City Report: Dalian

Thursday, January 11, 2007 4:20

Dalian, the “Pearl of the Northeast” is one of the most important cities in the Northeast, Dalian offers a very comfortable lifestyle to locals and foreigners alike. A scenic environment, combined with the city’s comprehensive range of facilities and rich legacy of cultural heritage, give Dalian an extra edge as a tourism site, honored by the United Nations with the Global 500 Award for its contributions to environmental protection. As one of China’s most vital sea ports, it is well positioned in a range of sectors, including petrochemicals, shipping berths, machinery, refrigeration and digital information.

As the logistic hub, finance and foreign currency clearance centre of northeast China, it has attracted a huge influx of enterprises from sectors as diverse as banking, insurance, trading, freight services, logistics and consultancy.

Surrounded by China’s “Rust Belt”, the provinces near Dalian possess the state owned enterprises that have historically manufactured China’s heaviest goods. Now that many of these state owned enterprises are being allowed to fail and restructure, these companies are becoming the Northeast’s heaviest burden.

In an effort to promote growth, the Central Government created the “Revitalize the Northeast” policy in 2003 that provided financial and political incentives for investing in the northeast provinces. While still considered a failure, investment has gone down in many of the areas since the policy was implemented, it has been a boom for Dalian as it is seen as the only safe haven for investments in the area.

Economic Overview:

Dalian is the window for northeast China and the gateway to Beijing and Tianjin. It is backed by the vast hinterland of northeast three provinces and Inner Mongolia whose total population is over 100 million. 80% of the export cargo from northeast China is handled through the Dalian Port every year.

A long history of international trade, Dalian is located on the strategically important southern tip of China’s Liaoning peninsular. Dalian has been one of the fastest growing Chinese cities over the past decade, and has consistently grown by double-digits year over year. Surrounded by the Yellow Sea in the east and Bohai Sea in the west, Dalian is a marine gateway connecting northeast China and a greater part of north China with the rest of the world, particularly Japan and South Korea

Unlike the three provinces surrounding Dalian, Liaoning province has a lower concentration of State-owned enterprises and has been able to attract large amounts of investment that the others have not. In the future, as the Government tries to once again revitalize the North east “rust belt”, Dalian will only continue to grow.

In the last year, Dalian has hosted over 50 conferences & exhibitions that have drawn thousands of business leaders to the area. Dalian has entered sister-city relations with 18 cities in fourteen countries including Japan, the Republic of Korea, the United States, Canada, Germany, France, the United Kingdom, Italy, Australia, Russia, Ukraine, Macedon, Cuba and Congo.

Foreign Presence:

Ranking top in China in terms of overall economic strength, Dalian is an up-and-coming entry port, trade and tourism city. Currently, it is home to over 10,000 foreign ventures and have established trade links with over 160 countries and regions around the world (over 2,000 of which come from Japan)

As can be see in figure 2, Dalian has been very successful in attracting foreign investment. With over 5 billion USD in contracted FDI in 2004, Dalian has received by far more capital than any other city outside of Beijing, Shanghai, and Guangzhou. It can also be seen that the growth rates in FDO have increased following the 2002 policy changes. As this policy begins to take shape, “Go West” policy took 3-4 years to fully mature, and other provincial economies begin to grow, Dalian will be a primary benefactor as companies establish regional offices in Dalian or use Dalian as the entry point.

Dalian FDI

The city has so far attracted 72 Fortune 500 enterprises to set up 125 operations locally. In the last year 12 state level R&D centers, 7 logistics centers, and 5 regional headquarters were established in Dalian. To date GE, Goodyear, Pfizer, Dell, Accenture, Wal-Mart, Canon, Toshiba, Mabuchi, Sanyo, Matsushita, Hitachi,LG Industry, Hyundai, Posco, Carrefour, Total, Tyssen Krupp, Liebherr, Nokia, Ericsson have all established a presence in Dalian

Wrap Up:

Dalian, like Xiamen, has done an excellent of attracting high technology investment . In addition to investment from Fortune 500s, many small to medium sized companies have begun to move into the area to support these facilities.

The area has done particularly well with Korean and Japanese investment for high technology, and with Shenyang drawing in significant automotive investment in the last 3 years, expect the FDI growth to remain high.

However, it should be noted that Dalian’s continued growth will be heavily reliant upon the other economies in the surrounding provinces due to the positioning of its port. If the surrounding areas fail to grow, Dalian risks being overlooked for Western or Central cities like Chongqing, Xi’An, Chengdu, or Wuhan.

Overall, for companies entering China or expanding existing operations, Dalian is a city that should be considered. With a high quality labor pool, one of Asia’s best ports, and the national/ regional government is actively pushing investment. The city itself has built a strong high tech park and base, and for firms with Japan and Korean operations, Dalian also offers the potential to become a back office hub with their high concentration of Korean and Japanese speakers.

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