Industrial Parks in Yunnan
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China Knowledge Press Pte Ltd
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ISBN: 978-981-08-6191-9
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© China Knowledge Press Pte Ltd, 2010
China Knowledge Rating System and Year 2010 Rating Results
Rating China’s Industrial Parks
The culmination of years of research, surveys, interviews and site visits, the China Knowledge Rating System assigns ratings to industrial parks based on five broad factors subdivided into 21 attributes with a view to guiding foreign investors looking to set up in China.
The Rating System not only indicates the best industrial parks in China, but also serves as a guide to understanding China’s economy and future directions for development and to finding the hottest investment spots in a vast land of approximately 9.6 million sq km.
The rationale behind this large-scale research project, and the resulting Rating System, lies in the significance of industrial parks to China’s economic development and to the country’s ability to attract foreign investment.
However, the Rating System also offers more to investors; it allows existing and potential investors to gauge investment locations to find the one that will best suit their business needs. The Rating System is based on factors that include location, infrastructural development, contracted and utilized foreign direct investment (FDI), availability of human resources and administrative efficiency, giving investors a good sense for which industrial park is most suitable for their particular industry, product or service.
The importance of industrial parks to China’s economy cannot be underestimated. In 2008, the GDP of 54 state-level Economic and Technological Development Zones (ETDZs) reached RMB 1.53 trillion (US$220.3 billion), accounting for 5.1% of the nation’s total. Meanwhile, the 54 state-level High-tech Industrial Development Zones (HIDZs) contributed 9.7% of China’s total value-added industrial output.
Similarly, in terms of attracting FDI, these industrial parks have played a pivotal role. In 2008 the utilized FDI secured by state-level ETDZs reached US$19.5 billion. This translates to 21.1% of the national total. While data is not yet available for HIDZs and Free Trade Zones (FTZs), estimates based on past data indicate that state-level ETDZs, HIDZs and FTZs attracted an amount equivalent to nearly one-third of China’s total utilized FDI each year.
The ability of industrial parks to attract FDI is an important consideration for many foreign investors. Certainly, areas that attract the most foreign investment are the hottest destinations for subsequent capital inflows; they are also the areas that are developing faster and promising and delivering returns.
With hundreds of industrial parks to choose from, finding the ideal industrial park can be problematic for foreign investors unacquainted with the local context. An evaluation of industrial parks is thus particularly critical to aid such investment decisions. Additionally, as many major industrial players are based in industrial parks, in-depth, detailed descriptions of important industrial parks will guide investors in mapping out the industries they are most interested in.
Scope of Ratings
Industrial parks in China are of varying sizes and are at different levels and stages of development.
Some industrial parks are located within other industrial parks. For instance, Export Processing Zones (EPZs) are subsumed under ETDZs or HIDZs, in order that they may leverage the established facilities and resources of the enterprises in the ETDZ and HIDZ. Hence, some EPZs are not graded individually, but as a part of the larger ETDZ or HIDZ within which they are located.
Likewise, Software Development Parks (SDPs) and University Science Parks (USPs) are usually located within a High-tech Industrial Development Zone or High-tech Park (HIDZ). SDPs and USPs are thus also not given individual gradings. Rather, it is the respective HIDZs or HIDZs in which they are located that are rated, taking into consideration the contributions of these SDPs and USPs.
An even more unique case is that of Guangzhou Development District. It administers four state-level development zones: an ETDZ, an HIDZ, an FTZ and an EPZ. In this case, the district is graded as a whole, rather than as four different zones.
Border Economic Cooperation Zones are specifically designed for border trade and export-processing business. Because they are economically small and located in remote areas, they are excluded from our rating system.
Holiday Resorts are specifically designed for tourism. They are also excluded from our rating system.
The scope of the Rating System hence encompasses ETDZs, HIDZs, EPZs and FTZs.
Selection of Factors
The China Knowledge Rating System for China’s Industrial Parks (henceforth, CK Rating) is based on key factors that each have a significant impact on investment decisions. It asks the question: what are business people most concerned with vis-á-vis possible locations?
Taking into account regional competitive advantage, economic performance, infrastructure and other factors, CK Rating evaluates the various industrial parks.
CK Rating Comprises Five Categories:
Macroeconomic Performance of Local Area;
Level of Development of the Industrial Park;
Local Investment and Operating Costs;
Local Skill Level and Availability of Human Resources;
Quality of Management and Administration.
Of course, the weightings for these categories are not the same for all types of investment. For example, land resources and transportation are more important for manufacturing than for research. CK Ratings allow for this difference.
Weightings tailored to production enterprises and R&D enterprises, the two major types of enterprises that invest in China’s industrial parks, yield ratings that enable a company of either type to find the most suitable park.
Sources of Data
The sources of data used in assessing industrial parks include on-site studies conducted by China Knowledge, surveys prepared by China Knowledge and completed by industrial parks, news related to industrial parks, data released by government agencies that include the National Information Center, the Ministry of Commerce, and the China Torch Program Committee, and the websites and brochures of industrial parks.
Rating Mechanism
A value is assigned to every attribute in each category according to standardized criteria. This value is a figure between 0 and 10 (0 for least desirable and 10 for most desirable). Based on the value assigned and the weighting of the attribute, a figure (e.g., X) is reached. Adding up these figures for every attribute in the same category, a new figure is derived (e.g., Y). Based on the weighting of that particular category, a percentage of Y (e.g., Z) is derived. The final figure, Z, is calculated for all categories, and an overall score is derived. This overall score is then matched against a set of grades, AAA, AA, A, BBB, BB, B and C, which are the possible ratings given for industrial parks.
It is a straightforward matter to assign values for attributes such as GDP and fixed asset investment. The values for attributes such as accessibility and efficiency, which are more difficult to evaluate, rely on China Knowledge’s on-site studies and interactions with the relevant administrative bodies. Media reports are also used as reference points.
Discussion
To determine the overall value in the first category, the most important aspects of the host city are its GDP and transportation system. Most investors invest in cities of high GDP, that have a large market, well-developed infrastructure, comprehensive upstream and downstream industrial chains, a good financial system and a rich talent pool. In addition, they consider the geographic location of the city, the throughput of ports and airports, the logistics volume of the city and the city’s infrastructure for transportation.