Cover Story: Chengdu: Gateway to the West

Chengdu and the West China region is the new hot spot for doing business in China, writes Sophie Loras.

 
  
 
It may not be as well known to Australians as Shanghai or Beijing, but the business and cultural connections between China’s western city of Chengdu and Australia are numerous.
 
Adelaide helped to put Chengdu on the Australian radar in 2008, when ZoosSA signed a
wang_wang_and_funi_zoossa_webcooperative agreement with China to help secure the long-term survival of the giant panda as part of a global breeding program. Panda ambassadors Wang Wang and Funi – from Chengdu’s internationally recognised giant panda research base – have delighted more than 500,000 visitors at Adelaide Zoo since arriving at the city’s multi-million dollar purpose built enclosure in November 2009 on a 10-year agreement.
 
*Pictured above: Panda diplomacy: Since the arrival of giant pandas Wang Wang and Funi at Adelaide Zoo in November 2009, relationships between Australia and Chengdu have grown at an accelerated pace. (Courtesy ZoosSA / Adelaide Zoo)

 
In September 2012, Perth signed a sister-city agreement with Chengdu after forming a Charter of Mutual friendship between the two cities in 2010.

 
And most recently, in February this year, Victoria cemented Australia’s links to this burgeoning region with the establishment of Sichuan Airlines thrice-weekly direct flights between Chengdu and Melbourne.
 
Beyond Chengdu, Sichuan’s Leshan and Hervey Bay in Queensland have held a sister-city relationship since 1999 and Chongqing and Brisbane have held one since October 2005.
 
In a mark of the growing trade links between Australia and western China, the Australian
chengdu_toast_web_ government will, pending regulatory approval, open its fourth Greater China consulate in Chengdu, complimenting the existing presence of an Austrade West China office and the recent launch of AustCham West China.

 
*Pictured right: Australian Ambassador Ms Frances Adamson inspects Australian products on display at an Australian Spring trade fair in Chengdu in April 2013. (Courtesy Austrade)
 
It’s a dynamic and rapidly growing region, and Chengdu, as the capital of Sichuan province is leading the way, alongside the municipality of Chongqing, in positioning west China as the new hot spot for business.
 
In the last decade, Chengdu has attracted huge government investment into infrastructure under the Chinese government’s “Go West” Strategy, shaping it into a launching pad and logistics hub for the entire West China region.
chengdu_img_8942_web
 
Among projects reflecting the rapid growth and affluence of the region is the city’s airport.
 
*Pictured right: A fashion show formed part of the launch of Australian Spring in Chengdu in April 2013. (Courtesy Austrade)

In August 2012, Terminal 2 of Chengdu Shuangliu International Airport was officially launched to facilitate increased domestic demand, bringing the number of gates across its two terminals to close to 100. The airport is equipped to process up to 35 million passengers a year and is ranked in China’s top five busiest airports.

Already a number of international airlines are operating from this hub, including Air Asia, British Airways, KLM and Qatar Airlines, in addition to the big international Chinese carriers, Air China, China Eastern, China Southern and Sichuan Airlines. As well as Melbourne, Sichuan airlines also flies to Seoul, the Maldives, Jakarta, Ho Chi Minh City, Singapore and Vancouver.

There is also significant investment going into three planned high-speed rail links designed to connect west China with Europe and Asia within the next decade – linking the Pacific by rail all the way to the Atlantic.

 
Local construction within Chengdu includes plans for an elaborate 10-line rail and light rail metro system. Already the city boasts two lines, with a further three currently under construction.
 
The city also recently completed construction of its elevated second ring road in a record eight months to coincide with Chengdu’s hosting in early June of the 12th Fortune Global Forum. Construction on a third ring road has already begun.
 
The hosting of the Fortune Global Forum is itself a milestone for Chengdu, which will showcase the city and the region as “China’s new future.” The forum is attended by the CEOs of the Fortune Global 500 companies, along with high profile Chinese and international leaders.
 
Southeast of the city centre is the new Tianfu District, an eco-city development set to become Chengdu’s new city centre, which will house government offices and technology and software hubs.
 
Chengdu already hosts bases for 50 percent of global fortune 500 companies and has developed a reputation as a software and auto manufacturing hub for international brands including Apple, Hyundai, Volkswagen and Volvo.
 
