Market Intelligence for China

Transcription

1 Market Intelligence for China Market Intelligence in China requires constant monitoring and quality assessment. The information available from traditional channels is often too general or inaccurate to be of any real use, but by diversifying information sources, worthwhile, quality material can be found and utilized effectively. Executive Summary If I tell you I know a country where every dream was possible, a place you would go to get rich with the implicit recognition that anyone with enough tenacity, hard work and good ideas would become successful, what country would you think about? Fifty years ago, most people would have answered this question by proposing the United States. However, several financial crises later, a new place of economical dreams and financial empires has risen to the top to challenge its Western rival with the confidence of its high growth and never ending market possibilities; China. China has become a besieged fortress surrounded by investors, and Market Intelligence (MI) practitioners who apply constant vigilance and monitoring are the ones with the keys to get in. The middle kingdom is a country of fast changes where the ones lacking in information are left behind in a blink of an eye, and where the ways to stay on top of this critical knowledge are scarce and sophisticated. This Global Intelligence Alliance White Paper offers some possible solutions to overcome the inherent MI challenges in China, through the combined expertise of our team in Shanghai. To do so, this paper discusses the major economic indicators in the country s key regions, as well as provides some of the most recent and relevant local insights and opportunities. We conclude with a few MI best practices within the Chinese market context and several cases to illustrate them. Market Intelligence for China 1

2 Table of Contents Executive Summary... 1 Table of Contents INTRODUCTION OVERVIEW OF EASTERN CHINA OVERVIEW OF NORTHEAST CHINA OVERVIEW OF CENTRAL CHINA OVERVIEW OF WESTERN CHINA CHALLENGES IN CONDUCTING MARKET INTELLIGENCE FOR CHINA RECOMMENDED SOLUTIONS BUSINESS CASES...33 Case 1: Market sizing and competitor intelligence for the Chinese BGM meter market Case 2: Market and pricing strategy analysis for the infant milk formula market in China and Thailand Case 3: Customer intelligence of Metal-working lubricant across 8 countries in APAC 9. CONCLUSIONS ABOUT GIA CHINA REFERENCES...37 The term Market Intelligence which is used in this paper refers to understanding the present and future business environment by using the intelligence process to provide decision-making support. Terms such as competitor analysis, technology analysis or customer insight will be used under the overarching term Market Intelligence. Market Intelligence should be seen as synonymous with concepts such as Competitive Intelligence and Business Intelligence. Market Intelligence for China 2

3 Exhibit 1. Xinjiang Tibet Gansu Qinghai Heilongjiang Jilin Liaoning Beijing Inner Mongolia Tianjin Hebei Ningxia Shanxi Shandong Shaanxi Henan Jiangsu Anhui Shanghai Hubei Chongqing Sichuan Jiangxi Zhejiang Guizhou Hunan Fujian Yunnan Guangxi Guangdong Northeast China Region Eastern China Region Hainan Central China Region Western China Region 1. Introduction With the biggest population on earth (about 20% of the world s population), the third largest territory, the second most important economy, the highest number of skyscrapers, the second spot in the world s billionaire ranking (10% of the total) and many other world records, China can easily cause vertigo and inspire a marvelous feeling of anticipation to anyone daring enough to venture into its market of superlatives. The country is also host to some of the world s most critical stock exchanges with Hong Kong and Shanghai, and increases its commercial strength as a hub and manufacturing plant every year with 6 of the 10 largest container ports of the world. That being said, this economical wonderland has its mysteries and complexities that one should not underestimate when coming to the middle kingdom. First of all, due to its sheer size, China is a maze of languages and cultures where 56 ethnic groups interact in a myriad of dialects unified through a standardized writing system. The geography also covers everything from the snow covered peaks of Tibet to the tropical beaches of Hainan, making China a whole continent rather than a country where you can grow, mine or produce anything at any given time. In other words, don t ask if you can do something in China, but rather how and where you should do it. A decision even harder to make as the 32 provinces and 5 autonomous regions have extremely high levels of independence to establish their own regulations and policies. The available resources, differences in development, culture and mentality all contribute to blur the picture and make it difficult for foreigners and locals alike to understand and predict what is seen as necessary or welcomed by local authorities. At the same time, the global trends of the economic reforms since 1978 have been defined by the heart of the Chinese political system in Beijing and must be analyzed thoroughly when Market Intelligence for China 3

4 researching the region. As this white paper is being written, China is preparing for the transition to a new generation of leaders who might radically change the rules of the game for the next decades. This major political change will require a very close monitoring from specialists and market analyst to ensure that no one is caught unaware in the wind of change that is sure to blow in the People s Republic over the next few years. However, these hurdles never discouraged far-sighted foreign businesses who kept on investing steadily in China year after year and ensured that the GDP growth rate stayed well ahead any other economically relevant country, and ensured them the leadership in their segments. With this white paper, GIA offers you a first set of insights on how to address this colossus of modern times with a rigorous and systematic region by region approach based on the Regional Economic Development and 11th Five Year Plan. It provides an overview of Eastern China, Northeast China, Central China and Western China, highlighting some of the challenges of conducting Market Intelligence in China, and provides practical solutions based on real life case studies and experiences. 2. Overview of eastern china Exhibit 2. Heilongjiang Jilin Xinjiang Tibet Gansu Qinghai Liaoning Beijing Inner Mongolia Tianjin Hebei Ningxia Shanxi Shandong Shaanxi Henan Jiangsu Anhui Shanghai Hubei Chongqing Sichuan Jiangxi Zhejiang Guizhou Hunan Fujian Yunnan Guangxi Guangdong Northeast Coastal Region Eastern Coastal Region Hainan Southern Coastal Region Introduction Eastern China is the most developed and prosperous region in China due to the geographical advantages of having many ports along the coastlines and the opening-up policy. It consists of 10 provinces and autonomous municipalities: Southern Coastal Region (Fujian, Guangdong and Hainan), Eastern Coastal Region (Shanghai, Jiangsu and Zhejiang) and Northern Coastal Region (Beijing, Tianjin, Hebei and Shandong). These three regions are the most developed in China. Market Intelligence for China 4

