China looks west to Chengdu

China looks west to Chengdu

By Monika Chansoria | 12 January, 2013
The southwest region of China has a huge market, cheap skilled labour supply.

The capital city of Chengdu located in China's southwest Sichuan province and the upper reaches of the Yangtze River, appears to be at the heart of the Chinese government's Western Development Strategy ("Go West" campaign) wherein heavily backed preferential investment policies for western provinces was initiated during late 1990s. The "Go-West" campaign catered for western China's 12 provinces, autonomous regions and Chongqing Municipality in order to catch up with the booming coastal regions of eastern China. In April 2011, China's State Council approved plans for the Chengdu-Chongqing Regional Economic Zone, paving way for it to become the most important economic and modern industrial production centre for western China by 2015. Significantly, 2015 will be the final year of China's current 12th Five-Year Plan period, i.e., 2011-2015.

Today, Chengdu being the most populated and economically developed city in western China, has become the epicentre of high-tech innovation and development. The southwest region of China holds to its advantage abundant natural resources of energy, a huge market, cheap skilled labour supply, strategic geographical location and a cost advantage. Holding a sub-provincial administrative status, Chengdu is gradually witnessing policies such as high governmental investment, preferential tax rates, and incentives for start-ups such as one-year interest-free loans that seem to be steadily, yet progressively, paying off. According to China's top economic planner, the National Development and Reform Commission (NDRC), as many as 23 key western projects at a total investment of 682.2 billion yuan since the end of 2010 have been formulated.

Attracted by cheap labour costs and favourable government investment policies, Chengdu aims to tap into China's rapidly expanding consumer market as well as seeks to become a focal point for software development and innovation. It is interesting to note that nearly one-third to one-half of Apple iPads being sold worldwide is currently being assembled in Chengdu. Additionally, Intel makes almost half of its chips in the city, and the city boasts of housing Chinese technology companies like Lenovo, Huawei, ZTE and the Taiwan electronics giant Foxconn. Besides, prominent foreign companies include Texas Instruments, Fujitsu, IBM, Hewlett Packard, Microsoft, Sun, SAP, Ubisoft, Siemens, GE, Cisco, Motorola, Nokia, Ericsson, Alcatel, Accenture and Dell.

To realise its objective of going beyond manufacturing alone and becoming a hub of innovation, Chengdu is developing a "Software Park", and is thus changing the entire gambit of the technology scene in China. Until now, Beijing, Shanghai and Shenzhen near Hong Kong were known to be epicentres for China's IT industry. If the sales figure are anything to go by, Chengdu's IT sector neared $47.6 billion in 2011.

In November 2012, a summit sponsored by Chengdu's Municipal People's Government called "China (Chengdu) Internet of Things Summit" sought "new opportunities for the technological and industrial development of the Internet of Things", according to Yan Zongming, member of the Party Standing Committee of Shuangliu County, which is a leading base of Chengdu's Internet of Things industry. Earlier in 2010, Chengdu had formulated the Chengdu Internet of Things Development Plan, establishing Chengdu's High-Tech Zone as the research and development area and Shuangliu County as the manufacturing area for the Internet of Things industry located in the city. Till September 2012, Shuangliu had signed agreements on 31 Internet of Things projects, with total investments of approximately 33.1 billion yuan ($5.3 billion).

Moreover, China's strategy to develop its western regions also brings into focus the Tianfu New Area, located in Chengdu, launched in December 2011, with an expected GDP of 650 billion yuan ($103 billion) by the end of 2020. Plans for the Chengdu Tianfu New Area envision a city fuelled by modern manufacturing and high-end service clusters. .

With its sound infrastructure, preferential policies, low operating costs, plentiful human resources and quality services, the city has become a focus for global giants as they move further inland in China. Since the reform and opening-up policies were introduced in 1978, the Chinese State Council has promulgated that it will focus on scientific development and accelerate the shifting model of growth in pursuing economic and social development with efforts being made to ensure stable and steadfast development of the economy, while improving science and technology and turning its resource advantages into economic benefits.

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