Foreign SMEs Swarm into Chengdu

The new foreign investment policy of China opens a door for the foreign small- and medium-sized enterprises (SMEs) to enter West China.

The “Several Opinions of the State Council on Further Doing a Good Job in the Utilization of Foreign Investment” (hereafter Opinions) issued by the State Council, or Cabinet in April, paved the way for the foreign companies to get into West China.

According to a source from the National Development and Reform Commission, right now the eastern area of China is haunted by the land shortage and increasing production cost. In comparison, the western and middle part of China is blessed by the advantages in land, resource and labor cost. Therefore, this place is more suitable for the labor-intensive foreign enterprises.

The insider from the Chengdu Municipal Investment Promotion Commission (Chengdu Investment) told us that there were 61 foreign-funded projects approved in Chengdu in the first quarter of 2010, up 60.5% year on year. The contract value of foreign investment was 590.17 million US dollars, up 64.0%; the amount of actually utilized foreign investment reached 1.003 billion US dollars, up 29.4%. In addition, two members of the Global 500 enterprises set foot in Chengdu, increasing the total number of the Global 500 in Chengdu to 169. All the indexes about foreign investment are taking on an increasing trend.

More Foreign SMEs in Chengdu

According to the Chengdu Investment, the Opinions put forward four measures about “guiding the foreign investment into the western and middle part of China”, including the amended “Catalogue of Priority Industries for Foreign Investment in the Central-Western Region” and the other stipulations. These measures possess significant meanings for the western and middle part of China in using foreign capital. However, the experts point out that detailed supporting measures are needed for the convenience of implementing the Opinions.

Previously, the director of Chengdu Municipal Bureau of Commerce said that Chengdu has already been blended into the Yangtze River Delta, Pearl River Delta and some other key important areas in China and will welcome the industries of electric information, modern service, high technology and advanced manufacturing transferred from the coastal areas. Chengdu Investment said that the Chengdu government will work out some favorable conditions for the foreign investment companies based on the central government’s policies. The investors from Hong Kong, Macau and Taiwan will enjoy more favorable conditions in Chengdu. Yuan Xin, president of Chengdu Foreign-funded Enterprises Association, found that more and more foreign SMEs have stepped into Chengdu, most of which are labor-intensive companies specialized in manufacturing and business trade.

Yuan Xin said that Chengdu is not so developed as the coastal areas in China. Though introducing big projects and large enterprises for building high-end industry is the primal objective, great importance is also attached to the recruitment of these labor-intensive SMEs. This could release the employment stress. Meanwhile, the blossoming of the large enterprises and SMEs could promote the consummation of the relevant legal system and is an important figure to measure a city’s performance in attracting foreign investment.

More Weight on Business

Recruitment

In Yuan Xin’s opinion, the relatively better living and development environment in Chengdu is the major reason for attracting the foreign investment. He said that Chengdu government issued many favorable policies to support foreign companies’ development. These measures about water, electric power and gas supply, in particular, are thought very highly by the foreign enterprises.

Yuan Xin said that many foreign investors also place weight on the “soft environment”, in which Chengdu possess great advantages. “Chengdu has natural-born advantages in the living environment, which is a factor the foreign investors must consider before making up their minds.” In addition, the diversified faculties of talents are also a great appealing for the foreign investors. “There are many universities and colleges in Chengdu, which provide a big talents base for the investors,” said Yuan Xin.

Though Chengdu is in an adverse place compared with the coastal areas in the logistics cost, it is still unparalleled with the lower cost of living, consumer price and human resource. If developing the knowledge economy, the restrictions from the logistics condition is smaller. The Chengdu government also realized this point and began to recruit the hi-tech industry, trying to turn the knowledge advantages into economic advantages. Last year Intel moved its development and research center from Shanghai to Chengdu.

The friendly investment environment needs publicity. Chengdu government is planning to hold many “business recruitment conferences” to make Chengdu better known to the foreign investors.