Jiading’s remarkable transformation is being brought about via

the construction of “Shanghai International Automobile City” (SIAC), a

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68 square kilometre corporate park that is already home to German auto

maker Volkswagen and several major auto component suppliers, including

TRW and Delphi of the US.

Apart from the manufacturing areas, the project – expected to cost at

least Rmb50bn ($6bn) – includes research & development facilities,

a commercial centre, residential housing and even a new golf course. In

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short, SIAC hopes to offer everything a foreign investor needs to feel

comfortable in China when it is finished in 2010.

Pulling power

While the foundations are being laid in Jiading, Mr Jin is jetting

around the world to promote SIAC. He is especially keen on attracting

component suppliers who want to supply VW in Jiading and General Motors

in Pudong, another Shanghai suburb. fDi caught up with him at a recent

event in Frankfurt, where he spoke to German component suppliers about

SIAC.

Mr Jin observes that while there are plenty of incentives for foreign

investment in China, the most crucial one for the suppliers is the

amazing growth prospects for the nation’s auto market. “Demand for

automobiles right now is booming; it’s probably twice that of the US,

which itself is a very big market. And it will probably stay that way

for a long time, as we have a lot more people than the US,” he says.

Tax attractions

Auto makers and their suppliers producing in China enjoy huge benefits

from a tax and labour cost perspective. Under current laws, foreign

investors pay no income tax in the first two years of their engagement

in China. After that, they only pay half the normal rate. Labour costs

are about one-tenth of what they are in Europe, according to

Christopher Sanders of Kostal, a German supplier of electrical

components which manufactures in Jiading.

However, the mayor acknowledges that labour costs have grown

considerably in recent years owing to the dynamic Chinese economy. “To

compensate for this disadvantage, various types of bureaucratic costs

for companies have been abolished,” says Mr Jin. Mr Sanders notes that

while it was encouraging that the authorities were doing something to

cushion the blow of rising labour costs, the measures did not

neutralise their impact.

In any case, Mr Jin stressed that unlike auto makers that invest in

China, component suppliers were no longer obliged to form a 50-50 joint

venture with a Chinese company. “As a result, we hope to attract as

many component suppliers to SIAC as we can. And all are welcome, as we

have the room to expand and develop the city further,” he says.

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