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.