The Chinese city of Chengdu must work to move higher up the value chain in order to ensure its growth is sustainable and it should seek to position itself as the new Silk Road to the fast-growing regions in south-east Asia, Dr Frank-Jürgen Richter, chairman of the Switzerland-based independent think tank Horasis, told fDi Magazine.
“Chengdu should not just attract manufacturing, but move up the value chain to invest in research and development,” said Mr Richter. “If you rely on just manufacturing, you can lose easily. No one is immune from the shocks [of the global economic crisis] anymore, and stories about China decoupling are just not true. Although we are seeing a lot of domestic Chinese companies moving inwards [to] Chengdu, I think a good development strategy for Chengdu would be to exploit the potential of being [near south-east Asia]. The Chinese government is moving its emphasis away from Europe to other parts of Asia and Chengdu could [become a] centre for the new Silk Road, connecting China to Kazakhstan, Uzbekistan and south-east Asia.”
Although Chengdu’s 2011 growth rate of 15.2% continued to outpace China’s average rate of 9.2%, Chengdu faces difficulties in fostering an international business reputation to rival the country's other major cities. While maintaining that the city’s competitive costs of doing business, particularly in the manufacturing sector, continues to be a draw for companies experiencing rising costs elsewhere in China, Mr Richter said that the city should try to attract international corporations looking to set up regional headquarters.
“Nobody is doing manufacturing anymore in Shanghai or Beijing because it is not worthwhile, cost-wise, but Chengdu is still at a reasonable cost level and it welcomes investors in a big way, which is important,” said Mr Richter. “I think it is doing well and is on the right path. What it should improve on is [its] regional headquarter [offering]. Chengdu has still not built up the reputation as a hub for global businesses. Companies still go to Shanghai, Beijing or even Hong Kong. There are still a lot of people that only think [Chengdu] is the capital of pandas. So moving Chengdu in the direction of being a hub would be very meaningful.
"For that Chengdu would need more international institutions including international organisations, international schools, hospitals and so on. Chengdu should also be very active in attracting young foreigners who can build up their own companies [there] and it should make itself a melting pot. The success of Singapore is based on foreigners coming in to work. Chengdu should also plan a programme to attract highly educated young foreigners to come and co-build its future.”