The road to rebalancing

Local governments roll out the red carpet to attract foreign investment

A bank merely opening a new branch is not normally a significant news event.

However, this month's opening by the British bank Standard Chartered of a branch in Changsha has been much heralded in the media.

The modest-looking premises in the city's New Time Plaza is seen as an indication of the business potential that now exists in China's high-growth inner regions.

As such even the soft opening in July merited attendance by none other than the bank's global Chief Executive Peter Sands and Hunan province Party Secretary Zhou Qiang.

Susan Sui, 41, general manager of the branch, which will employ 30 people, says the bank has wanted to open a branch in Changsha for some time.

"As a foreign bank we can only open two or three branches a year so we have to do a lot of research before we open up in any location," she says.

"We have observed the (local) government had made a lot of effort to attract foreign investment and I think more Fortune 500 companies will set up a presence here."

Despite the publicity, Standard Chartered is not the first foreign bank to open a branch in Changsha. HSBC opened a branch four years ago, followed by Bank of East Asia, Citibank and the South Korean bank Shinhan.

Sui has spent a large part of her career in the previously booming southern coastal regions. She was deputy general manager of the Guangzhou branch and regional sales manager of the bank's South China Global Enterprise. Before moving to Changsha in May, she spent five years as general manager in Zhuhai, which borders Macao.

But she believes the real growth opportunities now lie in inner regions like Changsha.

"Because of the European debt crisis and the US slowdown, the economy of the coastal regions has been affected a lot whereas in central China there is a lot more dynamism and energy to develop the economy," she says.

Another European business that opened in Changsha is Earlex, a British maker of paint spray guns, steam cleaners and other professional power tools for the DIY and professional market.

The business, based in Guildford, Surrey, which has a number of other international operations, opened a sales office in the city earlier this year.

Terry Lan, 32, the sales manager, is another recruit from the south coast, having previously worked in Shenzhen.

"Changsha was chosen because the company was not that familiar with the China market and wanted a central location with easy access to other cities and where living standards and rental costs might be lower," he says.

Lan, a graduate of Sydney University, says companies are increasingly relocating to Changsha and other areas of central China because of the new fast rail links that mean coastal cities in Guangdong are just three hours away.

"A lot of manufacturers are moving their facilities from Guangdong because they are trying to reduce their costs. They can manufacture here and also transport their goods by the bullet train to the ports on the south coast in less than three hours."

In Guiyang, the capital of one of China's poorer and less developed provinces, Guizhou, a Chinese-born US citizen has returned to make a major investment.

Ji Yong, 44, is one of the leading experts in the world in his field of optoelectronics, having built a reputation for himself with ventures in Silicon Valley and elsewhere in the US.

He has put up 10 percent of the capital in Guizhou Haotian Optoelectronics Technology, in the Jinyang Technology Industry Park in the city. The other major investor in the $350 million (280 million euros) venture is Guiyang Industry Investment Group, a local government investment body.

The company produces high-tech sapphire crystal that has a number of applications, including mobile phone screens and medical equipment.

Ji believes there is huge potential to develop the company, which was formed in 2010, beyond its current size.

It now has 200 employees but he believes this could soar to an extraordinary 200,000 within three years.

"We will certainly grow to 4,000 people, but depending on discussions we are having with one particular client this could be 200,000. We would obviously have to bring a lot of the workforce from outside since the local population cannot provide these numbers."

Ji says the advantages of locating the business in Guiyang is a plentiful local supply of raw materials such as aluminum oxide and also cheap electricity, but says the real impetus comes from the local government to create a cluster in this industry.

"It wouldn't be possible to start a semiconductor business here in the same way because you would be competing against established industries elsewhere. When you start a new industry everyone is on the same level," he says.

But he admits that it would still be easier to start the business in one of the coastal regions where the local workforce would be more skilled.

"We are having to make major efforts to train people, even starting courses in optoelectronics at the local college," he says.

He points out the local government is keen to bring in companies in the same field from the US and elsewhere to build up a supply chain.

"We are having discussions with the chief executive of a US company in this sector about setting up operations here," he says.

Sui of Standard Chartered says in Changsha one of her tasks is to help local businesses develop operations overseas.

The city has a number of heavy-machinery makers such as Zoomlion and Sany that are looking to become major international players.

"In Changsha there are many construction machinery companies that want to go abroad and invest in places like Africa. We have a strong network there and we can provide a lot of specialist services," she says.

She says the local government is also keen for Standard Chartered to act as a catalyst to bring in investment from some of its existing clients.

"When we met with Zhou (Party Secretary of the Hunan provincial government) he asked us for help to introduce some of our clients from Africa, Hong Kong and Macao to invest in Changsha, and I think Standard Chartered can be a good agent for that," she says.

For Lan at Earlex, there remain advantages of being located in the coastal regions, and the company will open a new office in Guangzhou next month, although keeping a base in Changsha.

"To some extent Guangdong might still be an easier place to do business because it is more developed and slightly more convenient. However we will operate from the two bases," he says.

Contact the writers at andrewmoody@chinadaily.com.cn and huhaiyan@chinadaily.com.cn

(China Daily 08/24/2012 page5)