City Report: Suzhou

Tuesday, April 10, 2007 11:24

Just a half hour train ride from Shanghai is Suzhou, one of the hottest areas in the Shanghai region for manufacturing investment. Suzhou has enjoyed tremendous growth in the last 5 years as Shanghai’s cost of manufacturing rose, and Suzhou was able to offer similar investment experience with lower costs.The Suzhou government ,working with the Singaporean government, established the Singapore-Suzhou Industrial Park with very attractive investment incentives, and they focused on the soft side of business to ensure that the city would become a world class manufacturing base.

Foreign managers living there now say that Suzhou’s quality of life has improved dramatically in the last 3 years, and as a result foreign managers are willingly moving to manage Suzhou operations. For many, Suzhou’s lifestyle is preferable in many ways as the city has more nature areas, cheaper costs of living, and all the comforts that can be found in Shanghai.

Suzhou Macroeconomic

As the table above shows, Suzhou has seen double digit growth for the last five years. Real Estate development investment (including industrial, commercial, and residential) has followed this trend closely, disposable income, consumption have all increase as well, and following this trend the government is very optimistic about the future.

SIP has actually been responsible for the majority of the growth in Suzhou, and with special status in Beijing, the park is making independent decisions that will continue to benefit the area. There is a new focus on goods requiring high value add, and they are encouraging a number of areas.

To sustain Suzhou’s growth, and its place in the Chinese economy, Suzhou is investing billions to improve the city’s infrastructure. In addition to new government buildings, the government has recently completed a new exhibition center, is finishing a new culture and arts center designed by Peter Starke, and has recently broken ground on several new buildings that will become the nucleus of a new central business district.

Unlike many areas of China that only focus on building the hardware, Suzhou has also invested heavily in the software required to effectively attract investment. Suzhou has 25 colleges, 70 research institutions, and every year more than 50,000 graduates hit the streets to become the future skilled labor Suzhou needs to drive industry.

As Shanghai continues to growth, Suzhou only stands to benefit. In addition to capturing the overflow of many companies who find Shanghai too expensive, many suppliers to those manufacturing in Shanghai are locating in Suzhou’s parks and the surrounding area.

Due in large part to its proximity to Shanghai, Suzhou was one of the first regional cities that foreign companies looked to setup manufacturing. More and more foreign companies are continuing to move to Suzhou to open new factories as the prices of land and labor costs are lower.

As can be seen in the figure below, contracted FDI increased by over 300% from in 4.67 billion USD in 2000 to 15.3 billion USD in 2006 (contracts increased from 943 to 2181), and as a sign that Suzhou’s FDI is transforming into higher quality investments through wholly owned vehicles, the gross number of contracts actually decreased out between 2002 and 2006 while both contracted and utilized capital rose.

Suzhou Investment

This change shows that like many other cities in China, contracts are moving from lower value joint venture agreements to high value wholly owned foreign entity establishments.

For Suzhou, a city that has planned their economy to support and benefit from the growth in Shanghai, the foresight and planning has paid off. Many foreign executives located in Shanghai look to Suzhou before anywhere else for further investment in the south as operations can be managed from Shanghai if need. However, the city is also very suitable to supporting an expatriate lifestyle, and many project managers are opting to move to Suzhou full time.

Both comments and pings are currently closed.

7 Responses to “City Report: Suzhou”

  1. Des says:

    July 2nd, 2007 at 10:14 pm

    Great post…..I’m very curious on the source of the Suzhou statistics you posted, if you could share that, it would help me alot.

    Des

    http://www.koval.net

  2. Rich says:

    July 3rd, 2007 at 1:13 am

    Hi Des,

    Thank you for your support.

    The statistics come through desktop research and interviews. Typically we first look at the Statistics books/ websites that are put out at national, provincial, and local levels. Then we follow up with local officials we are in touch with.

    To be fair, statistics in China are often not 100%. however, They are a good guide for overall trend analysis.

    Have a good week
    Rich

  3. Tracy says:

    July 12th, 2007 at 9:44 am

    Rich,

    I find the information to be quite helpful and am using the statistics as a guide. Do you know where I can find information on the industrial manufacturers in the area? We have several customers in this province and I am researching the justification to either green field a business or develop an alliance with a local company. Any information would be greatly appreciated.

    Kindest regards,
    Tracy

  4. Rich says:

    July 12th, 2007 at 11:32 am

    Tracy,

    I am glad the information is useful. Please send me an email with some more details.

    The best (free) advice I can give you is to look at the various park websites. Sometimes you can find the names of companies there, or run a google search.

    I am actually making a trip there Monday to look at project and will be with local officials. If you can send me an idea of what you are looking for I will be happy to ask a few questions for you.

    Hope all is well
    Rich

  5. Prologis in China: If You Build It, They Will Come says:

    July 26th, 2007 at 6:43 pm

    […] Chonging, Dalian, Dongguan, Guangzhou, Hangzhou, Nanjing, Ningbo, Qingdao, Shanghai, Shenyang, Suzhou, Tianjin, Wuhan, Xiamen, Xian, […]

  6. More Real Estate Hurdles Coming Soon for Investors in China says:

    July 29th, 2007 at 11:52 pm

    […] multiple times. It is a common sight, especially in new suburban areas of the second tier cities (Suzhou , Chengdu, and Wuhan), as the game of “if you build it they will come” is played out […]

  7. Ming su says:

    March 3rd, 2008 at 5:18 pm

    I am a Suzhounese, if you need any information regarding with Suzhou, I might be able to help u