When scanning the landscape for favorable business locations, it’s easy to be overwhelmed by the number of important variables you need to take into consideration. Depending on your industry, these variables can range from the reliability of local infrastructure, demographic factors, government policies, and availability of trading zones.
For many reasons, China has emerged with an interesting amount of advantages that appeal to both domestic and foreign entrepreneurs and investors. Firstly, Xi Jinping’s quasi-capitalist government has set measures in place such as incubators and subsidies that really incentivize business development. At the same time, industries such as internet finance, digital health, and e-commerce have yet to be fully regulated, which makes the country an exciting place for budding business owners. Additionally, as the world’s second-largest economy, China has a wide availability of money in the market, specifically in venture capital and private equity. On the demand side, it’s no secret that the country has a massive consumer market, so the opportunities to scale are more favorable than in many other places.
Perhaps most the most elusive and important variable in China is its prevalent business-friendly ecosystem. The country is effectively a soft-power hub where opportunities to network and create partnerships are all within arms-reach. For these reasons, your question shouldn’t be “should I do business in China?” but rather, “should I do business in Shanghai, Wuhan, or Beijing?”. If you’re ready to make the leap, here’s a thorough breakdown of the 5 most business-friendly cities in China.
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China’s capital city is traditionally known for its rich history and extensive imperial past but has quickly become one of the world’s most modern hubs for doing business. It currently hosts upwards of 21 million people and some of the largest and most profitable corporations. Beijing is a quick city in all aspects of the word. Internet speeds are off the chart, cash is being replaced by instant-pay apps, facial recognition software is largely utilized to facilitate bank transfers and payments, and people are generally known to be quick, savvy decision-makers with aggressive business mentalities.
Beneath the surface, Beijing has recently been implementing a series of business-friendly measures that make the city’s economic environment quite appealing. Both private and public institutions are adopting the mantra that every little bit counts. Manual transactions are now online, procedures have been either streamlined or shortened, and costs have been reduced. Here’s why Beijing is China’s most business-friendly city:
Creating a Business
In March 2018, Beijing significantly expedited the processes required to start your own business. The daunting question of “how long will it take to get my business running?” has been answered by the city’s authorities. Now, the entire registration process can be completed within one week as opposed to the previous three weeks. In each of the city’s five districts, Beijing has set up “one window” stations where you can submit your registration materials in one convenient meeting. The online registration mediums have been shortened from eight days to two days, with same-day approval available in some circumstances.
Prior to this year, the departments of transactions, taxes, and registration were each their own entities to be dealt with separately. Nowadays, the three have been combined under one online platform. Registering your property is now easier than ever, and city officials expect that 90% of applications will be handled through the new online interface.
Incentivizing Foreign Investment and Participation
In an effort to attract talent from overseas, Beijing has announced new policies related to visas, residency, and foreign investment. Those who qualify will benefit from longer visa terms, permanent residency, freer cross-border travel, and the ability to enroll their children in schools. Beijing has also relaxed regulation required for foreign investment.
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Number two on our list of China’s most business-friendly cities is Shanghai, the country’s most populous city. In the last two decades, Shanghai has witnessed a large increase in business opportunities for both locals and foreigners. Even during the 2008 recession, Shanghai experienced significant economic growth. Here are some reasons why businesses have been thriving in Shanghai:
Shanghai Free Trade Zone
Perhaps the most prominent reason why investors are interested in setting up shop in Shanghai is the newly established Shanghai Free Trade Zone. The country’s first real attempt to implement regional economic reform since 1980 has begun with incredible success. The zone is essentially a safe space for a range of business-related practices. Capital required to set up a company has been effectively eliminated, as well as the capital required for single shareholder companies and joint-stock companies. Foreign investors are no longer required to invest 15% within 3 months and 100% within 2 years, with timelines being made significantly longer. The city’s government has pledged to open up 18 service industry sectors to foreign investment including shipping, law, and engineering. Even video game consoles are now allowed to be sold in the region, previously banned in China since 2000.
Shanghai is strategically located in the heart of the Yangtze River Delta and lays claim to the busiest container port in all of China. For this reason, the city is one of the world’s most prominent shipping hubs. In knowing that two of the city’s top sectors — real estate and retail — are heavily dependent upon sourcing foreign materials, Shanghai’s location is perfect for businesses that are resource-intensive. The city is also well-equipped with modern transportation infrastructure available by air, rail, and road.
Culture and Society
One of the often-cited reasons why foreigners find Shanghai appealing is the mix of centuries-old tradition and modern innovation. The city projects a curious blend of traditional Chinese architecture and Western gaudiness. Guanxi –– the central idea in Chinese society relating to relationships and trust — is heavily valued in business environments. Furthermore, Shanghai boasts one of the country’s best educational systems. Although this may seem unrelated, knowing that China’s best young talent is easily available in your backyard is worthy of consideration when deciding where to build your business.