5 But each region varies greatly due to its geographical coverage from north to south. This paper will explore the dynamics for different regions. Southern Coastal Region The Southern Coastal Region is one of China s most well-known areas. With the Pearl River Delta Economic Zone, and close access to Hong Kong, this area is both a production giant and an import/export colossus. The three provinces in this region, Fujian, Guangzhou, and Hainan, cover an area of 0.33 million square kilometers, 3.4% of the total area of China. The population of the region reaches million persons equaling 10.6% of China s entire population. Table 1. Economic indicators of provinces in Southern Coastal Region GDP GDP Growth Rate Population GDP/Capita FDI Import 2007 Export Province (US$ bn) % (M) (US$) (US$ bn) (US$ mn) (US$ mn) Guangdong , , ,955 Fujian , ,330 53,319 Hainan , ,573 1,309 Total , , ,583 Sources: China Statistical Yearbook, 2010, with data in The Southern Coastal Region is a well-developed economic region. The three provinces together have a combined gross domestic product (GDP) of US$781 billion, and an average GDP per capita of US$4,583. Guangdong has been much more developed in the years after the opening-up policy began than the other two provinces primarily due to its fortuitous location bordering both Shenzhen and Hong Kong. Alone, Guangdong has the largest export (US$358,955 million) and import (US$252,139 million) value compared to all other Chinese provinces. Also, its population (96.4 million persons) and provincial GDP (US$578 billion) are the highest in China. Within the Southern Coastal Region, Guangdong s FDI (US$394 billion) and GDP/ capita (US$5,997) are much higher than the Fujian and Hainan. Fujian is the second largest province in this region. It has a population of 36.3 million and a GDP per capita of US$4,936. Like Guangdong s connection with Hong Kong, Fujian is closely linked with Taiwan which helps the province to establish relatively high GDP levels, and GDP per capita rates. The GDP growth rate (15%) of the province is the highest in the Southern Coastal Region. Import (US$26,330 million) and export (US$53,319 million) values as well as FDI (US$118 billion) are a far second compared with Guangdong s enormous draw, but these values are relatively high compared to China in general. Hainan, which is well-known for having the most beautiful, tropical beaches and being one of China s chief tourist destinations, is the southernmost tip of China. It is the smallest province in the region. It has a population of 8.6 million and a GDP per capita of US$ 2,816 which is much lower than both Guangdong Province and Fujian Province. Market Intelligence for China 5

6 Regional highlights Strategic position One of the Southern Coastal Region s main attributes is its extreme close proximity to international trade and financial centers such as Hong Kong and Taiwan. Guangdong has relatively easy access to Hong Kong, and Fujian is separated from Taiwan only by the Taiwan Strait. To travel from Guangzhou to Hong Kong requires about 2 hours by either bus or train and costs about USD 30. Cargo delivery from Hong Kong to Guangzhou can take from 2 to 3 days. The ports in this region are vital for overseas trading. In 2009, Guangzhou City handled about 518 million tons of freight traffic. This is about 1/3rd of the entire Guangdong Province freight traffic which reached 1,696 million tons in The major ports of the region include Guangzhou Port, Yantian Port, Shekou Port, and Chiwan Port. Two out of China s top three ports are in this region Shenzhen Port and Guangzhou Port. The close geographic relationship the region shares with Hong Kong and Taiwan will ensure that the future of the region will be especially bright for foreign trade and commerce, and that the region will maintain its importance on the world stage. Pearl River Delta Economic Zone Background information The 9 cities which make up the Pearl River Delta Economic Zone (PRD) Guangzhou, Shenzhen, Dongguan, Foshan, Zhongshan, Zhuhai, Jiangmen, and parts of Huizhou and Zhaoqing cover an area of 11,000 square kilometers or 0.1% of the total land area of China. The region is arguably the most economically diverse in Mainland China. Since the launch of the program in 1978, the region has been growing dramatically and attracting a great deal of foreign attention and investment. In 2009, the PRD s investment in fixed assets reached RMB billion (US$140.6 billion). In the same year, retail sales in the area equaled RMB1.08 trillion (US$158 billion) which is a 15% increase from Exhibit 3. Zhaoqing Guangzhou Forshan Dongguan Huizhou Zhongshan Shenzen Jiangmen Zhuhai Macau HONG KONG Market Intelligence for China 6

