Suzhou's Foreign Trade and Investment Environment
By Klaus Koehler, Managing Director, Klako Group


Suzhou, one of China's oldest and most beautiful cities, was last year's top destination for foreign investments, surpassing even Shanghai. With a 2,500-year history, Suzhou in southeast Jiangsu province is renowned for its historical and cultural heritage as well as for its natural beauty. In recent years, the city has joined the ranks of the country's major manufacturing platforms and has become one of China's fastest growing and wealthiest cities. Located 80 kilometers west of Shanghai, Suzhou is a key industrial center with a population of roughly 2.3 million. Ever growing industrial zones lie on either side of the city. The municipality of Suzhou includes neighboring towns and small cities, such as Kunshan, Wujiang and Changshu and has a population of 5.9 million. Suzhou's average disposable income stands at RMB 10,515 (US$ 1,271) and is among the highest in China.

Infrastructure

Bordering Shanghai on the east, the Yangtze River on the north, the city of Wuxi on the west, and Taihu Lake on the south, Suzhou enjoys advantageous geography and excellent land, water and air transportation. The city is well linked by expressways, railways and waterways to Shanghai and other major cities such as Nanjing and Wuxi. The city is served by two airports, Shuofang Airport in the west and Guangfu Airport in the south. Suzhou is only 80 kilometers away from Shanghai Hongqiao Airport, 90 kilometers from Shanghai Harbor and Zhangjiagang Port, and 120 kilometers away from Shanghai Pudong International Airport. The Beijing-Shanghai Railway, the Shanghai - Nanjing Expressway, as well as major state highways pass through the city. To accommodate increasing business and traffic, the local government has implemented huge construction plans to upgrade road transportation. In addition to the 500 kilometers of roads that are scheduled for completion by 2008, the city has also begun work on a light rail system, which is also due for completion in 2008. The rail network will be 540 kilometers long and extend to the municipality's outer cities and suburbs. The city possesses some of the most advanced electricity, gas, and water supplies in the country It enjoys a well developed telecommunications system with advanced equipment, high capacity and wide bandwidth. The Internet is easily accessible and widely used.

Economy

Since China initiated its opening up and reform policy, Suzhou's economy has sustained an average annual growth-rate of over 15 percent. In 1985, Suzhou was set up by the State Council as one of the 14 Open Economic Areas in the nation's coastland. With a gross domestic product of US$ 22 billion in 2003, Suzhou accounted for almost 2 percent of the national total, generated by a mere 0.4 per cent of the national population. Industry still makes up the main part of the area's economy. Its industrial base is broad, producing a wide range of products both in heavy and light industries. Although traditional industries, such as textiles, still play a significant role, the city is transforming its industrial base from traditional industries to high tech industries. Information technology, electronics, electrical machinery, bio-technology and medicine, chemicals and household electrical appliances have now become the six pillar industries. The service sector has also increased its relative share in the gross domestic product in recent years. Financial services are developing rapidly, in particular, the insurance sector.

Suzhou is the largest export base of Jiangsu province, exporting to over 140 countries or economies. In 2003, the city's exports surged by more than 70 percent. The United States is Souzhou's leading export market, accounting for approximately one third of the city's total exports. Other major markets include the EU, Japan, Hong Kong and ASEAN. Suzhou's leading export items are machinery and electronic products and components. Other major exports include textiles, optical and medical instruments, base metal products and chemical products.

Huge amounts of investment have poured into the thriving city in recent years pushing Suzhou's development. In 2003, Suzhou attracted more than US$ 5.5 billion in foreign funds. Investments in the industrial sector accounted for 83 percent and reached US$ 4.8 billion. Foreign invested enterprises are now one of the major forces of the city's industrial output. Currently, there are more than 5,500 foreign enterprises operating in Suzhou. Among the world's top 500 multinational companies, 85 have a presence in the area, and more than 30 of them have established research and development centers in Suzhou. The leading foreign investors are from Hong Kong, Taiwan, Singapore, the US and Japan.

Industrial Parks

The two most significant industrial parks in Suzhou are the China-Singapore Suzhou Industrial Park (SIP) and the Suzhou New District (SND). Both parks have an industrial profile biased strongly towards advanced sectors, such as electronics and information technology, pharmaceuticals, and precision engineering. Companies are attracted by Suzhou's high-quality labor force and infrastructure, a supportive local administration and the proximity of Shanghai.

Situated to the east of Suzhou, the China-Singapore Suzhou Industrial Park (SIP) was established in 1994. The SIP is a cooperative project between the governments of China and Singapore, providing entrepreneurs and investors from all over the world with a transparent investment environment and efficient management. The park offers tax incentives, simple investment approvals, special export processing and logistics, and expedited visa processing. Since it was inaugurated in 1994, SIP's main economic indices have grown at an average annual rate of 40 percent. The park has attracted foreign direct investments totaling US$16 billion for more than 1,400 projects, which generated more than 75,000 jobs. SIP is now running out of industrial land to meet future demand, and the park's management recently asked the city to allocate another 70 square kilometres of land, doubling the park's size.

The second major industrial park in the city is Suzhou New District (SND). The park was launched by the Suzhou City Government in November 1990 and approved as national new & hi-tech industrial development zone by the State Council in November 1992. Located on the western side of of Suzhou, the development construction commenced in 1991 on a planned area of 52 square kilometers. Today, SND covers an area of approximately 258 square kilometres. The pillar industries in Suzhou New District are electronics and information, precision machinery, biomedicine and new materials. With the objectives of pooling hi-tech industries, building a new city and establishing new systems, SND has made great efforts in constructing convenient infrastructures and utilities while establishing efficient and standardized management and service mechanisms. The area is divided into four sub-districts: a central commercial area, a hi-tech industrial area, a comprehensive economic development area, as well as a holiday and leisure area. More than 880 foreign-invested companies have been approved to settle in SND. 95 percent are wholly foreign owned and 5 percent are joint ventures, with over 95 percent engaged in manufacturing. The district has attracted an accumulated amount of foreign investment of more than US$ 9 billion.

Education

With a long tradition of educational excellence, Suzhou has a well educated workforce. Education is spread widely, with 88.5 percent of locals completing high school and 41.1 percent completing higher education. Its primary and secondary education ranks among the nation's best. The Suzhou Municipality has identified technical and vocational education as part of its strategic plan to boost its overall education. In most of the city's colleges and universities, much emphasis has been put on the alliance between industry and degree programs. At present, there are 9 universities, 46 schools for adult further education and 63 independent research institutions. 2,450 Suzhou-based patent applications have been approved.

Eco-City

Suzhou is one of 10 nationally designated "model environmental cities". The municipal government of Suzhou attaches great importance to environmental protection and continuing development and plans to build an "eco-city". The city's top priorities are to develop a public transportation and alternative energy infrastructure and to continue ongoing clean-up of polluted air and waterways. Its green initiatives include relocating polluting industries outside of the city and away from waterways, and a pilot project requiring local taxis to run on natural gas. Suzhou New District Industrial Park is the first development zone in China that has been demonstrated as a model of environmental protection by the State Environment Protection Bureau.

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