Home of the Sichuan pepper, the region is also renowned for its pristine scenic beauty andchengdu_giant_buddha_le_shan_web tourist hotspots. Chengdu itself is famous for its teahouses and art precincts and its internationally renowned Panda Research Centre. Sichuan is a province of incredible natural beauty and home to a number of world heritage sites, including the Swiss-like natural reserve of Jiuzhaigou – home to a number of ethnic minority groups, alpine valleys and lakes. The holy Buddhist sites at Emeishan and Leshan, home of the Leshan Giant Buddha (pictured right), are also located in Sichuan.
 
Australian Spring
 
In an effort to tap into this burgeoning region, the Australian Trade Commission recently hosted an ‘Australian Spring’.
 
In April, Australia’s Ambassador to China, Frances Adamson, convened the opening of Australian Spring, simultaneously launching a fifth Australian Chamber of Commerce under the AustCham Greater China umbrella.
 
In launching AustCham West China, Ms Adamson says the launch of AustCham Greater China’s latest chapter reflects the huge significance of business potential that West China presents.
 
“Australian businesses cannot afford to miss out on these emerging opportunities,” says Ms Adamson.
 
Ms Adamson notes Australian companies ANZ (with a busy and growing back officechengdu_anz_hub_building_weboperation in Chengdu), BlueScope Steel, Rheem, Cochlear, Servcorp and design consultancy Place Design Group, which are all working in the region and continuing to contribute to Chengdu’s growth. All form the base membership of the new West China chamber.
 
*Pictured right: ANZ’s Chengdu hub.

 
The new chamber also includes a number of successful Chinese companies including Taifeng Group which is currently looking at investment opportunities into Australia.

 
“Chengdu is at the centre of the developments happening in China’s western provinces.

Australian businesses have noticed this dynamism, and are increasingly present in the city,” says Ms Adamson.

 
“This active business engagement demonstrates Sichuan Province’s increasing openness to foreign investment, in line with active policies at the national level, specifically the national government’s ‘Go West Strategy’.”chengdu_place_design_4-pool_and_club_house_web
 
As a result, Ms Adamson says the opening of a new Consulate-General in Chengdu remains an important priority for Australia.

*Pictured right: PLACE Design Group’s Bund Brilliance in Chengdu.

 
David Dukes, the Australian Trade Commission’s Trade Commissioner for West China says Chengdu is known throughout China as a place with a leisurely lifestyle, but a city already exhibiting signs of a fast growing city.
 
Austrade’s West China Initiative encompasses Sichuan (home to a population of almost 90 million and a GDP ranking 8th nationwide at RMB 2.1 trillion / A$355 billion), Chongqing, Yunnan and Guizhou.
 
Australia has had more than 30 years of involvement in the development of West China with longstanding Austrade offices in Chengdu and Kunming.
 
Mr Dukes says provincial and local governments in the region continue to offer foreign businesses interesting financial and tax incentives.
 
“The interest in Australia and Australian projects remains high, maybe higher than in some of the coastal areas,” says Mr Dukes.
 
“The upcoming Consulate-General, the new AustCham West China and the existing Austrade offices in the region provide a very good and experienced support network. It is an area where complementarities and similarities with Australia both provide opportunities for Australian companies,” says Mr Dukes.
 
Ching Lee is the General Manager of Rheem China and Chairman of the newly formed AustCham West China.
 
Mr Lee, who arrived in Chengdu 17 years ago to set up Rheem’s China operations (initially through a joint venture), says the announcement last year that Australia would open a consulate in Chengdu, accelerated a long-discussed desire by the Australian business community in the region to establish their own chamber of commerce.
 
With the assistance of AustCham Greater China (founded by AustCham Shanghai, AustCham Beijing and AustCham Hong Kong & Macau) and a groundswell of interest, it has taken less than six months to establish the new chamber in West China.
 
In the almost two decades that Ching Lee has resided in the Sichuan capital, the business environment has changed dramatically, with the local government opening up more industrial land to encourage foreigners to base themselves in the city.
 
Mr Lee  says that with more than 50 percent of Fortune 500 companies having a presence in Chengdu, the business environment has become more open and transparent.
 
Increased infrastructure, more international air links and the ease in finding English-speaking staff, also make Chengdu a desirable base for foreign organisations.
 
In terms of livability, Mr Lee says the city has much working in its favour.
 
