Shile Consulting Blog

Top 4 regions for Doing Business in China

2024-01-14 18:38 Incorporation China
Doing business in different regions of China is like doing business in different countries. It is necessary to plan specific strategies taking into account the unique characteristics of each region. Business rules and labor laws vary by region; entrepreneurs and business structures must fully understand the functions and factors of key Chinese cities when making business plans in China.

In this article, we will share information about the economy, industrial development, politics and trends of the four largest megaclusters of the Chinese economy:

East: Shanghai — Jiangsu — Zhejiang (Shanghai — Jiangsu — Zhejiang)

North: Beijing — Tianjin — Hebei (Beijing — Tianjin — Hebei)

South: Greater Bay Area

West: Chengdu-Chongqing

1. Shanghai — Jiangsu-Zhejiang

Shanghai is the mainland one of the most populous city and an international center for finance and trade, innovation and technology, transportation and logistics
Shanghai has the highest GDP of any city in mainland China, amounting to about 3 trillion yuan in 2018, marking an exceptional milestone in the Chinese economy. The city is moving towards a post-industrial economy and is striving to develop 6 industries:
  • Electronics;
  • Information Technology;
  • Automobile industry;
  • Petrochemical industry;
  • Machinery and equipment;
  • Biomedical complex
  • The three largest industries include financial services, wholesale and retail trade, and real estate
Surrounded by Zhejiang and Jiangsu provinces, Shanghai is closely linked to Suzhou Industrial Park and Changshu Economic and Technological Development Zone, home to domestic and international manufacturers opened their factory and warehouses.

Shanghai Free Trade Zone

Shanghai, along with Beijing, Chongqing and Tianjin, are four centrally run cities directly controlled by the central government and thus benefit from preferential treatment priority in certain policies.
Through the implementation of the reform and opening-up policy, Shanghai for the first time became a major port for domestic and international import and export, attracting huge foreign investment
At the end of 2017, 7 billion foreign direct investment was attracted to the Shanghai Pilot Free Trade Zone (SHFTZ), accounting for 41
2% of the entire city.
In August 2019, China’s State Council approved a pilot FTA in Shanghai, which will extend the border to Lingan New District, providing some tax incentives and access to favorable policies to attract more talents in the region.

Shanghai Stock Exchange

In addition, Shanghai has one of two stock exchanges in mainland China, the Shanghai Stock Exchange
The new Shanghai Science and Technology Innovation Council, known as STAR Market, is expected to become the “China NASDAQ Exchange” as a fundraising platform to stimulate innovation and new sources of growth.

2. Beijing — Tianjin — Hebei

As the second largest city in terms of GDP (it exceeded 3 trillion yuan in 2018) and the seat of China’s central government, Beijing is the headquarters of most of China’s largest state-owned companies, and it houses the largest number of Fortune Global 500 companies in China.
Chaoyang District, which is called Beijing Wall Street, attracts a large number of foreign investments due to its favorable investment environment, convenient transportation and highly efficient telecommunications system.
Zhongguancun National Demonstration Zone, was established in 1988, is the first high-tech park in China and is currently the Chinese headquarters and research center for international high-tech giants such as Google, Baidu, Microsoft, HP and Sina. On the other hand, Tianjin and Hebei Province function more like logistics centers and host heavy industry factories.

Three-year action plan

In August 2019, the Beijing Municipal Commercial Bureau unveiled a three-year action plan for the service sectors aimed at creating more opportunities for foreign investment and talent. The action plan consists of 7 subsectors:
  • Science and technology
  • Internet and information technology
  • Finance
  • Education
  • Culture and tourism
  • Healthcare
  • Professional services

3. The Greater Bay Area

Guangzhou, the capital of Guangdong Province, and Shenzhen, China’s “Silicon Valley,” are two ideal places to do business in southern China.
Guangzhou has been successful in moving up by producing higher-end products, especially in the automotive industry and high-tech manufacturing. The city is rapidly becoming a center of innovation.
Shenzhen pays great attention to technology, financial services, modern logistics and cross-border e-commerce. Many Chinese high-tech startups created in Shenzhen quickly turned into multinational companies, for example, Tencent, Huawei, DJI.
Guangzhou and Shenzhen are included in The Greater Bay Area Development Plan (“GBA”), a political initiative expected to reach 3.6 trillion US dollars by 2030. The aim of the project was to create one of the largest urban areas in both size and population, which would provide regional competitive advantages and compete with San Francisco, Tokyo and New York.
Major infrastructure projects in GBA, such as the bridge between Hong Kong and Macau, the high-speed railway between Hong Kong and Shenzhen, Guangzhou and Hong Kong, increase connectivity and convenience between GBA cities. This is a strong indicator of a broader strategic vision aimed at promoting economic reform and improving the competitiveness of Southern China.

4. Chongqing-Chengdu (Chengdu — Chongqing)

Geographically, Chongqing is the gateway to the vast western regions of the country. It is twelve times the size of Shanghai, but the price of land in Chongqing is much cheaper than in coastal cities.
In 2018, the annual import and export volume of Chongqing amounted to 522.26 billion yuan. Within the framework of the “One belt one road“ and “New International Land-Sea Trade Corridor within the framework of the China-Singapore Demonstration project” Chongqing will strengthen its strategic position as a shipping center and national logistics hub.
Cargo transportation between Chongqing and Europe takes about 12 days. The financial sector, considered the financial center of the upper reaches of the Yangtze Belt, is another key sector with great potential for foreign investment.
Chengdu, the capital of Sichuan Province, is the third largest luxury goods market in China after Shanghai and Beijing. A large number of well-known luxury brands have opened their first ever flagship stores in Chengdu IFS and Taikoo Li. According to reports from various sources, shopping malls annually show double-digit growth in both sales and rents.
Chengdu has proven itself well in other industries as well. In 2022, 22 projects with foreign investments totaling $3.39 billion were signed.

What’s next?

Market accessibility and a developed economy are important factors for starting a new business.
The establishment of Tier 1 cities makes it advantageous for international companies to benefit from a more established and prioritized foreign investment policy.
On the other hand, Tier 2 cities are looking for opportunities and changes and may be able to offer more flexibility or lucrative offers while trying to attract foreign businesses.
It is necessary to examine the level of support for foreign business by local authorities, such as support from trade organizations, the availability of tax incentives, consumer habits and logistics efficiency.

Factors to consider when starting a business in China:

  1. GDP growth and population
  2. The price of land and skilled labor
  3. Efficiency of telecommunications, infrastructure and logistics
  4. Demographic factors such as income level, market size, consumption structure, openness to foreign culture, etc.
  5. Corporate tax rate / availability of tax benefits
  6. The level of support by local authorities for foreign business, for example, the presence of a free trade zone, the priority of key industries (a list of positive and negative factors), the complexity of company registration
  7. Support from Chambers/trade associations
  8. Competition from other target market participants
  9. The legal system
  10. Intellectual property protection strategy
  11. The friendliness of the Work Visa /Immigration policy
  12. Having a trusted agent or business partner

How can Shile Consulting help?

We provide company registration and corporate outsourcing services in China.
With knowledge of local conditions, a reliable administrative base and experience working with international clients to help you at all stages of starting and running a business in China. Having experience working in many regions of China, we can find the best structure for your business.
For more information, questions and support, please contact us by email: info@shileconsulting.com