Despite the Sichuan earthquake in 2008, Crestar, which runs ELFA as a premium kindergarten in Chengdu, managed to break even within one and a half years of operations.
Economic activities in Chengdu has picked up during the first quarter of 2009, with a healthy growth of 10.8 percent. This was largely due to the government stimulus package for the earthquake-affected areas.
MARKET FOCUS
By Isabel Yeo, Centre Director, International Operations (Western China), IE Singapore
IE organized an ICT mission to Chengdu where Singapore ICT players including nova CITYNETS, Korvac, Civica, and STET, met with the relevant government departments including Sichuan IT Dept, Chengdu IT Bureau, Chengdu Commerce Bureau, Hi-Tech zone administration committee, Chengdu Immigration Authority, Chengdu Education Bureau, and the Health Bureau.
The mission enabled our ICT companies to understand more about the Chengdu ICT market and explore potential collaboration with system integrators and partners like Chengdu Vocational Training College.
To coincide with ChinaSoft Conference, Chengdu OC also coorganised a separate Digital Community Seminar with Chengdu Municipal Information Office and Chengdu Software Association. They share their Digital Community Consortium solutions and facilitate one-to-one business match-making. Several companies have already found potential leads through this.
Sichuan's provincial capital Chengdu is the most prosperous city in Western China. In 2008, hengdu GDP reached RMB390 billion, a year-on-year growth of 7.5%.
The city's strength is in its service industries such as financial services and Information and Communication Technology (ICT). Among all inland Chinese cities, Chengdu has the biggest insurance market, the busiest aviation hub, as well as the second largest economy and banking markets. Chengdu's listing among the Top 30 on Forbes List of the best commercial cities in China is another significant leap forward to become increasingly on par with Beijing, Shanghai and Guangzhou.
Investor confidence in Chengdu remained high as the city suffered little physical damage from the Sichuan earthquake. Among the 1,141 foreign-invested enterprises(FIEs) surveyed, close to 81% of them were back in operations by end May 2008. In fact, Singaporebased companies see opportunities in the aftermath of the earthquake due to the high demand for reconstruction in infrastructure, environmental, business and infocomm technology services.
Singapore was the second largest foreign investor in Sichuan with 384 Singapore companies investing a cumulative contractual foreign direct investment of US$1,736 million as of end 2008. In 2008, bilateral trade between Singapore and Sichuan amounted to US$566 million, with Singapore's exports to Sichuan growing substantially by 112% to US$234.99 million.
In terms of logistics and infrastructure, Chengdu is a regional air hub for Southwest China. The Shuangliu international airport ranks fifth in China for its number of passengers and effectively connects Chengdu with more than 70 domestic cities and 26 countries all over the world.
Chengdu was designated as a pilot reform city on 9 June 2007. This initiative targets coordinated rural and urban development through reforms in all sectors. The three main objectives of the program of pilot reform city are:
Approved in January 2009, the comprehensive plan focuses on all the service industries. This plan is seen as a strong commitment by the government to beef up its service sector and presents more opportunities for Singapore-based companies especially in ICT, Transportation, Finance, Real Estate, Education and Healthcare sectors.
According to the plan, by 2012, Chengdu targets to build:
Chengdu aims to be the centre of technology, commerce and finance, as well as the hub of communication and telecommunication in the Southwest region by 2017. According to a report in the state-owned China Daily newspaper, the municipal government also intends to transform the city into a logistics hub in western China by 2010. The government has also invested about RMB 9.9 billion in the ambitious Subway Project to construct an underground railway network that connects the centre of the city to its suburbs.
Chengdu is focused on developing its services industry, particularly in industries like education, electronics and ICT, environment, healthcare, infrastructure, transport and logistics.
Opportunities: Kindergartens, vocational and technical training institutes
Singapore companies can consider tie-ups with developers who seek to promote their luxury properties through partnerships with international quality pre-school services, and tap on government subsidies for training with priority given to residents affected by the earthquake.
Opportunities: Business process outsourcing, IT outsourcing, disaster recovery planning and business continuity plans.
The post-quake reconstruction in Sichuan increases the need for ICT products and services, creating potential collaboration with large system integrators or banks.
Opportunities: Waste treatment, clean energy, waste disposal systems and pollution control.
By 2010, the Sichuan government plans to invest S$16.5 billion in wastewater treatment plants, solid waste treatment plants and hazardous waste treatment plants. The Sichuan provinces are aiming for clean energy to account for 60% of their energy generated. Chengdu authorities set aside RMB 37 billion for environmental improvements up to 2010, which includes waste disposal systems, air, noise and water pollution control.
Opportunities: Acquisition of local hospitals, joint collaboration for higher-end healthcare services,integrated tourism projects which includes elderly care services.
The local government budget stands at RMB 7.5 billion to rebuild sanitation systems in three years. Singapore companies can collaborate with hospitals and local healthcare players to jointly develop midendto high-end healthcare services. Also, resorts and healthcare services in new tourist development areas such as Congzhou, Dujiangyan and Dayi make good options for investment.
Opportunities: Mass housing, water, electricity, roads and postal services.
The China National Development and Reform Commission (China"s microeconomic management agency) indicated that bulk of the China stimulus package (a total of RMB 4 trillion) will go towards infrastructure projects, with RMB 1 trillion towards rehabilitating areas devastated by the Sichuan earthquake. The Sichuan government is also investing RMB 3 trillion to provide mass housing and facilities such as water, electricity, roads and postal services. Many urban infrastructure projects, such as railways, townships, buildings, schools, hospitals and roads have been accelerated as a direct result of the Sichuan earthquake.
Rated as one of the more favourable cities to live in, Chengdu real estate is booming due the growing demand created by residents from other Sichuan provinces purchasing Chengdu property. Local authorities are providing post-quake incentives, tax rebates and expedited approvals to encourage investment into the province.
Opportunities: Services for the second airport in Jintang, Chengdu, third-party logistics (3PL) services and value chain provision.
Chengdu Shuangliu International Airport strives to handle 40 million passengers, 100 million tons of goods and open 20 direct flights by 2015, building itself as China"s fourth largest aviation hub. The Sichuan government will also speed up the preparatory work for the new airport in Jintang, which presents opportunities for Singapore companies in terms of logistics services such as air cargo handling, and maintenance, repair and overhaul (MRO) services.
As a transportation hub for Western China, opportunities are abound in Chengdu for logistics companies in terms of providing value chain provision, food processing, food cargo handling, warehousing, cold chain supply management and other 3PL services.
A complimentary service by www.iadvisory.com.sg
Name: Sunny Chia
Company: UPS
Expertise: Import/Export
Market: Asia Pacific, Europe
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