“It’s a very easy going lifestyle. The people are very receptive to outsiders and are very welcoming,” he says.
 
“You can buy everything you need here and the location is so accessible to every Chinese city and Hong Kong just a two-hour flight away – so in that sense it’s very convenient.”
 
Peter Arkell, the Managing Director of Swann Global’s Asia operations, serves as the Chairman of AustCham Shanghai and is proud of the collective effort the Australian business communities across Greater China have played in helping the West China chamber to launch in such a short time.chengdu_sichuan_airlines_flight
 
“With the launch of AustCham West China, AustCham Greater China can now speak for a much bigger, more diverse community of companies operating in China with a link to Australia,” says Mr Arkell.

*Pictured left: Sichuan Airlines inaugural flight between Chengdu and Melbourne in February 2013. (Melbourne Airport)

 
Mr Arkell says Chengdu is an exciting city which has been emerging for some time.
 
“It’s a city of deep and proud history and for AustCham not to be there would be leaving a big gap.”
 
“For me, one of the wonderful aspects of forming AustCham Greater China is that it gives a platform to the centres of Australian business people across China,” says Mr Arkell.
 
chengdu_melbourne_airport_sichuan_airlines_cover_web“We took 20 years to evolve but now it will be so much easier for smaller groups across china to lean on AGC to resource themselves.“
 
*Pictured left: Sichuan Airlines hostesses arrive in Melbourne on the inagural Chengdu-Melbourne flight in February 2013. (Melbourne Airport)

Outbound Investment

Swann Global, which specializes in recruitment for the mining and resources sector, has a number of offices across China, including Chengdu.

 
Mr Arkell says having a base in Chengdu, has allowed his business to tap into the new shift in the Australia-China trade relationship towards Chinese outbound investment.
 
“A big driver for our business is shifting from inbound business coming into China. We are now keen to be in touch with those Chinese businesses which want to invest in Australia and especially in the west of China, there are a number of big businesses wanting to invest in the Australian mining sector,” says Mr Arkell.
 
“These Chinese companies are not afraid to give something a crack and so it’s exciting for us to be able to help them enter a new and challenging market.”
 
The opportunities for Australian businesses to tap into West China’s outbound investment boom extends well beyond mining.
 
Andrew Lumsden, a partner at Corrs Chambers Westgarth and the Co-Chair of the law firm’s China Business Practice, recently led a fact finding mission to the region for senior representatives of the company’s Sydney office.
 
“Corrs has been actively engaged in China for many years and what we have found in the provinces is a growing sophistication in thinking about outbound investment. Chinese businesses understand there are lessons to be learned from previous outbound investment and are actively seeking to learn from past experience and develop new models for investment,” says Mr Lumsden.
 
“What we are seeing from our dealings is a more sophisticated model for “going out”. We see more and more Chinese clients looking to provide patient capital. Taking a smaller stake and getting to know the Australian business environment rather than demanding total control of an investment,” he says.
 
Mr Lumsden says there is recognition in China that Australia has more to offer than resources, especially in agribusiness and its reputation for clean and safe food.
 
“There is a recognition that Australia has a “brand” of clean and safe food, and combining this brand with an understanding of the Chinese consumer is very appealing.”
 
Ken Waldron, the Managing Partner of Walpark International, agrees.
 
Walpark’s expertise is in the food and beverage and agribusiness sectors.
 
“Australia has a very good reputation for food production – especially for food coming directly from Australia,” says Mr Waldron.
 
He says food accreditation in China is exceedingly important and for Australia, this presents an added opportunity.
 
Education
 
Opportunities in the education sphere are also strong.
 
The Australian Council for Private Education and Training (ACPET) has had a presence in Chongqing for a number of years – choosing the central Chinese city over more traditional bases such as Shanghai and Beijing.
 
“Chongqing is growing at such a rate that skilled workers are widely needed,” says ACPET CEO Claire Field.
 
“With a need for high quality vocational colleges with advanced teaching and management approaches to train their workforce, and the unique understanding of the Australian tertiary system, it was an easy decision to choose to base our representative in Chongqing,” she says.
 
The ACPET China office was opened by NSW Premier, Barry O’Farrell during his visit to China in July 2012.
 
