Coastal city going high-end: Investors flock to Zhuhai

The AG600, which is thought to be the world's largest amphibious aircraft, is made in Zhuhai. [Photo by Zhou Jianping for China Daily]

Fluor Corp, the American engineering and construction conglomerate, and Finland's marine engineering stalwart Wartsila were among the latest big-name companies to invest in Zhuhai, a relatively unknown city that has become a growing magnet for foreign investment.

This coastal city in southern Guangdong province has continued to defy the economic slowdown in China and had attracted $3.06 billion (£2.0 billion) in European investment by the end of 2014, with forecasts that it may this year equal or surpass its 2014 GDP growth of 10.3 percent.

BP, Shell, Bosch, Philips, Schneider and ABB are among the European companies that have set up operations in Zhuhai. Fluor's investment formed part of a combined 35.5 billion yuan ($5.59 billion) investment by multinational and Chinese companies in 28 equipment-manufacturing projects in the city.

The investments were announced during the city's inaugural Advanced Equipment Manufacturing Investment and Trade Symposium for the western Pearl River region in August.

The Fortune 500 company, which has a British subsidiary, has joined a growing number of foreign investors in Zhuhai, including British ventures such as Telebahn Electrics and London News Energy Solutions that have invested a total of $1.39 billion locally.

Zhuhai's lower costs, strategic location — the city is about an hour by rail from Guangzhou, the provincial capital, and will soon be directly linked with Hong Kong and Macao by a 55-km long Y-shaped bridge — and developed marine industrial chain helped attract $1.93 billion in foreign investment last year.

Official statistics show the city had 12,080 foreign-funded projects by the end of last year, 133 of which were funded with capital from Europe.

Fluor has agreed to invest $490 million over the next two years for a 49 percent stake in a joint venture managing the Zhuhai fabrication yard of Offshore Oil Engineering (COOEC), a subsidiary of China National Offshore Oil Corp, the Chinese state-owned enterprise that has held a virtual monopoly over resource extraction in the nation's territorial waters in the South China Sea.

Gerald Stone, senior vice-president of Fluor's energy and chemicals division, said the new joint venture, COOEC-Fluor Heavy Industries, was part of Fluor's strategy to break into the potentially lucrative and emerging on-shore and off-shore markets close to Zhuhai in the South China Sea, China, and Southeast Asia.

"We're trying to access new markets, and the South China Sea is a market we want a part of, so that's part of the strategy," he said.

When Jean-Jacques Verdun arrived in Zhuhai 14 years ago he said his first impression was that the city was missing out on the fast-paced level of development gripping China. It was 2001 and across the nation many cities and regions were churning out cheap products from cheap factories, riding high on a low-end manufacturing boom that seemed without end. But Zhuhai was different, spurning quick profit and breakneck development for steady growth.

"At the time we thought, 'Are you sure?' All these factories are going elsewhere," said Verdun, the French Chamber of Commerce and Industry representative in Zhuhai. But then the boom ended and the city's steady approach to growth and investment in highend manufacturing was revealed as prescient.

"Zhuhai has never aimed at attracting low-end manufacturing," he said. "They were already highend (manufacturing in 2001). It's a bit of a hidden gem."

He Zhiyun, deputy general manager of Panyu Chu Kong Steel Pipe Corp (PCK), is of the same mind.

She said her company, a market leader in producing steel pylons for bridges and offshore resource projects, moved into Zhuhai about five years ago because of the city's strategic location near the South China Sea and Southeast Asian markets, as well as the excellent investment environment fostered by the city government.

"Everyone in the company believes the decision to invest here was a good one," she said. David Luo, chief executive of marine engineering joint venture Wartsila-Yuchai Engine Corp, said the fact Zhuhai had not ravaged the local environment during its development drive had been a big attraction for his European parent company.

He said the company decided to invest in Zhuhai in 2013 because of the city's well-developed infrastructure, its strategic location that brought access to Macao and Hong Kong at a fraction of the cost, and an excellent investment environment. He said the city government had also begun assessing the option of introducing university training courses to meet Wartsila-Yuchai's growing need for highly skilled workers.

"We believe the government policy and initiatives here will benefit us and help us grow our customer base," Luo said.

Marine-related industries aside, Zhuhai has attracted investment from 42 of the world's top 500 companies, as well as some of China's biggest brands, including the world's largest air-conditioning manufacturer, Gree.

Gao Zhongde, general manager of CRRC Equipment Engineering Corp, CRRC's base in the city, said the Zhuhai government's plan to transform and grow the local manufacturing, hi-tech and service industries had created a framework that had helped his company's 1 billion yuan investment in Zhuhai pay dividends.

Bolstered by government concessions such as tax breaks, land deals and research and development support, the highend manufacturing sector accounted for 47.3 percent of Zhuhai's industrial value added last year, with the hi-tech industry accounting for a further 25.9 percent.

According to the city's development blueprint, the output value of the equipment manufacturing industry would reach 190 billion yuan this year, 300 billion yuan in 2017, more than 550 billion yuan in 2020 and 750 billion yuan by 2025.

The authorities in Zhuhai said the aim was to create a world-class offshore engineering equipment manufacturing base, a national general aviation production base and an intelligent equipment manufacturing base by 2025.

Besides the equipment manufacturing sector, hi-tech industry and high-end tertiary industry were also being given priority.

A partnership between Zhuhai city government and Beijing's Tsinghua University saw the creation of the Tsinghua Science Park 13 years ago. The park, which offers rent-free space, resources, access to Tsinghua Universit's research and development facilities and the possibility of private equity funding, has helped to incubate 400 start-up companies, including five that now have annual revenues of more than 500 million yuan.

Focusing largely on new-energy projects, drone technology, and hi-tech medical equipment manufacturing, the park has produced successful businesses such as medical supply company Scanmed, which recently received approvals to begin exporting cutting-edge keyhole surgical equipment to Australia, Brazil and India.

With 450 million yuan in private equity funds at the park's disposal and expansion plans on the table, deputy general manager He Jie said the park is throwing open its doors to foreign entrepreneurs and businesses.

"Anything you want, we have it," He said. "Money, talent, research and development resources from the best university in China, and a base close to Macao, Hong Kong and Shenzhen, as well as the (Hengqin) free trade zone. We've got it all."

Speaking at the investment and trade symposium in late August, which showcased 200 Chinese and internationals companies, Zhuhai Mayor Jiang Ling said the 28 new projects would "inject new vigour into Zhuhai's economic development and help Zhuhai to fortify its position as a leader of advanced equipment manufacturing.

"Zhuhai is at the prime stage of its development and the city is anticipating an even rosier development prospect in the next decade," the mayor added. Basing his upbeat forecast on the growing importance of Zhuhai's position as an international gateway to the western Pearl River region, Jiang predicted the Hengqin Free Trade Zone would play an important role in improving the business environment.

He said the completion of the bridge to Hong Kong and the city's geographical proximity to the South China Sea made Zhuhai an appealing location for high-calibre professionals.