Chengdu: A Wise Choice for International Businesses

When the cost of domestic investment increases, many investors choose to move production base from home to abroad. China is exactly one of these new markets. However, where is the best place for foreigners to invest in China? Many investors prefer eastern coastal cities like Shanghai, Suzhou and Nanjing, but the center of central and western China, Chengdu, which owns its own unique advantages, may be a better choice.

Market accessibility is the first factor which worth considering. In eastern China, convenient traffic conditions and advanced economy contribute to the favorable investment environment. Nevertheless, recent years, with land prices rising, resource shortage has turned into a serious problem and the market is tending towards saturation. It is obvious that these cities are gradually losing their traditional privileges, especially for those foreigners who want to establish new enterprises in China as the resource insufficiency remains outstanding now. So, apparently, it is wiser for foreigners to seek a new target city.

Chengdu Business: A Low-Cost Investment

Unlike eastern cities, Chengdu is a good choice which is able to balance the market accessibility and the cost. On one hand, Chengdu shares great market potential. Last month, as the first half of 2016 went by, many major cities released their economic data. According to these statistics, we can see that Chengdu, with 559 billion GDP, ranks 8th. This fully shows the internal market potential of Chengdu. Meanwhile, the market coverage area of Chengdu is considerable, more than 800 cities in China contained. On the other hand, Chengdu possesses a cheaper cost. Away from the eastern seaboard, Chengdu is less involved in the land resource competition. The cheap land reduces the operating cost of companies. Besides, as a transportation junction, Chengdu also has access to a low logistics cost. Up to the December of 2015, Chengdu Shuangliu International Airport has already opened 251 routes, including 163 domestic routes and 86 international and regional routes. In the meantime, as the most important railway station of Chengdu, Chengdu East Railway Station has 14 platforms and 26 station tracks. This well-developed transportation not only decreases the logistics cost but also makes up the position weakness of Chengdu.

In addition, the cluster effect of enterprises should never be neglected, especially for those foreign investors whose intention is expanding existing companies which already have a strong financial backup, matured management system, and advanced technology. What an investor concerns more in looking for a place to set up a branch is the positive externality. In Chengdu, its primary industry serves as a solid foundation while its secondary industry and the tertiary industry also occupy a national leading position. There are 271 companies in Fortune Global 500 and many high-technology companies have branches in Chengdu, such as Lenovo, Motorola, Ericsson, and Siemens. New companies will benefit from this from acquiring knowledge spillovers and low-costed but professional labor and getting supports in raw material supply. For example, after Intel’s settlement in Chengdu in 2003, substantially related industries gradually gathered in Chengdu. Since then, a chip-device-component-termination-software-service outsourcing supply chain gradually shaped. Companies in this supply chain support each other and develop together. After several years’ rapid development, now, globally, 80% of iPad production, 50% of computer chip production and 20% of laptop production are completed in Chengdu.

A Great Environment for Company’s Growth

On top of this, a free and unconstrained investment environment is conducive to the future development of a company. Since ancient times, as the cultural exchange center, Chengdu has its own openness, inclusiveness, and cultural diversity. This comfortable cultural atmosphere creates a favorable environment for entrepreneur team. Furthermore, the government’s preferential policies also create a better investment environment. The commercial institution reform in 2015 fully reflects this. We can see policies in relaxing enterprise name registration, simplifying registration procedures, and other fields. All these policies make it more convenient for foreign investors to register a company.

To sum up, with large market potential, low cost and a free and unconstrained investment environment, Chengdu is an appropriate place for a new company to expand China’s market. Meanwhile, the cluster effect of existing enterprises will also benefit transnational corporations. Moreover, taking all these factors into consideration, plus Chengdu is a financial and commercial center and a major industrial base of China, the secondary industry, and the tertiary industry are especially suitable to be developed in Chengdu.

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