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Strategically located just 20 miles from Hong Kong, Shenzhen is another one of China’s economic stomping grounds. Hosting industry leaders such as the tech giant Tencent, smartphone producer Huawei, and drone technology innovator DJI, Shenzhen is commonly known as the “Silicon Valley of China”. Innovation may be the primary reason for Shenzhen’s position on this list (the city spends five times more on research and development than Hong Kong), but it’s certainly not the only one. If you’re looking beyond the household names of Beijing and Shanghai, the “migrant city” from humble beginnings may be your ideal location to start a business. Here’s why:
Economic and Tax Incentives
Much like Shanghai, Shenzhen has created a special economic zone to help incentivize certain industries. The QianHai Zone provides lower labor costs, lower rental costs, a closer proximity to mainland China manufacturing, lower corporate taxes and other financial incentives. In terms of specific industries, reports suggest that the fields of finance, IT, logistics, science, and technology are particularly suited to flourish in the QianHai special economic zone.
Industrial Design Parks
A unique feature of Shenzhen is the presence of specially designated “design parks” to help curate ideas and spur business development. The incubators essentially help businesses get off the ground. For example, the Shenzhen Hi-Tech Industrial Park focuses on ventures in the fields of biotechnology, pharmaceuticals, construction materials, chemical production, and electronics. Other examples include the Shenzhen Software Park, an important program created by the Shenzhen Municipal Government supporting the development of the software industry, and the Sino-Finnish Design Park which facilitates cooperation between companies and governments in Shenzhen and Helsinki.
Location, Location, Location
Listed as the third busiest container port in the world, Shenzhen is another great option for setting up your business in China. Being as far South as it is, Shenzhen is significantly closer to the economies of Southeast Asia, India, and Australia. If not for business purposes, these regions are great getaway spots for vacations.
Other Intriguing Factors
Shenzhen also flexes its muscles in ways not necessarily business related. It goes without saying that it’s an international city, but it’s also a very green city with lush parks, surrounded by rolling mountain ranges. There is a highly developed transportation system and many tourist attractions including nearby beach resorts. To top it off, there’s a captivating nightlife, cheap shopping malls, and a thriving expat community.
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Generally speaking, China’s economic growth has been slowing for the past several years. However, thanks largely to the emergence of high-tech industries, that hasn’t been true for Hangzhou. Located just southwest of Shanghai, Hangzhou recently emerged on the scene thanks to a collection of socially and environmentally-friendly policies at the G20 summit. The government shut down environmentally-damaging factories and gave employees vouchers to incentivize vacation. Here’s why Hangzhou is on our list of most business-friendly cities in China:
Emergence of Hi-Tech
Thanks in no small part to the founding and subsequent eruption of the world’s largest e-commerce company, Alibaba, Hangzhou has earned the title of China’s “capital of e-commerce” and been on the receiving end of what some call the Alibaba effect. In 2016 Hangzhou became one of China’s e-commerce pilot cities and was granted preferential powers and tax policies for handling foreign goods. If your company model has to do with e-commerce and hi-tech, Hangzhou may be your best bet.
Hangzhou emerged as the world’s e-commerce capital largely in part due to strategically implemented government measures to help prop-up business ventures. The city’s government provides tax breaks for hi-tech firms, incentives for internet startups, and even housing subsidies for entrepreneurs and marketing events.
Other Key Industries
In addition to hi-tech and e-commerce, Hangzhou is an important player in the industries of equipment, biotechnology, and food and beverage manufacturing. Although known as China’s “capital of silk and women’s garment’s,” some say the labor-intensiveness of the industry doesn’t add much value to the city’s overall growth potential.
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Rounding up our list of China’s most business-friendly cities is Wuhan. A bit of a geographic outlier here, Wuhan is considered a political, economic, cultural, and educational hub of central China. Traditionally speaking, Wuhan has been primarily focused on the manufacturing sector. However, all that changed in recent years. Today the city boasts four scientific and technological development parks, over 350 research institutes, 1,600+ hi-tech institutes and investments from 230 Fortune Global 500 enterprises. If your business is better suited to a more central-China location, Wuhan is your place. Here are our reasons why:
Located 1,200 kilometers (745 miles) West of Shanghai on the Yangtze River, Wuhan is home to the largest inland port in China and one of the largest in the world. The city effectively links East with the West, as well as the North and South through advanced transportation technologies available by land, air, and river.
Special Industrial Zones
Building on its heritage as a manufacturing stronghold, Wuhan is home to many “special industrial zones” helpful in supporting industries from different sectors. Examples include the Optics Valley Area specializing in biotechnology and environmental protection, the Automotive Industry Cluster focusing on automobile and aviation, and the Wuhan New Port-neighboring Industry Cluster, which focuses on river transportation and steel-processing.
Culture of Urbanization
In the past few decades as China began modernizing, most people from smaller towns bypassed Wuhan en route to China’s bigger cities on the eastern coast. These days, however, Wuhan is noticing a huge population influx of its own. The result has been a growth in urban development and local attractions. Han Street, a new shopping complex, is one with plenty of Western brands that stretches for football fields. Han Street, the new metro system, and loads of employment opportunities represent the business ambitions of central China.