7 Special Economic Zones and preferential policy In 1979, the Chinese government announced that Guangdong Province would be allowed to follow less restrictive economic policies and would be permitted to set up three Special Economic Zones (SEZs), including two in the PRD, Shenzhen and Zhuhai. Areas of greater autonomy included finance and fiscal matters, foreign trade and investment, commerce and distribution, allocation of materials and resources, labor, and prices. Preferential policies in the SEZs included a number of features designed to attract foreign investment, such as: A 15 percent enterprise income tax rate Tax holidays of up to five years The ability to repatriate corporate profits and to repatriate capital investments after a contracted period. Duty free treatment of imports of raw materials and intermediate goods destined for exported products, as well as exemption from export taxes. Because of the preferential policies, the PRD region regularly experiences a huge amount of economic development and growth. Besides, the economic incentives to invest in the region, the region s close proximity to other financial capitals is an enormous advantage for foreign and Chinese companies who wish to enter the Chinese market while having access to the ports and financial services in Hong Kong, to enter the region. Industry focus The PRD region is also a world famous manufacturing base. Almost every significant manufacturing industry has a stake in the region especially those producing electronic goods and products, electrical components, watches and clocks, toys, clothing and textiles, plastic products, and many other products. Canton Fair (China Import and Export Fair) The Canton Fair is China s import and export fair held twice yearly in Guangdong Province since It is an internationally recognized affair that highlights various industries trade practices. The fair has even won the renowned China s No. 1 Fair award due to its long history, huge scale, international recognition, complete varied exhibits, its broad distribution of overseas buyers, and its huge business turnover in China. Table 2. Year Turnover (mn US$) Annual Total Growth rate Spring Autumn (mn US$) % ,300 Not available Not available Not available ,230 30,470 56, ,230 31,550 69, ,390 37,450 73, ,220 34,060 66, ,230 29,430 58, ,510 27,200 51, ,420 20,490 24, ,850 18,470 35, ,774 13,367 29, Market Intelligence for China 7

8 The Canton Fair exhibits the most complete varieties of products. The 103rd session of the Canton Fair, for example, covered more than 150,000 types of product, with buyers originating from all over the world. It hosted 192,013 guests from 212 countries and regions and it achieved a business turnover of US$32 billion. However, with the downturn of the global economy, the turnover has dropped since It is still, however, the largest fair of its kind in China Guangzhou Asian Games Guangzhou s 2010 Asian Games were considered a great success. They generated US$15 billion in revenue from tourism alone. However, the total investment of US$18.4 billion was not met by the tourism spike alone. The infrastructure investment that Guangdong Province committed to equaled US$16.3 billion of the total investment for the games. Infrastructure projects including metro system improvements and optimization, road building, environmental protection endeavors, and water treatment facility building were all extremely important during the preparation for the games. The infrastructure improvement projects will allow Guangzhou to present a much more modern, efficient city for years to come. Infrastructure projects According to the Chinese Central Government s 12-year plan ( ) for development in the Pearl River Delta (PRD) in southern China, the National Development and Reform Commission (NDRC) has mapped out plans for cooperation with Hong Kong and Macau with an emphasis on transport infrastructure projects, expecting to achieve greater economic integration in the PRD region by The Central Government has pledged to speed up infrastructure projects in the PRD, in part to compensate for the global economic downturn. In Fujian Province, three new ports are going to be constructed by The province has invested RMB 10 billion (US$1.5 billion) per year since 2008 to see that the ports are completed on schedule. Altogether, the three ports will add about 200 million ton of port capacity for the province. The Xiamen-Shenzhen high-speed railway is expected to open in China s fledgling high-speed railway network already connects Shanghai, Beijing, Hangzhou, and Nanjing, but it is still developing rapidly. The project is part of a greater rail project which will build a high-speed rail network connecting Shanghai to Hong Kong reducing travel time from 19 hours to 6 hours. Opening in 2012 is the new Guangzhou-Shenzhen freeway. This new roadway is the second of its kind to connect Guangzhou and Shenzhen. It is expected to significantly reduce traffic on the existing Guangshen Expressway. The roadway will cost about RMB 11.2 billion (US$1.64 billion). By 2020, 23 cities in the Pearl River Delta will achieve a one-hour inter-city light rail loop. The major city hubs of the rail loop will be Guangzhou, Shenzhen, and Zhuhai, and it is expected to require an increase of 1890 km. Yuan listings in the Hong Kong stock exchange The Hong Kong stock exchange is trying to boost Yuan liquidity due to the increasing number of investment products which dominate in China s currency. This will allow investors to purchase Yuan-dominated shares regardless of how much value of Yuan they actually hold. Once a stock is sold, then the proceeds will be converted back into Hong Kong Dollars. Market Intelligence for China 8

