Located in the eastern Chinese province of Shandong, the city of Zibo enjoys an illustrious (if little-known) status as the official birthplace of football, which was called ‘cuju’ and played there more than 2000 years ago.
Having been certified as such by football world governing body FIFA, the city of more than 4 million inhabitants often hosts football historians and other sporting delegations. Now it is hoping to leverage its strengths in other sectors, such as advanced materials and specialty chemicals, medical devices and pharmaceuticals to help it move up the investment league tables.
Leading the field
Key to Zibo’s game plan is the transformation and upgrade of its existing industrial base.
“Chemical, medical and manufacturing are leading industries in Zibo, and Zibo has served as an important city in petrochemicals since the Sinopec Qilu company was built up here in 1966,” says Guowei Xu, director of the Zibo government’s representative office in Beijing. “We expect to transform the traditional chemical industry towards fine chemicals and new-material chemicals," he adds.
Foreign investors are contributing to this industrial transformation. “The multinational chemical giant AkzoNobel, based in the Netherlands, intends to set up a high-end coatings project in Zibo,” says Charlie Liu, an FDI attraction representative of Zibo based in Toronto.
“Coating manufacturing depends on chemical materials, and they can be easily found in local factories, which means that the project enjoys the benefit of being close to source supplies. And coating is always in high demand in the Chinese market, so the company does not have to export its products, it can partly sell coatings in the Chinese market,” adds Mr Liu.
Sweden-based Perstorp, US-based Eastman and Germany’s BASF are among the chemical industry companies that have invested previously in Zibo.
Zibo, and its home province of Shandong, have room to catch up with the competition, however. Crossborder investment monitor fDi Markets tracked 532 greenfield FDI projects into Shandong with an estimated investment of $48.6bn since 2003, when its records began, placing it seventh out of 31 provinces by share of greenfield FDI projects (2.9%) during this period.
Among the province’s cities, Qingdao currently is top scorer for attracting greenfield FDI, according to fDi Markets statistics. Between 2003 and 2019 it won 245 greenfield foreign investment projects with an estimated investment of $21.5bn, accounting for 46.1%.
Zibo feels it can compete on its own terms, though, as it witnessed a rise in FDI inflows in 2019. Within that 12 months it attracted 71 FDI projects with investment of about $233m from January to November, rising by 57.8% compared to the same period in 2018. Major investors from Hong Kong and South Korea invested almost $130m and $65.9m, respectively, in Zibo in the first 11 months of 2019, according to the local Bureau of Commerce’s 2019 annual FDI report.
“Zibo is an inland city, so Qingdao may beat it as a coastal city, and Jinan can beat it as the capital of Shandong,” says Mr Xu. “But it only takes two-and-a-half hours from Zibo to Qingdao by car, so foreign investors who set up factories in Zibo can easily transport their products to Qingdao port for export trading.”
Additionally, Zibo has adequate qualified employees for many sectors including chemicals, medicine and automotive, thanks to the more than 10 universities and colleges located in the city. “Investors do not really care about PhDs and masters degrees, especially for manufacturing investors; they care about vocational education. Thousands of graduates in Zibo can join the industry and make contributions in business immediately every year,” says Mr Liu.
More investment can be found in sectors such as automotive, given that the Zibo government is encouraging the transformation and upgrade of traditional industries into technological ones. Canadian auto parts company Magna International is reportedly considering Zibo as one of its potential investment destinations. Additionally, in January 2020, auto giant Geely, the parent company of Volvo, signed an agreement with the city government to partner in a project to produce 150,000 new-energy commercial vehicles annually.
Along with industrial transformation, Zibo is pursuing policy simplification as a way to boost its investment performance.
China has faced criticism over its lack of market openness as well as its business registration process. With the aim of satisfying international demand and encouraging more FDI inflows, in 2016 a ‘five in one’ business licence was introduced to allow a single application for five of the main licences required for a foreign business to operate in China. Moreover, the new Foreign Investment Law, designed to level the playing field for international investors, came into effect on January 1, 2020.
In 2019, Zibo was a pioneer in simplifying and speeding up the business registration process in China. “The process was tedious if the foreign investor applied for a business license in the past, and it could take you several weeks, even months. Zibo’s administrative approval office has a one-stop service, and it has different functional offices in one building, so every document can be issued under one roof,” says Mr Liu.
Against the backdrop of the US-China trade conflict, Zibo’s future strategy is to put more effort into attracting European investors, which have had fewer political clashes with China, though the city’s major source markets are Hong Kong and South Korea in 2019, according to Mr Liu.