This is China! BLOG

China Investment: How to Know When You’re Not Wanted

With tightening land policies and environmental regulations, Chinese administrators of Economic Development Zones (EDZs) are getting picky about who they accept into their investment areas.

I was recently with a client in the Hangzhou High and New Technology Zone to investigate leasing factory work space in which they can set up their new China operation. After sitting through a half-hour long presentation by an English-speaking government official about the wonders of the Zone, and then through another half-hour of questions and answers about the client’s project; and then through a final half-hour of Q&A from the client about the Zone itself, I was once again annoyed at the way these government types go about making you feel unwanted in their area.

“Well,” the Director for Western Investment started. Of course, it’s a Chinese “well,” which may or may not be prefaced by a bit of hocking and spitting. She was a middle-aged portly lady who looked liked a brawler, politically speaking. I’m sure she did not get to the position she was in by being “nice.” “We will need to study your work processes and have our people analyze the potential for pollution,” she intoned. This, just after the junior representative, who had delivered the presentation, had enthused, “We welcome traditional manufacturers to our area, since high-tech investment cannot absorb all the available labor.” That’s what I call government double-speak.

Essentially, they wanted a business application before a company decided whether or not to invest in the Zone. Of course, as I’d already warned the Client, the Zone had been set up in the early 1990s as a magnet for high-tech investments anyway. Indeed, many larger second- and third-tier cities had their own High and New Technology Zones set up at the same time as Hangzhou’s. At that time, though, the idea was to attract mainly computer manufacturing, a.k.a. Taiwanese investment. Now, the focus for the New and High Districts like Suzhou New District and Wuxi New District – both approved to focus on high-tech investment projects – is to attract not only computer-related investments, but also software development, IT- and Business Process Outsourcing. This client firmly fit into the “traditional” manufacturing mold.

But it’s not just hi-tech zones like scenic Hangzhou’s that are getting an attitude. My own Suzhou Industrial Park – where I have an office and a home – is getting picky. SIP is basically a conglomeration of four townships that have administrative responsibilities for their sub-zones. The zones having been very successful since the SARS scare four years ago. An American manager told me a couple weeks ago how his company had an appointment in one of the sub-zones to discuss and perhaps view pre-built factory workspace. The Americans were kept waiting for nearly an hour while the government administrators took their time getting to the meeting. After the prefunctory cross-introductions, the Americans were told there was no space for THEIR project.

The Singaporean part of SIP (Singaporean government and private investors have 40% of the shares in SIP), can be pretty snooty as well, if the company’s investment density (the total capital investment per square meter of the amount of land a company wants to lease) is too low or the company’s brand is not well recognized, at least within the company’s own industry.

In the Fuzhou Economic Trade and Technological Zone I just wanted to kick over the table when the Vice Director just went on and on about how un-cool my client’s project was. I guess he figured the project wasn’t sexy enough to get him promoted or there was not going to be much “joy” coming from a Wisconsin-based, family-owned concern.

My all-time favorite “diss” came from an engineer at Changan Automobile, in Chongqing. He had been elevated to the status of Emperor of the Changan Economic Development Zone, an investment area that was just a lot of dirt and heaps of rubble when I visited three years ago. The zone – an extension of the shadow-bureacracy that actually runs Chongqing – was created ostensibly to support investments in the automotive industry.

The Emperor was there to put me and my client’s project in its proper place; that is, at his feet. He just kept going on and on about the building specifications the client cited in business requirements as being completely inadequate and just plain wrong. It was the closest I ever came to being put in a Chinese prison for the crime of strangling an idiot in China.

China is changing. Times were when along the now-booming east coast government officials would eat worms to get an investment project in their area. Now, they are more willing to have the would-be investor eat the worms (with soy sauce, if that would make it more palatable), to show their worthiness. But there are the second-, third- and fourth-tier cities – what I call x-tier cities – in the interior of China that are just hankering for investment and development. There, however, earnest investors will have a whole host of other behaviours to contend with when they meet their earstwhile hosts.

Bill Dodson
SUZHOU, China