9 Having more Yuan liquidity generated in this manner will help the local Chinese economy by creating the need for trading partners to consider using the Yuan instead of other currencies. Essentially, this plan will be a big step to further internationalizing the Chinese currency. In late 2009, Yuan deposits in Hong Kong totaled RMB130.4 billion (US$19.49 billion) which was just 4.9% of foreign-currency deposits in the city. The PRD Development Plan China has unveiled a development plan for the southern Pearl River Delta in December of It has set ambitious goals for the area over the next 12 years, under the plan issued by the National Development and Reform Commission. Some key goals are: A center of advanced manufacturing and modern service industries. The delta will follow a high-end development strategy in building the manufacturing center, which will lead to a number of globally competitive manufacturers and brands. The region will also develop a modern service architecture that accommodates the needs of Hong Kong, an international financial center. It will also become a center for international shipping, logistics, trade, conferences, and exhibitions and tourism. By 2020, regional per capita annual output will rise to 135,000 RMB (about US$19,765), with 60 percent of that from the service sector. Services will account for 20 percent of regional trade by 2012 and more than 40 percent by The region also expects to develop 10 China-based multinationals with annual sales of US$20 billion by Two to three mega-size auto makers will emerge in the region with an output worth more than 100 billion RMB (about US$12.6bn) each by Equipment manufacturing in the region will focus on five areas: nuclear power facilities, wind power equipment, power transmission and distribution facilities, numerically controlled machine tools, and ocean engineering equipment. There will be an extra-large petroleum and chemical industry base in the region, with two or three mega refiners and ethylene producers by By 2020, the contribution of high-end manufacturing to industrial output will exceed 50 percent. GIA predicts that there will be tremendous opportunities existing in this region with the execution of this plan. Eastern Coastal Region Internationally well-known due to the Yangtze River Delta Economic Zone which includes many world famous cities like Shanghai, the Eastern Coastal Region is composed of three provinces Shanghai, Jiangsu, and Zhejiang. It covers an area of 0.21 million square kilometers, which is around 2.2% of the total area of China, and has a population of million which is around 11.3% of the total population. Economic indicators of provinces in Eastern Coastal Region In terms of GDP per capita, the Eastern Coastal Region is the most developed economic region with US$8,166. Also, the combined GDP of the three provinces is US$1,061 which is easily the largest GDP among every region of China. The GDP growth rates of the provinces are similar, but due to a great deal of FDI in Jiangsu Province, the Jiangsu GDP growth rate is slightly higher at 13%. Market Intelligence for China 9

10 Shanghai, one of China s autonomous municipalities, is China s financial and logistical center. It is the most developed area in this region and in China. The population in Shanghai alone is 19.2 million, and the local GDP is US$220 billion. Table 3. Economic indicators of provinces in Eastern Coastal Region GDP GDP Growth Population GDP/Capita FDI Import Export Rate Province (US$ bn) % (M) (US$) (US$ bn) (US$ mn) (US$ mn) Shanghai , , ,796 Jiangsu , , ,199 Zhejiang , , ,013 Total 1, , , ,008 Sources: China Statistical Yearbook, 2010, with data in Zhejiang Province is one of China s most important manufacturing bases. The province has a GDP of US$337, and a GDP/capita of US$6,498. In this region, it has the lowest FDI (US$164) and import (US$54,718 million) and export values (US$133,013 million). Jiangsu Province is another important manufacturing base, and it is the second largest province in the region after Zhejiang Province. It has a population of 77.3 million and a GDP per capita of US$6,527. Due to receiving the highest amount of FDI (US$444 billion) of any province in China, the province has the largest GDP (US$504 billion). Also, it is an import and export base allowing for an import value of US$139,541 million and an export value of US$199,199 million which is higher than both other provinces in the region. Regional highlights Strategic position Externally adjacent to the Pacific Ocean, internally adjacent to the East China Sea, the Yellow Sea and the Yangtze River, Eastern Coastal Region is endowed with the unique natural resources advantage in terms of strategic position. This region is home to a very extensive and highly developed transportation network that includes railways, expressways, airports and ports. The region is serviced mainly through the airports in Shanghai, Nanjing, Hangzhou, and Ningbo. The biggest two airports are Shanghai Hongqiao Airport and Shanghai Pudong International Airport, hub of Shanghai Airlines and China Eastern Airlines; the two airports combined serve the heaviest air traffic flow in China. Highway transportation is the main transportation mode within the Eastern Coastal Region. In 2009, Jiangsu s highway passenger traffic accounted for 95% of its total traffic and 76% of all freight traffic. However, railways have been developing rapidly recently especially due to the high-speed railway network which is being built up in the region. It is very convenient to travel from Shanghai to Zhejiang and Jiangsu, either by bus or train. It usually takes half an hour from Shanghai to Suzhou, one hour and a half to Hangzhou, 3 hours Market Intelligence for China 10

11 and a half to Ningbo by train. Prices are rather cheap, less than US$12. Waterway transportation is a very small proportion of the overall transportation in the region. It is only 1% of the entire passenger traffic and 31% of the entire freight traffic. However, waterway traffic in the region is the highest in all of China. Zhejiang Province itself holds the 2009 record for most waterway passenger traffic (36.8 million persons) and freight traffic (520 million tons). The Yangtze River Delta Economic Zone (YRD) Background information The YRD metropolitan region refers to 16 cities in Shanghai, southern Jiangsu, eastern and northern Zhejiang, including Shanghai, Nanjing, Suzhou, Wuxi, Changzhou, Yangzhou, Zhenjiang, Nantong, Taizhou, Hangzhou, Ningbo, Huzhou, Jiaxing, Shaoxing, Zhoushan and Taizhou. Exhibit 4. Yangzhou Taizhou Zhenjiang Nanjing Huzhou Hangzhou Nantong Changzhou Wuxi Shanghai Suzhou Jiaxing Zhoushan Ningbo Shaoxing Taizhou The YRD is an important economic powerhouse of the Chinese mainland and it is one of the most developed growth poles of the Chinese economy. Although it only covers an area of 110,915 sq.km which is about 1.1% of China s total land area, its GDP reached RMB6 trillion (US$ billion) in 2009, which accounts for about 17.8% of China s total GDP. This is about RMB500 billion (US$73.2 billion). Economic policy The YRD s long-term economic policy focuses include: Strengthening the regional economic integration of YRD cities in the six main areas which include transportation networks, unified markets, environmental protection, information sharing, financial cooperation, and flows of talents Collaboration between the provinces in order to develop a regional tourism industry which will generate tourist revenue throughout the delta region. The main focus of the provinces will be to promote regional tourist brands and to integrate tourism resources. Following the guidelines of the preliminary YRD Regional Development Program in order to develop the area as China s key economic center with one of the best regional integrated competitiveness rates in the country Encouraging economic growth throughout the duration of the Twelfth Five-Year Plan period Market Intelligence for China 11

