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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 â€" 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 â€" 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.

Haier's HQ in Qingdao, eastern China â€" 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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Future

7 Ways The Pandemic May Change The Airline Industry For Good

Will flying be greener? More comfortable? Less frequent? As the world eyes a post-COVID reality, we look at ways the airline industry has been changing through a pandemic that has devastated air travel.

Ready for (a different kind of) takeoff?

Carl-Johan Karlsson

It's hard to overstate the damage the pandemic has had on the airline industry, with global revenues dropping by 40% in 2020 and dozens of airlines around the world filing for bankruptcy. One moment last year when the gravity became particularly apparent was when Asian carriers (in countries with low COVID-19 rates) began offering "flights to nowhere" — starting and ending at the same airport as a way to earn some cash from would-be travelers who missed the in-flight experience.

More than a year later today, experts believe that air traffic won't return to normal levels until 2024.


But beyond the financial woes, the unprecedented slowdown in air travel may bring some silver linings as key aspects of the industry are bound to change once back in full spin, with some longer-term effects on aviation already emerging. Here are some major transformations to expect in the coming years:

Cleaner aviation fuel

The U.S. administration of President Joe Biden and the airline industry recently agreed to the ambitious goal of replacing all jet fuel with sustainable alternatives by 2050. Already in a decade, the U.S. aims to produce three billion gallons of sustainable fuel — about one-tenth of current total use — from waste, plants and other organic matter.

While greening the world's road transport has long been at the top of the climate agenda, aviation is not even included under the Paris Agreement. But with air travel responsible for roughly 12% of all CO2 emissions from transport, and stricter international regulation on the horizon, the industry is increasingly seeking sustainable alternatives to petroleum-based fuel.

Fees imposed on the airline industry should be funneled into a climate fund.

In Germany, state broadcaster Deutsche Welle reports that the world's first factory producing CO2-neutral kerosene recently started operations in the town of Wertle, in Lower Saxony. The plant, for which Lufthansa is set to become the pilot customer, will produce CO2-neutral kerosene through a circular production cycle incorporating sustainable and green energy sources and raw materials. Energy is supplied through wind turbines from the surrounding area, while the fuel's main ingredients are water and waste-generated CO2 coming from a nearby biogas plant.

Farther north, Norwegian Air Shuttle has recently submitted a recommendation to the government that fees imposed on the airline industry should be funneled into a climate fund aimed at developing cleaner aviation fuel, according to Norwegian news site E24. The airline also suggested that the government significantly reduce the tax burden on the industry over a longer period to allow airlines to recover from the pandemic.

Black-and-white photo of an ariplane shot from below flying across the sky and leaving condensation trails

High-flying ambitions for the sector

Joel & Jasmin Førestbird

Hydrogen and electrification

Some airline manufacturers are betting on hydrogen, with research suggesting that the abundant resource has the potential to match the flight distances and payload of a current fossil-fuel aircraft. If derived from renewable resources like sun and wind power, hydrogen — with an energy-density almost three times that of gasoline or diesel — could work as a fully sustainable aviation fuel that emits only water.

One example comes out of California, where fuel-cell specialist HyPoint has entered a partnership with Pennsylvania-based Piasecki Aircraft Corporation to manufacture 650-kilowatt hydrogen fuel cell systems for aircrafts. According to HyPoint, the system — scheduled for commercial availability product by 2025 — will have four times the energy density of existing lithium-ion batteries and double the specific power of existing hydrogen fuel-cell systems.

Meanwhile, Rolls-Royce is looking to smash the speed record of electrical flights with a newly designed 23-foot-long model. Christened the Spirit of Innovation, the small plane took off for the first time earlier this month and successfully managed a 15-minute long test flight. However, the company has announced plans to fly the machine faster than 300 mph (480 km/h) before the year is out, and also to sell similar propulsion systems to companies developing electrical air taxis or small commuter planes.

