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Multinationals relocating to
smaller Chinese
cities
BEIJING - The high
land and labor costs of China's key cities are
forcing multinational companies (MNCs) to move
their industrial facilities to second-tier areas,
and Shanghai, Beijing and Guangzhou should rethink
their role, said Jones Lang LaSalle, the real
estate consulting firm.
In Shanghai
recently, the company released its new China
Industrial Guide, identifying the movement of
industrial sites to second-tier cities. The guide
gives executives in the property market an
overview of the rapidly changing industrial real
estate market in China.
"Our clients have
noted the increasing cost of labor and land in
Beijing, Shanghai and to some extent, Guangzhou.
This means that industrial investment will be
pushed farther inland. In the Yangtze River Delta
area, this means going beyond Suzhou to Hefei,
Nanjing and Wuxi," noted Michael Hart, head of
research at Jones Lang LaSalle China. "This is
true for the other key areas as well. We see a
potential trend among MNCs to consolidate their
industrial resources in China, which presents both
opportunities and challenges for China's young yet
vibrant industrial real estate [market]," he said.
In addition to providing a thorough
overview of China's industrial property landscape,
the guide also focuses on six major economic
regions, namely the Greater Bohai Bay region
(which includes the cities of Beijing, Tianjin,
Dalian and Yantai), the Greater Yangtze River
Delta, Southern China, Western China,
North-eastern China and Central China. Of the six
major regions, the Greater Bohai Bay Area, the
Greater Yangtze River Delta Area and Southern
China are the industrial hubs that continue to
power China's robust economic growth. These three
regions collectively contribute more than half of
China's GDP, despite having only 34% of the
population and 10% of China's total land area.
However, the cost of doing business in
these regions is relatively high. More favorable
investment policies in recent years for
northeastern and western China adopted by the
central and local governments have attracted
significant foreign investments. The level of
overseas investment in China has grown
dramatically of late, with actual foreign direct
investment topping US$60 billion in 2004. A
significant component of this investment has been
in the establishment of factories, warehouses and
research & development (R&D) centers.
Kenny Ho, Senior Manager of at Jones Lang
LaSalle China, said the industrial land price in
key cities is 30-40% more than that of the
second-tier cities in China. The guide noted that
it is difficult to find good-quality industrial
space close to Shanghai due to supply constraints
and high land, utility and labor costs. The
central government's tightening of the industrial
land supply in 2004 as a macroeconomic cooling
measure has added to the supply constraints.
As industrial facilities move inland, the
leading cities need to develop and grow into
strong bases for MNCs' regional headquarters and
provide centers for R&D facilities, Ho said.
The major industrial cities, including Beijing,
Shanghai and Guangzhou, will still be the choice
destinations for more sophisticated manufacturing,
including some aerospace and pharmaceutical
operations, the guide said.
Jones Lang
LaSalle's Guide also provides potential customers
of China's more than 4,500 industrial parks with
an overall picture of the lay of the industrial
land, thereby helping them to find an advantageous
foothold in the country. Ho said that whilst MNCs
are finding locations for industrial facilities
outside the main cities in China, second-tier
cities are also facing competition from foreign
cities, such as those in Brazil and India.
(Asia Pulse/XIC) |
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