The Chinese city of Changsha in Hunan Province has come a long way from its traditional agricultural roots. Renowned as the site of Chairman Mao’s conversion to communism and a fierce battleground during the Sino-Japanese War, modern Changsha is one of the most prosperous cities for industrial growth in the region.

The saturated markets of coastal China have led to a shift in manufacturing towards inland locations for both domestic and international firms. This has helped Changsha post hugely impressive growth, with an average 10%-a-year increase in GDP over the past two decades, according to the China-Britain Business Council (CBBC). Now, with a population of more than 7 million and a further 13% year-on-year GDP growth in 2012 alone, according to local government figures, Changsha is well placed to offer a variety of potential investment opportunities for foreign firms.

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“It is an exciting time for industry growth in Hunan Province. We see this underlining the expansion and gradual development of new regions of China. What is impressive is that [Hunan's] 11.3% [economic] growth on last year has come hand in hand with a rise in personal disposable income, which is fundamental to long-term sustainable economic growth,” says Mark Johnson, senior consultant at the Chinese practice of communications agency ‪Fleishman Hillard.

Building boom

Inland economic growth is a developing trend in China, but with continued competition from the rest of the country, as well as the rest of the Asia-Pacific region, it can only be sustained if the correct infrastructure is in place. This is one area in which Changsha has excelled in recent years, with the city undergoing a dramatic transformation. Now located on China’s high-speed rail network, it takes just three hours to travel by train to Guangzhou and Shenzhen, and only five hours to Beijing. In addition, there are ongoing works to extend the city’s metro system to create world-class transport facilities, as well as tunnels being built under its Xiang River to ease traffic congestion.

Perhaps the most striking project of all is the groundbreaking Sky City, set to become the world’s tallest building at 838 metres. Being built by Changsha-based Broad Group, the company plans to use innovative prefabrication processes to finish the building in less than a year. It has already built a 30-storey hotel project in only 15 days using these methods.

Bringing in business

Business infrastructure is also seeing investment, with Changsha-based online game operator Talkweb planning to build a 60-hectare animation and mobile game park, which will be the largest in central China. The ambition of this project is topped, however, by the creation of an entire central business district surrounding Meixi Lake in Changsha. With design partners including Kohn Pedersen Fox, Arup and Gale International, this residential and business development is expected to house up to 180,000 people and be completed by 2020.

All of this investment bodes well for companies looking to invest in Changsha and the wider Hunan Province. However, some caution is required given the sheer ambition and scale of the changes. With China’s economy beginning to slow, the days of funding growth through bank lending and debt seem to be coming to an end – yet the building continues in Changsha. And even though the city is one of four provincial capitals that are partners in the UK-China Sustainable Cities Initiative, questions are being raised about the removal of green space caused by the Meixi Lake development and whether this project is really the best use of resources given Changsha’s already-strong development. Even the proposed Sky City has hit problems, with construction stopping and starting due to concerns over regulatory approval and the potential viability of the construction.

A surge from abroad

Despite these concerns, the growth figures and the commitment of local, regional and central governments to Changsha’s development have prompted an influx of investment from foreign firms in recent years. Volkswagen has already pledged to enter the market with a planned 300,000-unit-a-year, Rmb10bn ($1.63bn) manufacturing plant to be completed in Changsha by 2015. This is just the tip of the iceberg in terms of foreign interest.

“Foreign companies that have already invested in Changsha include HSBC, Honeywell, Siemens, Nokia, Motorola, Bosch and Standard Chartered," says Miranda Hou, chief representative and manager at the recently opened Changsha office of the CBBC. At present, 119 of the world’s top 500 companies have invested or set up representative offices or branches in Changsha.

A new alternative

CBBC is one of a number of organisations seeing the potential of the region and the opportunities that it presents for foreign companies looking at alternatives to the relatively expensive, saturated market domains of China’s largest cities. And it is not just foreign firms that are flocking to the region to take advantage of industrial growth – China's largest construction machinery company, Sany Group, is looking to move its headquarters from Beijing to Changsha in the near future.

"CBBC opened an office in Changsha in January 2013 as we have seen the potential for opportunities in this region and its strong growth in recent years," says Ms Hou. "We are seeing opportunities in a wide variety of sectors, with government priorities for investment including the development of the photovoltaic industry with an intelligent grid, boosting the high-end luxury consumer market and creating growth in the engineering machinery, biopharmaceuticals, automobile and parts, culture and creative, new materials and animation/gaming sectors.” 

Although there will inevitably be hiccups along the way given the pace of the city’s redevelopment, the support for FDI in the region remains extremely strong. This is evidenced by a large-scale local government campaign entitled Invest in Hunan, which was recently launched in Changsha and was covered by Hunan TV – the leading broadcaster in China by audience ratings. With this sort of publicity, coupled with infrastructure investment, more foreign firms are sure to tread a path to Mao’s spiritual home.