Asiatic Sourcing Blog

Growth of Western China via Attractive Links to UK & Dubai

Western China is seeking to lure more of its quarter billion population to its cities by offering alluring jobs and financial opportunities. In past years, the Eastern seaboard containing such powerhouses as Shanghai has been the main attraction due to the wealth of that area’s cities.

However, those doing business in China are finding that very attractive offers are being made to draw them to the western section of the country. For example, Chengdu, the capital of Sichuan, is aggressively courting British and Dubai financial firms in the hopes of drawing their business to the city.

Such financial companies, which include those specializing in fund management, insurance, and private equity, along with those interested in China sourcing via lucrative Chinese businesses, are finding that the tax breaks being offered by China’s “go west” policy are possibly worth the risk of building there.

The “go west” plan was devised by the Chinese government to stave off the constant flow of poor migrants that are flooding eastern cities and creating a variety of potentially explosive problems. The hope is to diffuse the situation by diverting more of the population flow to the western sections of the country.

The plan channels a great deal of development money to western cities and offers tax breaks to corporations interested in starting up or relocating China manufacturing firms and other forms of business. Corporate tax breaks include a 2-year tax-free status on profits and a lower corporate tax rate of 15pc compared to the normal 25pc for a ten-year period.

A good example of a top performing company taking advantage of the deal is Foxconn, a huge electronics company that manufactures Apple iPads and has set up base in Chengdu. Foxconn has grown from a handful of workers 18 months ago to just over 80,000 employees today. Other big name players are Intel which has moved its operations to Chengdu from Shanghai, and Volkswagen which is using Chengdu as its car manufacturing base to produce 20 million Polo and Golf cars each year for the booming Chinese market.

Proton Products is also eyeing a possible western relocation. The company catering to the steel cable industry currently has a Shanghai plant that produces laser-based machinery, but admits it pays twice as much for a Shanghai engineer as it would for one in the west which forces it to charge more for those wanting their China products.

British firms have been quite slow in responding to the incentives even with cheerleaders such as Lord Green, Britain’s trade minister, heralding the “limitless” potential of Western China business. Although London seems to be coming around, countries like Dubai, Germany and the United States are the ones making solid moves to set up business in Western China.

Experts are anticipating the same magnitude of growth in the western portion of the country within the next ten years that was experienced in the 1990s Shanghai boom. The uncertainty in the whole deal is how much assistance and freedom the eastern-based Chinese government will give the leaders of cities as Chengdu in their march towards growth and expansion of businesses that will ultimate attract those who wish to buy from China.

/* ]]> */