This is China! BLOG

Fajitas, Magueritas and China IT Outsourcing Centers

It’s not often Chinese government officials invite me out to eat Mexican food, replete with tasty Magaritas. But there I was, stuffing my face with chicken fajitas on a Saturday night at Suzhou Industrial Park’s (SIP) newly opened Casa Zoe Tex Mex with two officials from nearby Wujiang Economic Trade and Development Zone and one from SIP, where I live and have an office. Wujiang is a township about a twenty minute drive south of Suzhou.

John* and I had first met during an investment project I was introducing to SIP nearly five years before. Since that time, he had moved over to become a big-wig in Wujiang city government. Fluent in English with a broad smile and a warm handshake, John is always a fount of information about what’s happening throughout Jiangsu Province in terms of investment trends. That Saturday evening John also invited along one of his staff, Wendy, and a former co-worker from his time as an administrator in SIP, Sarah. Wendy is a very intelligent lady as small as a bird with a shy smile; but get her going on the merits of the Wujiang Development Zone and she’s unstoppable! Sarah is relaxed and social, and speaks English easily with an American accent. All are well-traveled to America and Europe on the many junkets their local governments make abroad to spread their message of local China investment to the uninitiated.

I asked Sarah as I was spooning refried beans into my mouth if she had seen any differences in the kind of companies she was talking with now compared with five years before. She, too, had chosen to eat fajitas – large, plump shrimp, but without the tortilla (which, I think, takes all the fun out of eating fajitas). She said immediately, “Five years ago was about manufacturing companies. We went to Ohio a lot!”

John and Wendy laughed in agreement. John, who had dived so deep into his burritos I thought he’d never come up for air, chimed in, “Cleveland. Cincinnati. Findlay!” I had a feeling they had had enough of visiting “America’s Heartland”.

I added, “You probably also visited Chicago and Detroit a lot, too.” They nodded agreement, looking weary at the recollections.

“Now,” Sarah said, “it’s Silicon Valley, the east coast of America. And New York. And Virginia.” I cocked an eye at her, surprised Virginia was on her typical itinerary. “Fairfax,” she answered. “It’s now supposed to be the richest county in America.”

“The CIA’s home?” I blurted out. “Be careful who you take as an investor!” We all laughed at the thought of America’s favorite spy agency with a “front” here in SIP. Fairfax, at any rate, had become rich because of the government largess that had been doled out as defense-related and IT projects during Bush Junior’s tenure in office, Sarah pointed out.

“And how are the Americans doing in their investment numbers compared to the Europeans?” I asked Sarah. She answered that because SIP was shifting more of its focus to IT and R&D-related investment, the Park was attracting more American interest than European because the Americans had more IT and R&D companies.

She noted that at a recent conference she had attended in New York City most attendees seemed bullish on China as an IT outsourcing destination for American companies. The question on most speakers’ lips, she said, was, “Why aren’t you already in China?” Everyone seemed to know about the 700,000 plus IT graduates pouring out of Chinese universities. “And even though the turnover rate for employees in China may be 20%, in India it’s higher – maybe 30%. Manufacturers would consider 20% really high; IT people figure that’s normal,” she added. “Also, they love the infrastructure China’s building for IT; India has a lot of problems in that area.”

I related that an Indian friend of mine in Suzhou who is General Manager of a British company once told me, half-jokingly, “What India needs is twenty years of no democracy!” His point was that Indian politicians were always fighting each other over infrastructure projects and have come to rely on the big companies to pay for infrastructure in India.”

We had all finished our meals, except for a lonely bowl of Mexican salad that sat forlornly between us all. We were all too stuffed to attempt the salad, which John had ordered early on as a side dish. I brought up the development of the Ascendas Technology Park in Hangzhou as a recent infrastructure project.

“Apparently,” I offered, “Hangzhou is positioning itself as the back office of Shanghai.”

John added, “A lot of parents of Shanghai people came from Zhejiang Province: Ningbo, Hangzhou and Wenzhou. Shanghai has very close relations with Zhejiang.”

“Probably closer than Jiangsu,” Sarah said. Wendy, from Wujiang was still picking at the remains of her overly large tacos. She didn’t seem to have much to say on the subject.

Sarah continued, “Hangzhou’s advantage over Suzhou as an IT and R&D center is that Hangzhou has Zhejiang University, which is a larger and better school system than Suzhou University.” Zhejiang University turns out nearly 135,000 graduates each year. “Hangzhou is also less expensive for hiring and for living. And because Hangzhou did not become dependent on manufacturing- as Suzhou has - Hangzhou can devote more resources to developing itself as an IT hub.” A primary driver of Hangzhou’s economy is the West Lake, a huge tourist draw. Hangzhou has from early on been more strict with its environmental standards than Suzhou. Though Suzhou now does not permit polluting or labor-intensive investment projects in area, Hangzhou has historically pushed for cleaner operations, always with an eye to “green” investments.

“Suzhou will always have manufacturing; we’re looking for a balanced investment environment,” Sarah said. “But Shanghai people feel closer to Hangzhou, which they feel is nicer than little Suzhou.”

John added, “And when they get the mag-lev train operating between Shanghai and Hangzhou, there will be a lot more Shanghai business going to Hangzhou.”

That’s not to say that Suzhou was out of the Race of 10 (or 11, depending on who you talk to) to develop as IT and R&D hubs in China. Far from it, in fact. Sarah pointed out that SIP had completed the first phase of the SIP Science Hub, on the southern shore of Yangcheng Lake. Yangcheng Lake is particularly famous for its prized hairy crabs, which Chinese people from Suzhou to Beijing eat by the bushel. The 4-square kilometer park when complete in a couple years will support residences, R&D facilities, and high-tech manufacturing operations. Sarah told me companies had already moved into the adjunct Park, another joint venture between China and Singapore.

All of us sated with Mexican food and interesting talk, we promised we’d do this again soon. But we’d perform a bit of R&D ourselves by exploring another of Suzhou’s Mexican restaurants. Nothing like wasting away in Magaritaville.

*I’ve changed all the names to protect the innocent.