Since the opening, ACPET has achieved a number of success, including the signing of an MOU for a Chongqing Australian Vocational Education Research Centre, an MOU with the Chongqing Education Evaluation Research Centre and developing strong relationships with education agents in the region.
 
“It’s still early days for us,” says Ms Field. “The role of our representative office is a national one but we are aware of the growing urbanisation of Western and Southern China. With that urbanisation comes an interest in the tertiary education opportunities offered by Australian providers both in China and in Australia,” says Ms Field.
 
Catherine Ng is the Projects Director International for Box Hill Institute of TAFE and has been a regular visitor to the west China region for more than a decade.
 
She has been assisting BHIT develop its west China strategy where it has a number of partnerships with Chinese universities and colleges in the region offering courses from logistics, engineering, technology and construction to tourism.
 
Existing partnerships are currently in the cities of Chengdu and Chongqing, but BHIT also has projects in neighbouring Guizhou.
 
Ms Ng says the education market in China has changed significantly – and providers have had to adjust to a more discerning and sophisticated market.
 
“Providers have to go in with eyes wide open and deliver on their promises – to their partners in China, to the parents and to the students,” she says.
 
“The sophistication of Chinese buyers is integral to the success of Australian business.”
 
On the ground in Chengdu
 
Speak to Australians on the ground in Chengdu and they tell tales of rapid growth and huge government investment into infrastructure.
 
Clint Wood, the Chengdu principal of Australian design, planning and environment consultancy, PLACE Design Group, arrived in Chengdu from Australia two years ago.

Since making Chengdu home, and helping to establish the business’s fourth base in Mainland China, Mr Wood has seen the number of expatriates in the city more than double and describes the rate of development as extraordinary.  It is he says, a city “on the move.”

 
He notes the construction of the city’s elevated second ring road – completed at record speed.
 
“In Australia, it would take us five years to build something like that – in China, it takes eight months,” he says
 
Mr Wood established the Chengdu office after three years of fly-in fly-out visits from PLACE’s Brisbane office. Since opening the office in 2011 with 12 staff, he now expects to double that to 25 staff in the near future.
 
PLACE Design Group has China offices in Shenzhen, Shanghai and Beijing and boasts an unusual China strategy – choosing to base the business on a regional model (so that no branch in China is more senior than another) rather than having one big office in the more popular hubs of Hong Kong or Beijing to facilitate all of its China projects in one.
 
“We had always wanted to go west. Chengdu has always been on the map as the fourth point on the square of China,” says Mr Wood.
 
“We want to be close to our clients. We have the confidence to do it because we have been in China a long time and we understand the market.”
 
Mr Wood says work opportunities in the region have been complimented by the city’s easygoing lifestyle.
 
“It’s a green city and with an outdoor lifestyle and a nice city with a lifestyle based culture,” says Mr Wood.
 
“We had existing introductions to work in the region but it’s also a nice location with a good feeling and that’s important too.”
 
The Chengdu office facilitates projects in nearby Chongqing as well as existing projects in Hangzhou and Weihai and has picked up projects in Chengdu’s new Tianfu District development.
 
“This is an exciting place to be as a designer because things are so fast. With that speed come a lot of challenges but also benefits to enhance one’s career and work on exciting projects,” says Mr Wood.
 
“As someone who enjoys large-scale projects, and being able to watch them come to life within an 18-month to two-year period, this is really an appealing and exciting place to be.”
 
BlueScope Steel has been manufacturing in China since 1990 and started the Chengdu operations in February 2003. It currently employs over 2000 people in China across eight manufacturing sites.
 
BlueScope Lysaght (Chengdu) Limited General Manager, Benny Yan, says BlueScope’s base in Chengdu further aligns the company’s strategic development with the objectives of local authorities and the government.
 
“Our presence in China’s Central West market further underpins the economic development in the local regions under the government’s Western China Development Strategy.”
 
The BlueScope Lysaght Chengdu plant provides high quality roofing and walling systems including the design, manufacture and on-site service for all its West China products.
 
These include material for industrial, public, power station and high-rise buildings, in addition to premium metallic coated and painted steel building products and engineered steel building solutions.
 
Mr Yan says compared to first tier Chinese cities such as Shanghai and Beijing, Chengdu doesn’t have the advantages of economy scale or always the talent resources, but he says, Chengdu’s reputation in the electronics, IT, mechanical and tourism industries, has made the city one of China’s top players within Central and West China.
 