12 Focus industry While the Pearl River Delta excels in the assembly of light consumer goods, the YRD is more focused on heavy industries such as machinery, chemicals and other upstream industries, i.e. the production of raw materials, intermediate goods, and capital goods including electronic parts, textiles, and chemical fibers. Shanghai predominates in the finance, banking, property, automobiles and logistics industry. Suzhou is a strong manufacturing base for foreign companies. Nanjing is a hub for the automobile industry, electronics, education, energy, iron and steel industries. Ningbo is a growing economic port which provides imports and exports routes for neighboring provincial cities. Foreign Trade In the YRD, the 16 cities were able export US$592.6 billion worth of goods in This is an increase of 32.8% Y-o-Y. Most exports from the region included products like machinery, transportation equipment, electrical equipment and parts, clothing, and raw materials. Major export market are the US, EU, Japan, Hong Kong, and South Korea. Foreign investment In Shanghai, Zhejiang, and Jiangsu, there were 130,771 foreign-funded enterprises in Major foreign companies included companies like General Motors, Shell, Matsushita, Exxon, Siemens, and LG to name a few. In 2009 the three provinces together accounted for about 38% of the nation s entire foreign investment. Foreign investment in this region is mainly engaged in the manufacturing sector, such as the manufacture of computers, mechanical and electrical products, hardware and chemical products etc. Relocation of high-tech industries to this region is particularly prominent. In particular, many Taiwan businesses have shifted their high-tech products manufacturing to the YRD region in recent years. Taiwan s high-tech investment is concentrated in Kunshan, Suzhou, and Wuxi, of which many of these companies are engaged in IT products and high-tech electronics such as PCs, semiconductors, integrated circuits, digital cameras and LCD monitors etc. Consumer Market The Eastern Coastal Region is one of the mainland s largest and most sophisticated consumer markets. The relatively high income level, combined with a large inflow of tourists, resulted in strong consumer demand. Its combined population of million contributed to total retail sales of RMB 4,497 billion (US$ 661bn) in The consumption pattern in this region is also moving towards services. The relative share of urban household expenditure on items like transportation and communications, education, cultural and recreation services have increased in the expense of items like food and household articles. The trend for rising expenditure on new types of durable goods, such as cars and computers, is also salient Shanghai World Expo The 2010 World Expo was held in Shanghai from May 1st to October 31st. According to information gathered by the Shanghai World Expo Coordination Bureau, Shanghai World Expo (Group), and GIA s in-house estimations the Expo was about 3.5 times larger than the Olympic Games and hosted around 73 million visitors from both China and abroad. Visitors from Shanghai alone equaled approximately 21 million. However, the event drew about 48 million visitors from other parts of China, and 4 million visitors from abroad. The enormous Market Intelligence for China 12

13 amount of people visiting Shanghai boosted the local economy greatly, and spiked the tourism industry throughout the Pearl River Delta. The Shanghai local government reports that it spent US$45 billion to invest in local transportation improvements, recreational facility projects, and public utility infrastructures in order to prepare Shanghai for its debut on the global stage. These optimization projects will ensure Shanghai s efficiency for a multitude of industries for years to come. A very conservative estimate of the local regional economic boost is US$16.4 billion due to the fact that many Expo visitors entered the Expo once or twice, and then toured other cities in the region like Hangzhou City or Suzhou City. However, the long-term local benefits of hosting the event will be very significant throughout the region. Key investment and projects The Eastern Coastal Region s transportation and energy infrastructure is extremely developed. But, several new projects are slated for the region in the next few years. In Jiangsu Province, the sales revenue of new energy vehicles is expected to break RMB 20 billion (US$3 billion). To support the development of the new energy vehicles Jiangsu will promote the localization of important components necessary to build the vehicles. The preliminary work to begin the first phase construction of Shanghai Disneyland is currently underway. The first phase of the massive project is expected to cost RMB24.5 billion (US$3.7 billion). It will be open to the public within the 12th Five-Year Plan period or between 2011 and Current projects within the region are directed at attracting businesses and tourists in order to boost the regional GDP and the regional innovativeness. The future of the region will lie in becoming China s innovative center, and it will be very attractive for many industries and companies. Northern Coastal Region The Northern Coastal Region is composed of two provinces Shandong and Hebei and two autonomous municipalities Beijing and Tianjin. This region covers an area of 0.37 million square kilometers, 3.9% of the total area in China and has a population of million people which is about 14.7% of the total population of China. Table 4. Economic indicators of provinces in Northern Coastal Region GDP GDP Growth Rate Population GDP/Capita FDI Import 2007 Export Province (US$ bn) % (M) (US$) (US$ bn) (US$ mn) (US$ mn) Beijing , ,354 48,379 Tianjin , ,939 29,892 Shandong , ,563 79,491 Hebei , ,938 15,689 Total 1, , , ,451 Sources: China Statistical Yearbook, 2010, with data in Market Intelligence for China 13

