570 Chongqing

Sect

ion

Six:

Loc

al Fo

cus

Chongqing

I. Introduction1. The CityChongqing is situated in southwest China and it is quickly becoming the most important industrial and commercial city in the region. Chongqing’s importance is demonstrated by the fact that it is one of only four cities in China to be elevated to the status of municipality.

The municipality covers 82,400 sq km—more than Beijing, Shanghai, and Tianjin combined—and has a population of 32 million, although only 14.1 million live in the urban city centre.1

2. EconomyFigure 1: Key Economic Indicators

Source: Economist Intelligence Unit 2

In 1996, just prior to Chongqing becoming a municipality, its per capita Gross Domestic Product (GDP) was EUR 410.3 By 2010, just fourteen years later, the per capita GDP had almost reached six times this amount, at over EUR 2300.

Although Chongqing’s total import and export figures plummeted approximately 19% year-on-year during the global recession, Chongqing’s GDP continued to grow at a rate far above the national average in 2009 of 9.1%, with Chongqing’s real GDP rising 14.9% year-on-year compared with 2008, thus demonstrating Chongqing’s speed of economic development. This can be explained by effects from both the ‘314 Plan’4 which was adopted in 2007 to stimulate Chonqing’s economic growth, as well as the ‘State Council Number 3 Document’5 which was adopted in 2009 as a formalisation and elaboration of the ‘314 Plan’. However, the main reason for the maintenance of such a high GDP growth rate came from increased public spending from the massive national economic stimulus package, which helped fixed-asset investment in Chongqing increase 31.5% year on year from 2008 to EUR 55.805 billion.6

3. Pillar IndustriesThe automotive industry is the primary pillar industry in Chongqing, and the most powerful economic growth point. According to municipal government statistics from 2006, Chongqing's automobile industry (including vehicles and vehicle parts) realised revenues of EUR 95.4 billion, an increase of 35.4% compared with the same period the previous year. This constituted 31.7% of the city's total GDP. During the same period, Chongqing produced 791,000 vehicles (including motorcycles), an increase of 17.3% compared to the same period in the previous year. These figures make Chongqing the fourth largest city in terms of automobile production in China, with its output

2007 2008 2009Area (sq km) 82,300Urban Population (million)

13.6 13.9 14.1

Municipal Communist Party Leader

Wang Yang Bo Xilai

Mayor Wang Hongju Nominal GDP (EUR billion) 43.37 53.49 68.52

GDP per capita (EUR) 1538.67 1891.85 2329

Utilised FDI (EUR million) 784.17 1963.38 1827.34

Total Import and Export (USD million)

7,160.00 9,048.30 7,720.00

Exports(USD million) 4,220.0 5,340.2 4,120.0

Imports (USD million) 2,940.0 3,708.1 3,600.0

Retail sales of consumer goods (EUR billion)

17.4 21.7 26.0

Per capita annual disposable income of urban residents (EUR)

1321.41 1507.98 1741.04

1 China.org.cn, viewed on 14th June 2010, http://www.china.org.cn/english/features/

ProvinceView/203467.htm

2 Most data points in the table are provided courtesy of the Economist Intelligence Unit

3 Kitakyushu Initiative for a Clean Environment, viewed on 7th June 2010 http://

kitakyushu.iges.or.jp/docs/sp/air/Chongqing%20(SO2%20Pollution%20Control).pdf

4 The ‘314’ Plan is the General Plan for the New Stage Development of Chongqing

proposed by President Hu Jintao during the 2007 NPC and CPPCC meetings. It is

named 314 because of the three positions formulated into four missions to realise

one goal: for Chongqing to take the lead economic position in the western regions of

China with an affluent society.

5 The ‘State Council Number 3 Document’ was promulgated in 2009 as an elaboration

of the ‘314 Plan’, and is formally named ‘Several Opinions on Promoting Coordinated

Urban-Rural Development in Chongqing’.

6 http://finance.sina.com.cn/roll/20100121/15547286609.shtml

571Chongqing

Section Six: Local Focus

European Business in China Position Paper欧盟企业在中国建议书 2010 / 2011

accounting for 11% of the national total.7 8

Other pil lar industries include heavy industry and chemicals. Chongqing is home to China's largest aluminium processing plant, operated by Southwest Aluminum Industry Group Co., Ltd. Completed in 2005, the facility has an annual capacity of 300,000 tons of high-grade aluminum and aluminum alloy products. ABB Chongqing Transformer Co., Ltd., a Sino-Swiss joint venture (JV) between ABB Ltd. and Chongqing Transformer Works, is ABB’s largest transformer plant worldwide and supplies large substations, power plants, and hydropower stations to China and overseas.

