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China 2.0

Inside The Global Expansion Of Chinese Industrial Parks

A key component of the growing "Chinese-style" international capitalism.

Chinese President Xi Jinping at the China-Belarus Industrial Park with Belarusian President Alexander Lukashenko on May 12
Chinese President Xi Jinping at the China-Belarus Industrial Park with Belarusian President Alexander Lukashenko on May 12
Zhang Yanlong, Zeng Jianzhong and Shen Nianzu

BEIJING — It was in the late 1990s that the first batch of Chinese businessmen launched the idea of building overseas industrial parks, also called "economic zones," where they could both better sell their goods locally and capitalize on lower labor and transport costs.

Over the last dozen years, the model has proven to be one of the most successful features of the Chinese economic reforms and opening-up to the world.

From India's Deccan Plateau, to the coast of the Red Sea, to the heartland of America, Chinese industrial parks can be found almost everywhere that Chinese goods are sold. Li Zhipeng, deputy director of the Overseas Investment Advisory Centre of China's Commerce Ministry, says more than 100 types of Chinese industrial parks have been built abroad, "the six largest ones of which account for a total investment of over 10 billion RMB ($1.6 billion), more than 400 companies creating over 40,000 jobs locally."

The best way to go abroad

Industrial parks are by no means a Chinese invention, having begun decades earlier in developed countries. But China has been efficient in adopting the model, and the pace of new construction is an impressive showing of China's economic progress. To such extent that other developing countries are turning to China to help them follow the same path.

Tianjin Teda, a state-owned conglomerate, set up the Egypt Suez Economic and Trade Cooperation Zone project with the Egyptian government. Egyptian executives declared that their goal was "to copy the model used by Teda to run its economic zone back at home."

The original vision for setting up an economic zone was for the purpose of manufacturing convenience — the leading industry would attract and gather support industries, thus forming a complete industrial chain. It can also avoid the risks of struggling alone abroad.

For instance, in 1999, Haier, a home appliance and consumer electronics multinational, built its first production facility park in South Carolina, in the United States. Two year later, there followed its second park in Pakistan. This also marked the beginning of Haier's brand-building abroad.

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Haier's HQ in Qingdao, eastern China — Photo: Brücke-Osteuropa

Li Zhipeng notes that the large and systematic establishment of Chinese industrial parks began around 2006, in line with the country's "Go Out" policy to building overseas economic zones. "Before that, these parks were set up by enterprises themselves at a relatively small scale. They were fragmented and overall not very big."

The Holley Group, a conglomerate with diversified investments, set up the Rayong Industrial Park in Thailand, and attracted more than 20 Chinese enterprises. The success of the park changed the Thai government's weary attitude toward China, says Hu Hai, Holley's general manager for overseas businesses, who took part in the establishment of the Rayong Industrial Park. "They discovered that they had spent years themselves trying to attract Chinese investments without success while it was much easier for us," says Hu. "Since then, the Thai authorities make the approaches for joint ventures with us."

Hu also pointed out that Chinese companies weren't really set up for foreign direct investment a decade ago, which made building out an economic and trading zone the logical way to begin expanding abroad.

Since then, Chinese parks have mushroomed on every continent. They have also become more and more integrated locally. "Our first generation parks were just to meet Chinese firms' manufacturing needs," says Hu. "But our second generation parks are not just about sending in bulldozers, building roads and equipping them with water and electricity. We also have to consider how we integrate with the local community more harmoniously."

The many differences in laws, policies, culture and customs are among the biggest challenges these overseas Chinese parks all face. In order to be better accepted by the locals, Holley chose to cooperate with Thailand' largest real estate company AMATA.

In Mexico it works with an influential local family business in the telecommunication industry. Meanwhile Haier is obliged to adjust its operation and management mentalities according to local conditions in India and Pakistan.

While adapting themselves locally, these Chinese industrial parks are quietly changing the locals. In a garment factory of the Suez Economic and Trade Cooperation Zone one slogan, in Arabic and in Chinese, reads: "If you don't work hard today, you'll be looking hard for work tomorrow."

A national strategy

The success stories eventually attracted the interest of higher authorities and the fragmented action was integrated into a national strategy. The China-Belarus Industrial Park is one such product. During his recent visit to Belarus in May, Chinese leader Xi Jinping visited this park and called the project a model of China's new Silk Road initiative and international cooperation.

Meanwhile, the Sino-Russia Silk Road Innovation Park is being put forward with the "One Park Two Places" model, meaning that two innovation centers are to be built respectively in China's western city of Xian and Skolkovo in Russia, with a unified management. The goal is to promote each other's enterprises by investing mutually in the other country and sharing resources reciprocally.

Chinese-style economic zones are going abroad. In history, large scale commercial communication has always led to far-reaching cultural and ideological fusion. Whether successful or not, the experiences of Chinese economic zone exploration will also become part of the history of China opening up to the world.

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