More multinational companies are eyeing China's second-tier
cities as expansion destinations for the next two years.
A survey released yesterday by Jones Lang LaSalle, a world
leading real estate services and money management firm, found
companies are most interested in penetrating these cities for their
preferential policies and huge market potential.
Chengdu, capital of southwest China's Sichuan Province,
northeast China's Dalian and east China's Hangzhou ranked as the
top secondary level cities on companies' radars.
The survey showed companies that set up off-shore manufacturing
and other outsourcing services in China's big three cities Beijing,
Shanghai and Guangzhou have long since expanded their operations in
secondary and tertiary locations. Newcomers are often lured by
competitive costs and business opportunities in those areas.
Anna Kalifa, head of research at Jones Lang LaSalle's Beijing
Branch, said the next two years would be "an exciting time" for
foreign firms in China.
"We expect first mover companies, such as those in the IT or
telecommunication, manufacturing, as well as transport and
logistics sectors to strengthen their investments in the
second-tier locations and begin eying expansions to potential
tertiary tier cities," said Kalifa.
She added the banking and finance sector would continue
aggressive expansion in the first-tier cities, as retail banks are
expected to competitively grow in first-tier locations and into
cities where they are permitted to conduct renminbi business.
"Companies in the professional services sector will focus on
gaining market share in key cities and expanding to select
secondary cities, while Chengdu, Hangzhou and Nanjing will be
target locations for this group, which includes accountants,
consultants, law firms," Kalifa said.
The survey also revealed that the industry mix of the
multinationals varied in different secondary cities.
According to Pol-Henry Cox, country head for Jones Lang LaSalle
China, the IT and telecommunication sector is more established in
Chengdu because of its incentive policies and large supply of
qualified labour.
The banking and finance industry, however, is more dominant in
Tianjin, as the municipality is one of the first cities to open to
foreign banks under WTO regulations.
Professional services firms have a stronger presence in Dalian
and Hangzhou as a result of the cities' successes in attracting
foreign businesses, the main clients of this group.
Cox indicated that Chinese cities hoping to attract
multinationals with manufacturing facilities, research and
development plants face tough domestic and international
competition.
"It is not enough that China have seemingly low labor costs, as
different competing regions offer various incentives geared towards
attracting a specific type of industry in order to get the
upper-hand," said Cox.
The survey targeted large multinationals, mostly global Fortune
500 companies.
The four largest sectors represented in the survey were IT and
telecommunications, with 28 percent of total respondents, followed
by banking and finance (16 percent), professional services (16
percent) and real estate development and management services (10
percent).
(China Daily January 19, 2006)