New aircraft designs

Airlines are also upgrading aircraft design to become more eco-friendly. Air France just received its first upgrade of a single-aisle, medium-haul aircraft in 33 years. Fleet director Nicolas Bertrand told French daily Les Echos that the new A220 — that will replace the old A320 model — will reduce operating costs by 10%, fuel consumption and CO2 emissions by 20% and noise footprint by 34%.

International first class will be very nearly a thing of the past.

The pandemic has also ushered in a new era of consumer demand where privacy and personal space is put above luxury. The retirement of older aircraft caused by COVID-19 means that international first class — already in steady decline over the last decades — will be very nearly a thing of the past. Instead, airplane manufacturers around the world (including Delta, China Eastern, JetBlue, British Airways and Shanghai Airlines) are betting on a new generation of super-business minisuites where passengers have a privacy door. The idea, which was introduced by Qatar Airways in 2017, is to offer more personal space than in regular business class but without the lavishness of first class.

Aerial view of Rome's Fiumicino airport

Aerial view of Rome's Fiumicino airport

commons.wikimedia.org

Hygiene rankings  

Rome's Fiumicino Airport has become the first in the world to earn "the COVID-19 5-Star Airport Rating" from Skytrax, an international airline and airport review and ranking site, Italian daily La Repubblica reports. Skytrax, which publishes a yearly annual ranking of the world's best airports and issues the World Airport Awards, this year created a second list to specifically call out airports with the best health and hygiene standards.

Smoother check-in

​The pandemic has also accelerated the shift towards contactless traveling, with more airports harnessing the power of biometrics — such as facial recognition or fever screening — to reduce touchpoints and human contact. Similar technology can also be used to more efficiently scan physical objects, such as explosive detection. Ultimately, passengers will be able to "check-in" and go through a security screening anywhere at the airports, removing queues and bottlenecks.

Data privacy issues

​However, as pointed out in Canadian publication The Lawyer's Daily, increased use of AI and biometrics also means increased privacy concerns. For example, health and hygiene measures like digital vaccine passports also mean that airports can collect data on who has been vaccinated and the type of vaccine used.

Photo of planes at Auckland airport, New Zealand

Auckland Airport, New Zealand

Douglas Bagg

The billion-dollar question: Will we fly less?

At the end of the day, even with all these (mostly positive) changes that we've seen take shape over the past 18 months, the industry faces major uncertainty about whether air travel will ever return to the pre-COVID levels. Not only are people wary about being in crowded and closed airplanes, but the worth of long-distance business travel in particular is being questioned as many have seen that meetings can function remotely, via Zoom and other online apps.

Trying to forecast the future, experts point to the years following the 9/11 terrorist attacks as at least a partial blueprint for what a recovery might look like in the years ahead. Twenty years ago, as passenger enthusiasm for flying waned amid security fears following the attacks, airlines were forced to cancel flights and put planes into storage.

40% of Swedes intend to travel less

According to McKinsey, leisure trips and visits to family and friends rebounded faster than business flights, which took four years to return to pre-crisis levels in the UK. This time too, business travel is expected to lag, with the consulting firm estimating only 80% recovery of pre-pandemic levels by 2024.

But the COVID-19 crisis also came at a time when passengers were already rethinking their travel habits due to climate concerns, while worldwide lockdowns have ushered in a new era of remote working. In Sweden, a survey by the country's largest research company shows that 40% of the population intend to travel less even after the pandemic ends. Similarly in the UK, nearly 60% of adults said during the spring they intended to fly less after being vaccinated against COVID-19 — with climate change cited as a top reason for people wanting to reduce their number of flights, according to research by the University of Bristol.

At the same time, major companies are increasingly forced to face the music of the environmental movement, with several corporations rolling out climate targets over the last few years. Today, five of the 10 biggest buyers of corporate air travel in the US are technology companies: Amazon, IBM, Google, Apple and Microsoft, according to Taipei Times, all of which have set individual targets for environmental stewardship. As such, the era of flying across the Atlantic for a two-hour executive meeting is likely in its dying days.

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