14 In total, the Northern Coastal Region is the second most developed economic region in China with a GDP of US$1,036 billion and a GDP per capita of US$6,974. The GDP growth rates of the region vary from 9% to 14%. Beijing, the capital of China, has a population of 17.6 million and a GDP per capita of US$ 10,110 which is just less than twice Shandong s GDP per capita and three times Hebei s. Also, Beijing has the highest import value in the region of US$166,354, and the second highest FDI valuing US$107 billion. Tianjin has the smallest population in the region at 12.3 million people, but it has the second highest GDP per capita (US$8,954) of the entire region. Despite have the lowest GDP of the region in real terms, Tianjin has the highest growth rate (14%). Shandong Province has a population of 93.7 million which is the largest population in the region. The province s GDP (US$496) is the largest in the region, but still lags behind both Beijing and Tianjin in relation to the population. However, both the FDI (US$112 billion) and the export value (US$79,491 million) are larger than all three of the other areas of the region. Hebei has the second largest population (70.3 million) and GDP (US$252 billion) in the region, but its GDP per capita is only US$3,590 which is the smallest by far. Also, Hebei receives the least amount of FDI (US$38 billion) in the region and has the smallest import (US$13,938 million) and export (US$15,689 million) numbers. Regional highlights Strategic position The Northern Coastal Region which lies along the Bohai Sea is a nexus for the north, northeast, and northwest regions of China. The region has access to both the Republic of Korea and Japan which makes it very attractive for any industry with an East Asia focus. Tourism abounds in the region due to a myriad of natural scenic areas, and historical spots which attracts people from the world over. Besides having famous historical places like the Great wall of China or Beijing s Forbidden City, the area also boasts natural seascapes like that of Qingdao and the famous Taishan mountain in Shandong. Besides tourism, the region is also ideal for many other industries due its well-developed infrastructure and its status as an R&D center. Travel in the region is extremely convenient due to the well-connected transportation network of railways, roadways, waterways, and airways. Tianjin which is only about 2 hours by rail away from Beijing boasts one of China s main deep-water ports. Tianjin Port which is the largest man-made seaport and river port in mainland China is one of China s busiest ports, and is the fourth largest port by throughput tonnage in the world. The 2010 cargo throughput was 400 Mt and 10M TEU of containers. Key cities and focus industry Beijing Beijing, as the capital of China and China s political, cultural and international exchange center, is one of the four autonomous municipalities along with Shanghai, Tianjin and Chongqing, which enjoys similar economic and administrative autonomy as a province. Market Intelligence for China 14

15 It has always been China s software and IC design center, with a 60% market share of these products. Computer and telecom equipment manufacturing are pillar industries, as too are microelectronics and digital audio-visual equipment manufacturing, so Beijing has developed an integrated industry chain covering the research and development of microelectronic technologies and materials, IC designing and IC equipment manufacturing, as well as chip production, packaging, testing and application. Beijing is well-known for its human capital and scientific research which has greatly furthered the development of many high-technology industries. The number of higher education facilities and institutions is generally accepted to be the highest number in the country. At the end of 2009, there were 99,917 engineers and 5,304 scientific researchers working in the country. Tianjin and Binhai New Area Tianjin, as an autonomous municipality, ranks third after Shanghai and Beijing. As part of the electronics hub, Tianjin is one of the first state-level electronics and information industry bases in China. Electronics and information technology form Tianjin s first pillar industry. It is home to over 200 global top 500 companies that have established manufacturing plants. Tianjin Binhai New Area (TBNA) is established in 1994, located to the east coastal area of Tianjin. It covers a total developed area of sq. km. Priority has been given to the development of the Binhai New Area in China s 11th Five-Year Plan ( ). Preferential policies, including the establishment of a free trade zone and pilot reforms in the financial sector, have been given by the State Council to support the development of the Binhai New Area, after Shenzhen and Shanghai Pudong. Key industries include electronics and information, petroleum exploration and processing, marine chemical, modern metallurgy, automobile and equipment manufacturing, food and beverage processing, and biopharmaceuticals. The TBNA has four strong advantages: Geographic advantage: It is located next to the China s largest deep water port, Tianjin Port, and it is relatively near to China s capital, Beijing Strong industrial foundations: Within the zone, there are seven dominant industries electronics & IT, automobile & equipment manufacture, oil and marine chemical industry, metal processing, green foods, pharmaceuticals, and new material and energy Great science and technology resources: Because it is very near to Beijing, Tianjin, and Hebei, it can access the region s scientific talent and experience Authorization to open-up the region: It has formed a complete policy in eight aspects regarding financial support, tax incentives, and financing facilitation Market Intelligence for China 15

