Chengdu vs. Chongqing: Logistics Hub(s) of the Southwest

Thursday, November 15, 2007 10:58

Chengdu Chongqing LogisticsWhile working on some research for a report, I interviewed a member of the Chengdu foreign investment bureau to better understand why foreign firms in general were choosing Chengdu, what the obstacles were, and what the future looked like..

Of the 20 or so questions we went over, one of my favorites was in response to my question

“Chengdu or Chongqing… which city will be the logistics hub of China’s southwest?”

to which my interviewee responded:

This question should be answered in different terms. In terms of air and land transportation, we Chengdu shall be taken as the hub in Southwestern China. But if it is in terms of water transportation, no doubt that Chongqing is the hub.

Looking at the map, and you can immediately see why Chongqing is the water hub. The Yangtze splits the city in half.

What I find interesting though is that from the perspective of this representative, and others in logistics & manufacturing, is that Chongqing’s real comparable advantages.. and that is the shame of it.

Taking nothing away from Chengdu, I have to scratch my head as to why Chongqing has allowed Chengdu take such an important role in logistics. Not just regionally, but also domestically, and more and more internationally (primarily air based movements).

After all, Chongqing has all the modes feeding into it. River, Rail, Highway, and air. So what is preventing them from becoming the center of gravity for the region on an intermodal basis? the opportunity exists to import containers from abroad, split them over rail and road to final destination…. right?

Well.. maybe not.

For Chengdu has apparently become know as the regional hub amoung the people I speak with, and if one looks at how this is impacting the logistics network… one can clearly see that there are more firms operating using Chengdu as their base of operations in the Southwest.

Where the competition could heat up, and where the opportunity for strong logistics firms comes out is in the trucking, 3/4pl, warehousing sectors… There are firms who are strong in both cities, but operating independently of each other who will come together.  This is particularly true for those with strong road-hual coverage in the area (and possibly cross border into Thailand & Vietnam).

From the consumer side. The situation is improving every day, and it really doesn’t matter if Chengdu or Chongqing comes out on top because in the end.. the consumer will be the big winner.

Stay tuned as over the next 18-24 months I would expect to see more acquisitions to be targeted in this area.  Currently working on a logistics project, it is clear that many firms have stabilized their east coast operations and partnerships, and that their intention is to focus more on the West.  With all the talk of Go West, the logistics firms have come to understand that their role in that movement is a very lucrative one.

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7 Responses to “Chengdu vs. Chongqing: Logistics Hub(s) of the Southwest”

  1. Matt in Chongqing says:

    November 15th, 2007 at 6:59 pm

    Does the difference in minimum invested start-up cost for a WOFE between Chongqing and Chengdu matter? From what I know, Chongqing is requiring in the millions still, while Chengdu has bumped down to 100,000 RMB.

  2. Rich says:

    November 15th, 2007 at 7:19 pm

    Hi Matt,

    For Chengdu, I have the below information that comes from a law firm in Chengdu. I will need to look to see if I have the Chongqing information, however from my experience all of these cities follow the national standards as a basic rule. IT is when you starting talking about the 100M USD investments that they start looking at ways to improve their competitive positions.

    1) According to PRC Company Law, a limited liability company shall have a minimum registered capital as RMB 30, 000. For establishing a WFOE which could be a limited liability company, there’s no additional specific minimum investment requirement. The registered capital of a WFOE could be paid by installments, subject that 15% of the registered capital shall be paid within 90 days upon issuance of the business license of the WFOE and the remainder shall be paid within 2 years upon issuance of the business license of the WFOE.

    2) For a consulting company, the administrative fees shall be calculated according to the registered capital of the WFOE. Normally if the registered capital is less than USD 10 million, the administrative fee would be approximately 0.08% of the registered capital. Our legal fees would be USD 8,000 upon issuance of the business license of the WFOE and USD 12,000 if post-establishment registrations are included.

    3) In Chengdu, we understand that currently there’s no similar restriction regarding the address of the rep office/WFOE. The investor may simply rent an office for the purpose of setting up a rep office/WFOE.

    Hope that helps.
    R

  3. China Law Blog says:

    November 17th, 2007 at 5:08 am

    Rich,

    Keep talking about logistics as everything points to it as one of the top areas for growth among foreign firms. I always think of law firms as canaries in coal mines since we are positioned to see what is going to happen down the road because so often companies come to us first. Based on my firm’s business alone, this canary is saying logistics is China’s next frontier for foreign companies. A completely out of whack proportion of our new clients has been American and Canadian firms in the logistics business and this has been true for the last six months, picking up even more so just in the last two.

  4. Rich says:

    November 17th, 2007 at 6:23 am

    Hi CLB.

    Yeah. I have been working with a number of firms in China, and more than that… talking to them. There is so much activity going on here, and it is really fun watching this industry grow.

    In fact, my current project has given me some great insights into the express market and where there were only a couple of firms 18 months ago on the domestic side that would have been considered “China-wide” ready, there are now quite a few.

    What will be interesting for your clients, and others, is who will see the big picture first and put their money into the pool. There are a number of firms watching from the sidelines that I think need to get into the game.. and there are some great niches still left too.

    R

  5. peter says:

    July 29th, 2008 at 11:01 pm

    check Maxxelli

  6. rose says:

    January 24th, 2009 at 2:17 am

    WHy chengdu got better development than chongqing in the past years?

    Because it had been and is still the capital of sichuan province and it took most of resources of sichuan province to develop itselp.Chengdu is really a selfish capital and in china,most capitals did such thing.

    In my opinion,chongqing have more bright future and it’s position and industry fundament is prior apparently on map.As now it is municipality directly under the Central Government,it could get more investment and development than ever.

  7. Hao says:

    January 6th, 2011 at 6:10 am

    I come from Chengdu. Chengdu has a longer history than Chongqing, and Chengdu have been one of China’s biggest cities for thousand years. 60 years ago, it’s the first time that Chongqing got more famous than Chengdu(but Chongqing was still a poor city). These years, the gap of economics between Chengdu and Chongqing becames smaller and smaller. It is true that Chongqing has bright future(even more bright because it has larger population), but in the history Chengdu is always in a better situation when it compare to Chongqing(even in 2011). Some foreigners think Chongqing should be better than Chengdu because they don’t have enough knowledge about china’s history.