“Sichuan is improving and more and more FDI and domestic investment is being drawn into the region,” he says.
 
The government offers preferable policies from its Go West Strategy in taxation and land acquisition in areas such as the Tianfu New District.
 
Mr Yan says both the Sichuan provincial government and the Chengdu Municipal government provide agencies to assist in the investment process such as registration and land acquisition.
 
There are even more attractive incentives for those operating in highly advocated industries such as high-tech.
 
ANZ established its Chengdu hub in November 2010. The wholly owned subsidiary of the ANZ Banking Group is located in Chengdu’s Tianfu Software Park and provides back office service and support to ANZ’s interests across the region. The hub employs more than 150 staff at present and will continue to grow to reach a work force of around 800 to 1,000 to support ANZ’s growth strategy in the next few years.
 
Chengdu remains one of China’s most important economic, education and research centres, producing over 100,000 graduates, including 46,000 IT graduates, each year – including world-class IT, finance and banking professionals.
 
“Our ANZ Chengdu hub aims to strengthen its operations ability to better support ANZ’s goal of being a Super Regional Bank across the region, and China is one of the important markets for growth,” says Brian Squires, Managing Director, ANZ Chengdu Hub.
 
“Our presence in Chengdu provides us with ready access to Chinese and English language capability as we look to expand in China. It means we now have more capability to gain greater efficiencies, reduce processing risk and better support our customers across Asia.”
 
Australia-West China Relations
 
Former Australian ambassador to China, Dr Geoff Raby was recently awarded the title of honorary citizen of Chengdu in recognition of his contribution to the development of relations between the region and Australia and his ongoing advocacy and promotion of the region to Australia and Australian business.
 
Dr Raby first visited Chengdu in 2007 during his time as Australian Ambassador and has continued to visit the region regularly since then. His long-term relationship with Chengdu Mayor, Dr Ge Honglin, has also helped to draw the region closer to the Australian mindset.
 
“Chengdu has developed very quickly. It’s a very dynamic place with growth still in the double digits,” Dr Raby says.
 
Dr Raby says Chengdu and Sichuan offer very competitive wages, and under the guidance of the Chengdu mayor, remains a very competitive city generally.
 
“Chengdu has an excellent workforce and now with AustCham Greater China opening a branch here, it is clearly a place offering great opportunities,” says Dr Raby.
 
For Australians like Ken Waldron, Chengdu has been a good starting point for a roll out across China. Government incentives and support continue to make Chengdu welcoming for foreign firms, and logistically, its proximity to other Asian and Chinese cities, including Hong Kong, (where Walpark has its original base), make it a convenient business hub.
 
“We came in under the radar, away from the big cities and learnt how to do business in China, then branched out to the east and south,” says Mr Waldron.
 
“Doing business here is getting easier and for smaller businesses like ourselves, it is easier to establish a place and a space in the local business community than if you were in Shanghai or Beijing.” 

chengdu_map_webFacts and Figures: Sichuan Province:

 

·      Land area:                                                  485,000 km² (5th nationwide)
 
·      Population (permanent residents):           88 million (4th nationwide)
 
·      GDP:                                                           RMB  2102.67 billion
 
(8th nationwide, up 15% y-o-y)
 
·      Per Capita Disposable Income (urban): RMB 17,899 (China: 21,810)
 
·      Per Capita Net Income (rural):                RMB 6,129 (China: 6,977)
 
·      GDP Per Capita (2010):                            US$2,545
 
·      CPI:                                                            5.3% (China: 5.4%)
 
·      Fixed Asset Investment:                            RMB 1514.2 billion (up 17.7% y-o-y)
 
·      Ratio between primary,
second and tertiary industries: 14.2: 52.4: 33.4
 
·      Actualised Foreign Investment:                US$11.03 billion (up 57.2% y-o-y)
 
·      Foreign trade value:                                  US$47.78 billion (up 46.2% y-o-y)
 
·      Exports:                                                     US$29.04 billion (up 54.2% y-o-y)
 
·      Imports: US$18.74 billion (up 35.3% y-o-y)
 
*All figures above are for the year 2011, unless stated otherwise
 
**Source: The Australian Trade Commission
 
Trade between Australia and Sichuan provncechengdu_sichuan_australia_trade_web
*Source: Australian Trade Commission


 
 
 

 

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