16 Exhibit Overview of NORTHEAST China Heilongjiang Jilin Xinjiang Beijing Liaoning Gansu Inner Mongolia Tianjin Hebei Ningxia Shanxi Shandong Qinghai Shaanxi Henan Jiangsu Anhui Shanghai Tibet Hubei Chongqing Sichuan Jiangxi Zhejiang Guizhou Hunan Fujian Yunnan Guangxi Guangdong Northeast China Hainan Introduction Northeast China is composed of three provinces: Heilongjiang, Jilin, and Liaoning. The region occupies an area of 0.8 million square kilometers, 8.3% of the total land area of China, and it has a collective population of million which is about 8.3% of the current Chinese population. Economic indicators of provinces in Northeast China Generally speaking, Northeast China is an economic region still under development in China. The overall GDP is only US$456 billion, and the GDP per capita is around US$4,109. Liaoning is the largest and most developed province in the Northeast region, and on its own has a population of 43.2 million. GDP per capita is the largest in the region with US$ 5,156 per person. Also, the province has the highest FDI (US$132 billion), import value (US$22,519), and export value (US$33,415). Table 5. Economic indicators of provinces in Northeast China GDP GDP Growth Rate Population GDP/Capita FDI Import Export Province (US$ bn) % (M) (US$) (US$ bn) (US$ mn) (US$ mn) Liaoning , ,519 33,415 Heilongjiang , ,147 10,082 Jilin , ,617 3,857 Total , ,283 47,354 Sources: China Statistical Yearbook, 2010, with data in Market Intelligence for China 16

17 Following Liaoning, Heilongjiang is the second largest province in the region. It has a population of 38.3 million and a GDP per capita of US$3,283. FDI (US$18 billion), imports (US$6,147), and exports (US$10,082) are several times lower than those which Liaoning Province claims. Besides having relatively low import/export rates and FDI levels, Heilongjiang s GDP growth rate is the lowest in the region and third lowest in all of China at only 5%. Jilin is the smallest province in the region. It has a population of 27.4 million and a GDP per capita of US$3,889. However, Jilin has the highest growth rate in the region at 15% and the fourth highest growth in all of China. Regional highlights Strategic position Surrounded by Mongolia, Russia, North Korea, and South Korea, the Northeast Region is an important if under-utilized window into Northeast Asia. As such the region has a well-developed transportation network of highways, railways, waterways, and airways. Shenyang is the railway hub of the northeastern. There are eight railways which connect Shenyang with Beijing, Dalian, Changchun, Harbin, and Fushun. The high-speed train which was completed in 2007 has drastically shortened the travel time between the northeast and the hub in Beijing. Using the high-speed rail, travel between the two cities will take four hours. Revitalization of Northeast Region Strategy Different from other coastal regions, the northeast region was the heavy industrial cradle of new China. Main industries in this region include: steel, energy, automotive, shipbuilding, airplane manufacturing, and military equipment manufacturing. It is also the most important production base of agriculture, forestry, and livestock-breeding. However, after the policy of reform and opening-up was introduced in China, the economic development speed and efficiency of the area became much lower than the coastal regions and the national average level as well. This is called the Northeast Phenomenon or Neo-Northeast Phenomenon. In 2003, a policy of Northeast Region Revitalization was adopted by the government to revitalize the regions traditional industry while speeding up development of aspects of structural regulations, regional cooperation, economic reform, construction of an environment-friendly economy, and increased efforts in education, healthcare, and cultural projects. Cooperation with Russia, the two Koreas and Mongolia, as well as securing natural gas supplies will become important factors in this revitalization program. The Chinese government has also launched a series of preferential policies for the strategy, including exemption of VAT for newly purchased equipment in Equipment manufacturing, petrochemical, metallurgy, shipbuilding, automotive, high-technology industry, military and agriculture processing industries. The restructuring of SOEs in this region may bring opportunities for foreign company s M&A activities to enter this region. Infrastructure projects and investment projects The government plans to use the Northeast China Revitalization Plan to spark the economy into maturing to levels much closer to the Eastern China region by Many transportation projects as well as industrial encouragement projects are in the works, and will begin to surface Market Intelligence for China 17

18 over the next few years. In Jilin Province, the 1st Nuclear Power Plant of the province is slated to begin construc- tion in The Chisong Nuclear Facility will require a total investment of RMB 85 billion (US$9.8 billion). Eventually, the facility will have six 1.25 million kw power units. Jilin Province also plans to double its auto production by The province is forming five auto industry clusters in various key cities around the province. Additionally, the province will increase its investment of clean-energy auto production till it reaches RMB1.8 billion (US$264 million) in The Revitalization Plan also includes the manufacturing industry, the efficiency maximization of power distribution and the natural gas pipeline network, agricultural development, tourism development, environmental pollution treatment, and many other aspects of the region s economy. 4. Overview of Central China Region Exhibit 6. Heilongjiang Jilin Xinjiang Tibet Gansu Qinghai Liaoning Beijing Inner Mongolia Tianjin Hebei Ningxia Shanxi Shandong Shaanxi Henan Jiangsu Anhui Shanghai Hubei Chongqing Sichuan Jiangxi Zhejiang Guizhou Hunan Fujian Yunnan Guangxi Guangdong Central China Hainan Introduction Central China consists of six provinces Shanxi, Henan, Hunan, Hubei, Jiangxi, and Anhui. Together the six provinces account for 10% of the country s land area. The total population of the region is million persons which accounts for about 27% of the total population of China. The region is rich in both mineral and agriculture resources. Compared to other regions, Central China draws very little attention. In general, the region is rather under-developed with no significant movement or outstanding cities. Economic indicators of provinces in Central China Central China is the second least developed region in China, just above Western China. The region s overall GDP is US$1,033, and the GDP per capita is US$2,897. The FDI in the region is Market Intelligence for China 18

