BEIJING
- More multinational companies are eyeing China's
second-tier cities as expansion destinations. A
survey released yesterday by Jones Lang LaSalle, a
leading real estate services and money management
firm, found companies are most interested in
penetrating these cities for their preferential
policies and huge market potential.
Chengdu, capital of southwest China's Sichuan province,
northeast China's Dalian and east China's Hangzhou
ranked as
the
top secondary-level cities on companies' radars.
The survey showed companies that set up
offshore manufacturing and other outsourcing
services in China's big three cities, Beijing, Shanghai and Guangzhou
have long since expanded their operations in
secondary and tertiary locations. Newcomers are
often lured by competitive costs and business
opportunities in those areas.
Anna Kalifa,
head of research at Jones Lang LaSalle's Beijing
Branch, said the next two years would be "an
exciting time" for foreign firms in China. "We
expect first mover companies, such as those in the
IT or telecommunication, manufacturing, as well as
transport and logistics sectors to strengthen
their investments in the second-tier locations and
begin eyeing expansions to potential tertiary tier
cities," said Kalifa.
She added the
banking and finance sector would continue
aggressive expansion in the first-tier cities, as
retail banks are expected to competitively grow in
first-tier locations and into cities where they
are permitted to conduct yuan business. "Companies
in the professional services sector will focus on
gaining market share in key cities and expanding
to select secondary cities, while Chengdu,
Hangzhou and Nanjing will be target locations for
this group, which includes accountants,
consultants, [and] law firms," Kalifa said.
The survey also revealed that the industry
mix of the multinationals varied in different
secondary cities. According to Pol-Henry Cox,
country head for Jones Lang LaSalle China, the IT
and telecommunication sector is more established
in Chengdu because of its incentive policies and
large supply of qualified labor. The banking and
finance industry, however, is more dominant in Tianjin, as the
municipality was one of the first cities to open
to foreign banks under WTO regulations.
Professional services firms have a
stronger presence in Dalian and Hangzhou as a
result of the cities' successes in attracting
foreign businesses, the main clients of this
group. Cox indicated that Chinese cities hoping to
attract multinationals with manufacturing
facilities, research and development plants face
tough domestic and international competition. "It
is not enough that China has seemingly low labor
costs, as different competing regions offer
various incentives geared towards attracting a
specific type of industry in order to get the
upper-hand," said Cox.
The survey targeted
large multinationals, mostly global Fortune 500
companies. The four largest sectors represented in
the survey were IT and telecommunications, with
28% of total respondents, followed by banking and
finance (16%), professional services (16%) and
real estate development and management services
(10%).