The local chemicals sector is founded on extensive supplies of natural gas. Yangtze River Acetyls Co., a Sino-British joint venture between China Petroleum & Chemical Corp (Sinopec) and British Petroleum (BP) is the largest acetic acid plant in China. Its current annual capacity of 350,000 tons is set to rise to one million tons when construction of a new, EUR 370 million plant is completed. In 2014, BASF will also start the commercial operation of their MDI plant. MDI is an important intermediary chemical in the manufacture of polyurethanes.9

In terms of the tertiary sector, Chongqing’s banking and insurance industry is strong. Chongqing is home to more than 300 financial institutions. ABN AMRO Bank N.V., Allied Commercial Bank, Bank of East Asia, Ltd., Bank of Nova Scotia, HSBC Holdings plc, and Standard Chartered Bank all have registered Chongqing branch offices. Great Eastern Life Insurance Co. Ltd., Liberty Mutual Insurance Co., and Metropolitan Life Insurance Co. also have a presence in the city. Boston-based Liberty Mutual has its China headquarters in Chongqing and was one of the first foreign insurers to establish a presence in western China when it opened a property and accident insurance branch in the city in 2004.

II. Business Environment1. InfrastructureChongqing is the main transportation hub in southwest China, with advanced river, road and air infrastructure.

In terms of air transit, Chongqing is well served by the Chongqing Jiangbei International Airport, one of the ten largest civil airports in China. Road transportation is centred around the Chengdu-Chongqing expressway which connects these two biggest metropolitan areas in southwest China. The expressway brings road travel time between Chengdu and Chongqing to less than four hours. Chongqing’s key economic posi t ion, however, is historically based on its location on the Yangtze River and much of Chongqing’s business infrastructure and logistics operations still revolve around Chongqing’s favoured position on the banks of the Yangtze. Chongqing’s Cuntan Port has consequently been developed into the world’s largest inland port, and river transportation continues to be key to Chongqing’s future growth.

2. Industrial DevelopmentThe focus of regional industrial development in Chongqing is mainly focused on the development of economic and technological zones under the management of the municipality. In total, there will be seven different industrial zones in Chongqing, including a micro-electronics park, a chemical industrial park and a hi-tech industrial zone.

3. EnvironmentChongqing’s growth, both in terms of economic growth as well as population, industrial, and agricultural growth, comes at the cost of increased pollution of Chongqing’s air, water, and land resources. As a result, Chongqing ranks highest among 23 large Chinese cities for atmospheric sulphur dioxide levels and eighth highest for levels of suspended air particles. In addition, Chongqing is the largest source of organic water pollution in the Yangtze River Basin upstream of the Three Gorges Dam. However, according to a report on the air quality of 47 major Chinese cities by the China Environmental Monitoring Center, Chongqing’s current air quality is considered to be improving.10

4. AdministrationDuring the past few years, there have been administrative improvements to assist foreign industry to do business and the Chongqing Municipal government has implemented several programs to improve the environment for foreign investment. For example, a service called the “E-governance program”, allowing for a faster flow of

7 CQ News, viewed on 19th June 2010, http://english.cqnews.net/Economy/200807/

t20080703_2131045.htm

8 Right.site asia, viewed on 5th June 2010, http://rightsite.asia/en/article/chongqings-

auto-industry-grows-2010

9 The China business review, viewed on 5th June 2010 http://www.chinabusinessreview.

com/public/0901/criticaleye.html

10 Ching.org.cn, viewed on 17th June 2010 http://www.china.org.cn/english/

MATERIAL/189327.htm

572 Chongqing

Sect

ion

Six:

Loc

al Fo

cus

information between governmental institutions and both companies and citizens, has been established.

The Chongqing municipal government has also simplified application procedures for foreign invested enterprises in Chongqing by implementing a “one stop” service. This service allows foreign investors to more easily access all investment-related departments. With the creation of a centralised service centre, the ease of entry into the Chongqing market has been improved. Despite these administrative improvements, there are still many areas which could be improved in Chongqing.

III. Key Recommendations Real Estate

Although residential properties are safe to be inhabited, the construction standards tend to be low due to the speed at which residential properties are constructed. Many problems still exist, such as damp, poor plumbing, and electrical issues. An increased focus on international construction and property management standards is needed to propel Chongqing to first tier city status.

This issue also exists in the commercial office market. Currently there is a shortage of Grade A office buildings in Chongqing. Many properties are presently under construction, but they will not be completed during this year. In the interim period, the management standards in existing office buildings need to be improved to stabilise the market.

Power Shortages

During peak seasons the government tends to cut power throughout the industrial zones to maintain the supply of

available power in residential areas. An improved system of power supply management needs to be implemented with a focus on maintaining power supply to key industries to ensure that cuts do not hamper revenues. A simple system of power conservation in non key areas would alleviate the power shortages in the industrial and factory areas, areas that are essential to furthering Chongqing’s growth.

Manpower

Attracting and maintaining talent is an issue every company in China faces, but one major issue facing Chongqing is the loss of talent to the larger first tier cities. A major challenge for Chongqing is how to attract and keep a talented workforce. The Chongqing government must make an effort to keep talented workers in Chongqing and also attract back to Chongqing those who have already left to develop their careers elsewhere, potentially through an incentive system. Attracting highly skilled employees across all industries is a major issue facing Chongqing.

Transportation

Transportation into the city centre is becoming increasingly problematic. It will always be an issue in Chongqing due to the topography of the city. Limits on the number of large vehicles allowed into the city centre during peak hours must be implemented. It is hoped that the future north/south metro line currently under construction will alleviate much of the problem. The government has certainly increased its focus on new metro lines. However, it is imperative that these lines are developed as quickly as possible to alleviate the crippling congestion into the city centre.