19 Table 6. Economic indicators of provinces in Central China GDP GDP Growth Population GDP/Capita FDI Import Export Rate Province (US$ bn) % (M) (US$) (US$ bn) (US$ mn) (US$ mn) Hubei , ,272 9,979 Hunan , ,657 5,492 Jiangxi , ,410 7,368 Anhui , ,791 8,886 Shanxi , ,732 2,837 Henan , ,131 7,345 Total 1, , ,993 41,907 Sources: China Statistical Yearbook, 2010, with data in US$187 billion which is about 8% of the nation s total. Henan is the second most populated province in China, and Central China s most populated province with 94.9 million people. The province s GDP is US$285 billion resulting in a GDP per capita which is US$3,005 third in the region. With regards to GDP per capita, Shanxi, Hubei and Henan are in the lead with amounts exceeding US$3,000 US$3,141, US$3,318, and US$3,005 respectively. Hunan, Jiangxi, and Anhui have the next highest GDP per capita (US$2,983, US$2,530, US$2,403 respectively). The largest GDP growth rates in the region are Anhui and Hubei s each at 16% in The highest FDI of US$38 billion belongs to Hubei Province. In second place for FDI is Jiangxi Province which claims US$37 billion. Regional highlights Strategic position Central China is China s geographic core. The area acts as a bridge between the well-developed east and the poorly-developed west. Despite relatively close proximity to the east, Central China has the second worst regional economy in China. The region s transportation network consists primarily of railways and expressways. Despite containing nearly 1/4th of the nation s highways, many areas and towns are still extremely remote and difficult to access. Transportation in the region is very inferior to the well-developed roads and structures that are abundant in the Eastern Region of China. Compared to the Eastern Region, labor and land are much cheaper which makes the Central Region ideal for re-establishing an industry from the Eastern provinces to reduce overall costs. Reportedly, many Taiwanese firms are in the process of re-locating to Central China because of the Eastern Region s high labor costs and cost of raw materials. In fact FDI of the region has been increasing rapidly in the region despite inhibitors like the global financial crisis. In 2007, the Central region s FDI was US$152 billion, but the current FDI figures show that the FDI is US$187 billion. Market Intelligence for China 19

20 The Central China Development Plan which is a relatively late addition to China s plan to develop the general economy of China as a whole is taking steps to develop the region, especially in terms of transportation, commodity supply, and raw material supply. In 2010, the National Development and Reform Commission issued the plans which will focus on developing the region as a core technology and modern equipment production base. Innovation will be encouraged to quickly modernize the region s more traditional manufacturing techniques. Key city Wuhan Hubei Province s capital, Wuhan is one of the most well-known and important cities in the Central region of China. The city is a major transportation hub with many railway and roadway crossways intersecting in or near the city. Wuhan s place as a major regional transportation hub and its close proximity to both Shanghai and Chongqing lend the city its reputation as the Thoroughfare to the Nine Provinces. Furthermore, it is within 300 km to other Central region cities such as Changsha, Zhengzhou, Hefei, and Nanchang. Wuhan has maintained a very steady growth rate of freight and passenger transportation from In fact, in 2009, Wuhan s total passenger traffic was 217 million, and the total freight traffic was 344 million tons. The local government is investing about RMB37 million (US$5.4 million) in increasing the annual throughput capacity to 160 million tons. When finished, the port will be used to promote an export-oriented economic development of the region by reducing enterprise transportation cost in foreign trade. In order to push the policy of opening up foreign trade to better deal with economic globalization, Wuhan has sustained growth in foreign trade to contribute to the Rise of Central China plan. The total import and export value for the city in 2009 is US$11.5 billion. Recently, Wuhan has been attracting an increasing number of employees from the surrounding areas. The city is known in the area as having a good living environment and having a stable demand of labor force. The Wuhan Expert Program employs 10 local and foreign experts from key industries and enterprises. These experts are then given an allowance of at least RMB 100,000 per year (US$15,000). Wuhan is quickly developing into an industrial center of the Central Region, and is increasingly more important for China as a whole. In the next few years, Wuhan will be a very attractive market to set up businesses and enterprises as the region continues to develop rapidly. Infrastructure Projects Despite the feeble economy of the region, several provinces are experiencing relatively major projects affecting the future of the entire region. For the most part the major undertakings are related to new power generation, but the alternative energy sources will help to ensure that the Central region develops smoothly and rapidly. In Hunan Province, the provincial government is encouraging the wind power industry with regulations and government guidance to promote the manufacture of wind power facilities. The Provincial Party Committee even claims that the wind power industry will reach RMB 100 billion (US$14.5 billion) by Four nuclear projects are planned to be built in Henan Province Nanyang Nuclear Station, Xinyang Nuclear Station, Luoyang Nuclear Station, and Pingdingshan Nuclear Station. The total investment for the key projects of Henan Province including the nuclear facility build- Market Intelligence for China 20