Location Search and Company Set-Up in North China [2/3]

By Richard Hoffmann, ECOVIS Beijing

The first article in the series Location Search and Company Set-Up North China identified six major considerations for the location search in China. Local infrastructure, supply of qualified personnel and cost structures are some of these factors that determine where a foreign invested enterprise will ultimately decide to set up its operations. As the expertise of ECOVIS Beijing is focused on Northern China and the cities of Beijing and Tianjin in particular, the following article summarizes the overall economic situation, main development areas, transport and logistics infrastructure as well as the general living environment for both cities respectively.

An Overview of the Investment Landscape in Tianjin

Economy: Since the start of the 21st century, the Central Chinese Government has laid increased economic focus on the Bohai Rim Area. Especially the Greater Tianjin area has profited throughout the region’s advancement over the past decade. Continued investment into local infrastructure has built a dense network of highways and high-speed rail connections alongside one of the largest container and shipping ports worldwide. The close proximity to Beijing, as China’s cultural and political capital, attracts foreign organisations in particular to Tianjin. Its industrial focus lies with some of Europe’s strategically most important industries: Automotive, electronics, bio-technology, pharmaceutical and petrochemical companies have settled in Tianjin. Compared to other areas in China, the city also promotes more high-tech industries and values an overall forward-oriented and sustainable development that ultimately allows for higher standards of living.

Development Zones: A significant stage in the economic development of Tianjin is the administrative reform of 2006: The centrally located Binhai New Area was established following the example of Pudong in Shanghai. This reform enabled market structures and in return attracted a large cluster of highly profitable companies from China and abroad. One of the more well-known examples is the establishment of a manufacturing site for the Airbus A320. Beside the administrative development zone of Binhai New Area, the Greater Tianjin area accommodates a number of economic development zones: Wuqing Development Area (UDA), Xiqing Development Area (XEDA) and Tianjin Economic-Technological Development Area (TEDA) are the most renowned due to their state-level accreditation. They are also the most relevant for foreign companies interested in investing in the Greater Tianjin area and therefore recommended by ECOVIS Beijing.

Infrastructure: Due to its favourable location in the Bohai Rim Area, Tianjin represents an important gateway into north-eastern China. It is connected to neighbouring cities and metropolises further away through a dense highway and railway system. Seven expressways cross the city – for instance the Jingjintang Expressway leads to Beijing in merely 1.5 hours. Since 2007, another way of travelling between these cities is by high-speed railway which reduces the travel time to 30 minutes. Furthermore, Tianjin International Airport connects travellers to destinations in China and Beijing Capital Airport manages long-distance routes to international transportation hubs in Europe and North-America. Another focus point for international cargo transport is Tianjin New Port, the largest container port in Northern China. It services more than 600 destinations worldwide and therefore holds strategic importance for the development of the Bohai Rim Area.

Living Environment: Located on China’s northern east coast, the Greater Tianjin Area reports a warm continental climate with temperatures averaging 12 degrees Celsius throughout the year. Counting a total of 56 colleges and universities including Nankai University and Tianjin University, the rich talent pool is continuously filled with almost 150,000 graduate students each year. With almost 150 independent R&D institutions as well as renowned training centers such as the Sino-German Technical Training Center, Tianjin offers good conditions under which to further develop the expertise of employees. Due to the city’s attractiveness for foreign invested enterprises, a tightly-knit expatriate community has developed in downtown Tianjin with its cluster of bars, restaurants and outdoor seating areas along the Hai River. It is for certain a friendly and safe city for all ages, nationalities and walks of life.

An Overview of the Investment Landscape in Beijing

Economy: Beijing is one of the most developed cities in China with a strong services sector accounting for around two thirds of its GDP. This also makes it the first post-industrial city in China and sets it apart from many of its manufacturing oriented neighbours including Tianjin and Shenyang today. With over 750 different financial institutions located in the country’s capital, Beijing generates roughly one tenth of the financial industry’s revenue in the whole of China. The main production centers including the development zones are scattered around the outskirts of the city and house automotive suppliers, pharmaceutical companies and machinery producers alongside many more industries. Given some of the country’s highest salary levels and rising rental costs, manufacturing companies are, however, increasingly moving away from the city towards its neighbours.

Development Zones: As the glorious days of manufacturing in Beijing are slowly reversing to give way for the service sector, a number of service oriented centers are starting to mature. The Central Business District (CBD) accommodates the headquarters of many of the 50 Chinese Fortune 500 companies amongst numerous foreign counterparts and renowned brands. Further to the North of Beijing, Zhongguangcun is nick-named China’s Silicon Valley as it houses a vast number of adventurous start-up companies in the electronics and computer related industries. Beside this emphasis on services and innovation, there are though a number of development zones at key locations on the city’s outskirts: Beijing Economic-Technological Development Area (BDA) to the South and Beijing Airport Economic Core Zone (BAECZ) to the North are two state-level development zones recommended by ECOVIS Beijing.

Infrastructure: As the country’s capital, Beijing represents one of the most dynamic and developed transportation hubs in China. The city itself is divided by five ring roads and nine expressways and provides an extensive bus and subway system for commuters throughout all 14 districts. Ordinary rail services and the high-speed railway system connect Beijing to metropolises countrywide – Tianjin can be reached in 30 minutes, Shanghai in merely 5 hours and Guangzhou is only an 8 hour train ride away. Travellers for more international destinations in Asia or Europe are limited to depart from Beijing Capital International Airport to the North of the city. A second airport is currently being constructed in the South and is expected to open up by 2017 under the name of Beijing Daxing International Airport. Access to shipping facilities is slightly more difficult as the closest container port is Tianjin New Port at a distance of 170 km from Beijing.

Living Environment: The cultural and economic status as well as the comparatively modern infrastructure of Beijing attracts businesspeople from countries worldwide. The large expatriate community is scattered across the city from the university campuses of northern Haidian District to the diplomatic residences around Dongzhimen or Liangmaqiao. The climate is characterized by hot and humid summers but cold and dry winters with temperatures reaching negative 15 degrees Celsius on some occasions. Pollution is a known problem in Beijing as in any city of similar scale – one that is currently being tackled by the Chinese Central Government around the clock. It does, however, not dissuade the residents of Beijing to enjoy their studies and work in the bustling city: Over 70 colleges and universities including the renowned Peking University and Tsinghua University support businesses with exceptionally talented graduates.

Richard Hoffmann is Partner at ECOVIS Beijing China. He obtained an honor’s degree in law and worked in Germany, America and China for various prestigious law firms prior to joining ECOVIS. He has published more than fifty articles in international magazines, frequently speaks at high profile events in China and abroad and is often invited as a legal expert by international TV. Contact: richard.hoffmann@ecovis.com