UDA and XEDA in Tianjin – Industry Clusters for European SMEs

With the resolution of the Central Government to move Beijing away from its industrial image and towards a service based economy, more and more manufacturing companies are relocating to Tianjin. This especially applies to those small and medium-sized enterprises (SMEs) with limited financial resources to cover the comparatively high rental and rising labour costs in the country’s capital. In the neighbouring port city of Tianjin these companies enjoy a similarly advanced infrastructure, good exporting and shipping facilities, proximity to China’s largest talent pool and plenty more – all at significantly lower prices. ECOVIS Beijing has identified two industrial zones in Tianjin that offer particularly good investment conditions for foreign SMEs: China Wuqing Development Area (UDA) to the North and Xiqing Economic-Technological Development Area (XEDA) to the South of Tianjin.

At a mere 20-minute train ride from Beijing South Station and a 15-minute ride from Tianjin Station, UDA is located centrally between both economic regions. Leaving the often chaotic and hectic environment of either metropolis behind, visitors are immediately overcome with a sense of order upon arrival in Wuqing: comfortable streets and clean strips of grass accompany the short drive to the development zone’s Investment Promotion Bureau. Close by the building, the Chinese manufacturing bases for some of Europe’s largest engineering companies such as Germany’s GEA and Denmark’s Danfoss are clearly visible. During a meeting with one of the world’s leading producers of drive technologies (the company declined to be mentioned by name), ECOVIS Beijing saw first-hand how this medium-sized enterprise had successfully set up its mostly automated workshop in UDA.

For a deeper understanding of the zone as an area to work and live, ECOVIS Beijing spoke to one of UDA’s longest standing German investors: WAGO Electronic (Tianjin) Co., Ltd. was set up 16 years ago and produces components for electrical connection technologies. The medium-sized company has continuously grown its facilities inside the zone for which it relies on steady collaboration from the Investment Promotion Bureau. The increase in its workforce is met by local supply whereas managers are hired from Tianjin and executives – as so often the case – from the German business community. These mostly live in Beijing’s Southern Daxing District and commute either by train or car to Wuqing. With its neatly trimmed lawns and modern interior, the manufacturing site of WAGO depicts the showpiece of what the investment of a European SME in UDA may develop into.

The Xiqing Economic-Technological Development Area (XEDA) lies further South in Tianjin but is easily accessible by a 15-minute drive from Tianjin Station. Numerous Fortune 500 companies such as the American consumer goods provider P&G and the Chinese construction machinery giant SANY Group have contributed to the development of industry clusters. These are essential in attracting European and particularly German SMEs – Rema Tip Top China’s automotive division chose to invest in XEDA for the advantage of proximity to suppliers and customers. In a meeting with ECOVIS Beijing, the German manufacturer of tyre repair material and workshop equipment spoke about the support provided by the Investment Promotion Bureau when purchasing its land-use rights and constructing its production halls throughout its ongoing expansion in the zone.

Rema Tip Top China did, however, highlight the fact that further incentives and support are necessary to attract and retain those SMEs from overseas that are exposed to increased financial risks given the small size of their businesses. The Investment Promotion Bureau acknowledges this fact but makes it very clear that the times of great tax incentives and preferential investment schemes throughout China’s development zones are largely over. Upon visiting the Bureau and dining alongside its officials in the modestly decorated canteen, ECOVIS Beijing recognized the down-to-earth mindset reflected ultimately in the Bureau’s incentives offered to SMEs. On the downside, however, the zone noticeably lacks social facilities and a sense of community and also investment into transportation infrastructure seems comparatively low giving XEDA an all too industrial air.

As with any location in China, deciding to invest in Tianjin exposes foreign SMEs to financial and operational risks. Working together with ECOVIS Beijing and its contacts in UDA and XEDA respectively, provides the stable and reliable framework necessary to implement such strategic decisions. While many development zones in Northern China pride themselves in offering preferential treatment to foreign businesses, these may be no more than aggressive sales tactics; and while they take on large amounts of debt to finance unprecedented expansion plans, these may result in government bailouts and possibly bankruptcies in the long run. ECOVIS Beijing therefore recommends that all manufacturing SMEs interested in Northern China, consider the advantages of Tianjin and its location alongside the well-rounded services and long-term stability of UDA and XEDA respectively.

	Richard Hoffmann is a Partner at ECOVIS Beijing China. Richard 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
Ecovis Beijing is the trusted tax and legal advisor of several embassies and official institutions in China. It specializes in mid-sized international companies and focused on tax & legal advisory, accounting and auditing. If you’re interested in finding out more about tax and legal, don’t hesitate to sign up to our Newsletter or give us a call  +86 10-65616609 (ext 811/806)   or contact us directly via Beijing@ecovis.com