Location, Location, Location! But Where is Best to Invest?

Related entries: Business Issues, General, Investment, Research

Locating in China is an increasingly easy decision for businesses to take, given the cost savings that can be achieved. However, more and more businesses are looking to set up outside of the traditional locations such as Beijing, Shanghai and Guangzhou.

This is partly driven by cost considerations, as these vary greatly across China’s differently-developed provinces. However cost should never be the only consideration, as there are many factors that can impact business operations.

A World Bank study of 120 cities, reported in Shanghai Daily, (h/t China Challenges) notes that Southeast China provides the best business environment. Some of the key differences between locations included:

    • Business law and regulation – implementation varies.

    • Taxes and fees – these “average 3.1 percent of sales revenue at the top 10th percentile of cities”, but reach “6.9 percent at the bottom 10th percentile”.

    • Bureaucracy – “Firm interactions with major bureaucracies average 36 days per year at the top 10th percentile of cities and 87 days per year at the bottom 10th percentile”.

    • Entertainment and travel expenses – noted to be a “vehicle for corruption” were reported to “average 0.7 percent of revenues at the top 10th percentile of cities and 1.9 percent of revenues at the bottom 10th percentile”.

    • Customs – the time taken for clearance of exports and imports “averages 5.4 days at the top 10th percentile and 20.4 days at the bottom 10th”.

    • Education of staff – “University-educated workers account for 28.5 percent or more of the workforce in the top 10th percentile and 10.8 percent or less in the bottom 10th percentile of cities”.

The regional rankings, from best to worst were:

    1. Southeast (Jiangsu, Shanghai, Zhejiang, Fujian, and Guangdong);

    2. Bohai (Shandong, Beijing, Tianjin, and Hebei);

    3. Central (Anhui, Henan, Hubei, Hunan, and Jiangxi);

    4. Northeast (Heilongjiang, Jilin, Liaoning);

    5. Southwest (Yunnan, Guizhou, Guangxi, Sichuan, Chongqing, and Hainan);

    6. Northwest (Shanxi, Shaanxi, Inner Mongolia, Ningxia, Qinghai, Gansu, and Xinjiang).

That helps narrow the field, but luckily there is more detail:

    “Six cities offer outstanding performance in overall investment climate (both for domestic firms and for foreign firms), in government effectiveness (toward both domestic firms and foreign firms), and in progress toward achieving a harmonious society.

    These “golden cities” are Hangzhou, Qingdao, Shaoxing, Suzhou, Xiamen, and Yantai.”

Of all the cities, Hangzhou (Zhejiang province) was reported to have the best investment environment (as it did 3 years ago in the previous report), and was followed by the others listed above.

In addition, a second tier of 13 “silver” cities was identified, including:

    Beijing, Dalian, Dongguan, Foshan, Fuzhou, Guangzhou, Jiangmen, Ningbo, Shanghai, Shenzhen, Tianjin, Weihai and Zhuhai

It seems some Chinese cities are more equal than others when it comes to investing. Once again, research, planning and due diligence are key to making the right choices.

See news sources:

3 Responses to “Location, Location, Location! But Where is Best to Invest?”

  1. NewFrontierChina Says:

    The World Bank report has brought out some great information for companies looking to invest in China. I am very thankful that the report does focus on cities. China cannot and should not be interpreted as one big unit when it comes to deciding where to invest or start up business, but with cities that all have their own unique characteristics and regions with their specialties, choosing the best city for your industry is of great importance.

    This is something I talked about just days ago on the NewFrontierChina blog. Business opportunities in the Southwest are often completely ignored in the shadow of the more developed Eastern parts of China. I am glad cities like those here in the Southwest now have a chance to clearly market their strengths to investors with good facts.

  2. Archive » More Location Rankings| China Business Blog Says:

    […] ews Another year – and other survey of investment locations. I reported on a World Bank study last month, in which 6 “golden” and 13 “silver” cities for investment w […]

  3. China Business. Where best for doing business in China. Says:

    […] and Shenyang(?) took the first three places, followed by  Shanghai, Nanjing, Suzhou, Qingdao, Guangzhou and Shenzhen. The list is 100 cities long, but I have yet to find anything on the web that goes […]

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