Suzhou Industrial Park struggles to keep foreign companies
September 17, 2019 Category China News Round-up, Weekly
Suzhou Industrial Park (SIP) in Suzhou, Jiangsu province, struggles to keep its foreign companies amid the economic slowdown and the U.S.-China trade war, the South China Morning Post reports. Built on an area five times the size of Manhattan that was once farmland and fields, the park’s Singaporean-inspired design has an emphasis on tidy urban planning and green landscapes in the city of Suzhou, known as the Venice of the East for its many canals. In the 25 years since its establishment, Suzhou Industrial Park (SIP) has been very successful in attracting foreign companies with offers of cheap labor and top notch infrastructure, including Microsoft, Siemens, Honeywell and Panasonic. For the first half of this year, the park’s output was 14% of the entire Suzhou economy. But recently, local officials have turned to offering subsidies and other forms of support to convince foreign companies to stay. Home to 5,000 foreign enterprises – many of them exporters – SIP saw its exports decline 10% over the first six months of 2019 compared to a year earlier. Imports, meanwhile, have fallen 15%. These are significant drops, even as the occupants of the park are now increasingly catering to China’s domestic market.
In August, officials from Jiangsu’s Department of Commerce visited some of the park’s foreign firms, asking what problems they were having and how the provincial government could help, keen to stop more companies relocating to Southeast Asia. Among the companies officials called on was Swiss packaging maker SIG Combibloc, suffering from the 10% tariff China placed on many American imports, including manufacturing machines. Now the Suzhou government has agreed to exempt the company from the 10% duties. The company has decided to invest CNY3 billion in a new facility, according to Sha Haitao, Director at SIG Combibloc. Foreign firms have accounted for 60% to 70% of imports and exports in Suzhou.
Consistent with the import and export declines in SIP, Suzhou’s gross domestic product (GDP) growth slowed to 6% in the first half of this year, below the 6.5% rate in Jiangsu as a whole, though SIP still made the biggest contribution among all industrial estates to provincial GDP. But the trade war is not only to blame. Cheap labor and low-cost land have been disappearing in SIP, the South China Morning Post reports. Since its launch in 1994, SIP has attracted USD31.27 billion in foreign direct investment (FDI) and contributed over CNY800 billion in tax revenue as of the end of 2018.
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