Start your business in China-An overview of Industry Cluster by Region in China
In the past decades, China has shifted from a planned economy to a market-oriented economy. As the most populous developing country, regions in China bear differences in geography, history, and culture. Since the late 1990s, different provinces and regions in China have also become increasingly specialized. Nowadays, one can find significant spatial differences in the distribution of industries as well as industrial specializations. Since the vast bulk of business in China centers on the major city clusters and economic zones, having a general idea of several main regional economies is a must. We hope that this overview of industry distribution and specialization of different regional areas in China could serve as a useful starting point for those who are interested in understanding the Chinese industrial landscape and in searching for new business opportunities available in China.
Metropolitan Areas and Industrial Distribution
Jingjinji Metropolitan Region (Beijing, Tianjin)
In 2017, the Jingjinji Metropolitan Region contributed to 10 percent (around US$1.2 trillion) of China’s GDP. This region has been heavily involved in heavy industries and manufacturing. Beijing, the capital of China, is taking advantage of being the center of government. The city has the strongest research base in China and is home to many of the country’s best universities. Beijing has more unicorns than any other Chinese city. Beijing also complements its Internet services and machinery/instruments industries with strong petrochemical, education, and R&D industries. Tianjin, the emerging first-tier city in the area, has its strength in aviation, logistics, and shipping. The Jingjinji Metropolitan Region has clustered a significant growth for automobile, petrochemical, automotive, software and aircraft manufacturing.
The Yangtze River Delta (Shanghai, Suzhou, Hangzhou, Nanjing)
The Yangtze River Delta Economic Zone is dominated by Shanghai which is mainland China's financial center, as well as by other important economic hubs like the cities of Nanjing, Suzhou, Hangzhou, Ningbo, and Xuzhou. The vast interior of the Yangtze River Delta is heavily industrialized with advanced transport infrastructures such as highways, expressways, airports, and ports.
The region already accounts for 4.66 trillion RMB (US$682.21 billion) as its 2007 annual GDP. Its forecasted GDP in the delta would hit 16 trillion RMB (US$2.4 trillion) by 2020, based on the annual growth rate of 11 percent. Shanghai predominates in the finance, property, automobiles and logistics industries. 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 import and export routes for neighboring provincial cities.
Notably, German businesses are heavily invested in the Yangtze River Delta. Based on records from the fDi intelligence, Shanghai welcomed US$4.95 billion in capital expenditure (capex) from Germany between 2013 and 2017, creating more than 18,400 jobs. The top sector attracting German investment was industrial machinery, equipment and tools, as well as chemicals and automotive components. Additionally, German companies are playing an active role in several investment zones including the Taichang Investment Promotion Bureau, the Jiaxing Economic and Technological Development Zone, and the Pinghu Economic and Technological Development Zone within the region. As of August 2016, more than 250 German companies have settled in the Taichang region, generating sales revenue of US$2.72 billion.
The Pearl River Delta (Guangzhou, Shenzhen, Zhuhai)
Following the Open-door Policy and the economic reform in the late 1970s, the Pearl River Delta Special Economic Zone (PRD) has flourished economically. The GDP of the PRD grew from just below 12 billion RMB (US$1.45 billion) in 1980 to over 1,134 billion RMB (US$ 137 billion) in 2003. From the 1980s to 2000, the PRD enjoyed an average annual GDP growth rate of 21.9 %, well above the country as a whole (9.6%.) During this period, heavy industrial manufacturing and the high technology equipment production were two main drivers of the economic growth, hence the PRD was also regarded as the “factory of the world.”
Starting from the 2000s, however, the PRD began to transform its economic base from labor-intensive, high-energy consumption manufacturing to one that fuses technology-based manufacturing, trade-related services and business services, and high-tech industries like telecommunications, biomedicine, and new energy. For example, Shenzhen, the once global sweatshop factory, is transforming into a high-tech innovation industrial hub with the supports from local tech enterprises like Huawei, Tencent, BYD, and DJI. In 2017, the Pearl River Delta joined the ambitious Greater Bay Area (GBA) initiatives with Hong Kong and Macau, an attempt to speed up its industrial transformation through further regional integration and innovation-driven development.
The Chengdu-Chongqing City Cluster (Chengdu, Chongqing)
Besides the economically successful regions clustered along the east coast, a couple of Chinese inland provinces and regions have caught the eyes of investors around the world in recent years. Most notably, Chengdu and Chongqing are turning into an ideal base for industrial relocation from the coastal areas with their affordable labor, an abundant supply of land, and enhanced efficiency in logistics and transportation sectors.
Sichuan and Chongqing are now home to around 2,000 manufacturing companies focusing on producing power-generating equipment, shipbuilding, combustion engines, and oil rigging equipment makers. Additionally, the Chengdu-Chongqing city cluster is now industrial hubs for the electronic information industry and the natural gas chemical industry. Unlike city clusters along the coast, the Chengdu-Chongqing city cluster has the natural advantage of developing energy industry with its rich natural resources. Sichuan is rich in mineral resources with more than 132 kinds of proven underground mineral resources including vanadium, titanium, and lithium is the largest in China. Chongqing focuses on the exploitation of coal, natural gas, as well as thermal, hydro, wind, and biomass power generation.
The Future Outlook-Regional Industrial Transformation and Reconstruction
Aside from the trend of increasing regional industrial specialization and maintaining a medium-high-level economic growth, China’s economy has entered into a new stage of development with the key driver being industrial innovation and upgrading. Hence, for those who are interested in playing a part within the Chinese market, it is essential to not only understand the regional advantages but also keep track of the industrial transformation as well as business regulations and regional policies in different Chinese provinces and regions.
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