Consulate in Chongqing

China’s western inland region is the biggest territory in China. Western Chinese cities, such as Chongqing, are facing a strong development in the next decade. The development is fully supported by the ‘Go West’ strategy of the central government, which makes Chongqing a great alternative for Danish companies.

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The Danish Consulate in Chongqing was established in 2005 in order to assist Danish companies to get a foothold on China's western inland region - the biggest territory in China in terms of population (29 percent), geographic area (71 percent), and recently also GDP growth (app. 13 percent in 2008).

The real interest from companies’ points of view is getting access to the market where there is less competition for customers, suppliers and the local governments’ attention. It is a common perception that West China cities, such as Chongqing, Chengdu, Xian and Kunming, are going to develop in the next decade or so in ways similar to the more developed cities along China’s East Coast.

The Consulate suggests that the following types of companies intensify their work in West China.

Company Type:

Environmental and energy companies (natural gas, wind, waste-water, air)

Food companies
(production, control, machinery)

Metal and machinery
(components and assembly)

Building and construction
(architects and materials)

Educational institutions
(own campus, joint programmes)

Late-to-market companies - use West China as a gateway to the rest of China.

For the maximum benefit of West China, the business scope should fall into one of the following categories.

Category:

Major projects that demand approval from authorities

Wage-burdened goods and projects

Light transportable goods

Purchase of small amounts - buyers’ market compared to the rest of China

Production - favourable terms following the ’Go West’ strategy

Sales to China’s Southwest - easy access

The Industrial Centre of West China is Chongqing
Chongqing still faces a large-scale development to be able to reach the levels of the coastal provinces of China. However, this development is fully supported both economically and politically by the “Go-West” strategy of the Central Government. Thus, the funding is there but the technology is not, which is why Chongqing is very interested in attracting foreign companies for trade and investment. This, combined with the low wages and cost of production in Chongqing, makes this municipality a real alternative for Danish companies.

Manufacturing
Chongqing is one of the famous old industrial bases in China, with one of the biggest iron and steel production centres and an important aluminium production base. The manufacturing sector is also enjoying an upswing. Due to lower costs, Chongqing has attracted a number of domestic appliance manufacturers whose production was previously concentrated in the coastal provinces. These include Haier Co. Ltd., Midea Group and TCL international Electrical Co. Ltd., HP, BASF, who have all recently set up manufacturing in Chongqing. The major export items are motorcycles, autos, auto parts, chemicals, pharmaceuticals, agricultural products, and light industrial goods.

Business Environment
Like other inland cities, Chongqing has been unable to keep up with the booming coastal areas in terms of economic development. This has resulted in investment and income levels remaining well below those of major coastal cities.

Located in the middle of China, Chongqing does face some logistical disadvantages. However, the massive investments in the infrastructure of the municipality aim at breaking those barriers for foreign investments. With the Yangtze River running through the city, Chongqing is provided with a natural “water highway,” which links it to Shanghai. It takes only 5 days for a container to reach Shanghai.

The transport capacity of the city has improved substantially with the opening of the Chongqing-Huaihua railway and the completion of the Three-Gorges project along the Yangtze River. In addition to infrastructure expansion, diversified financial channels also score points with investors. As an established industrial centre, Chongqing has a growing base of companies able to supply new investors.

The Future of Chongqing
The rising land and labour costs in the coastal regions, combined with the improving logistical connections of Chongqing, are certainly going to attract more companies. The local Party Secretary, Bo Xilai, the former Minister of Commerce and a son of former vice-premier Bo Yibo, is viewed by most observers as the one who will be able to take Chongqing to the next level both in terms of rural and urban development.

The development of West China opens business opportunities for many Danish companies, and Chongqing is a desirable location for managing activities in the region. The Danish Consulate is one of only two European consulates in Chongqing and therefore finds itself in a unique position to give Danish companies a direct access to major companies, relevant leaders, and government offices.

Join a Danish Consulate Event on May 12-14, 2009
On May 12-14, 2009, the Consulate is organising the event “Chongqing Means Business.” It is an intensive business-oriented fact-finding tour of Chongqing, designed to identify customers and suppliers. It takes place simultaneously with Chongqing International Trade & Investment Fair, and the Consulate will make its vast local networks accessible to Danish companies. For more information, please contact Hans Halskov, hanhal@um.dk, or Sarah Chu, sarchu@um.dk.

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