Suzhou – China’s new engines of growth

Suzhou – China’s new engines of growth

When thinking of mainland China’s economic cities, four names are on the top of everyone’s mind:

  • Beijing (North, capital/political center)
  • Shanghai (East, financial center)
  • Shenzhen (South, technological center)
  • Guangzhou (South, manufacturing hub)

China’s engines of growth have diversified and decentralized in the recent past with new centers emerging around them.

Today, China is in the middle of a fundamental transformation away from heavy industry and low-skilled labor towards advanced and cleaner technologies for industrial applications and a new focus on R&D. With the national, provincial and city governments, all collaborating together, Chinese economic policies and private organizations on the market have propelled the growth of these new sectors.

This is reflected in the increase of patent filings all across China. It is no surprise that Shenzhen gets the first place for most patents registered per capita (Forbes (福布斯), 2018). However, another city in the top five stands out: Suzhou is right behind Beijing, ranked number three, ahead of Shanghai and Guangzhou. Last year until August, Suzhou registered more than 92 thousand patent applications and more than 7 700 patents were granted. It is one of many indicators in recent years that shows how Suzhou quietly approached and reached similar economic output and dynamics of top tier cities. It asserted itself as one of the main engines of growth in mainland China. (Wang, Shen, & Chung, 2015, pp. 60-62). 

Where is the Yangtze River Delta and Suzhou? 

The Yangtze River Delta consists of major economic and population centers in the province of Jiangsu around the Yangtze river (长江), south of it with the greater area of Hangzhou, the capital of Zhejiang, and its economic centers along the northern coastline (such as Ningbo-Zhoushan) and the city of Shanghai. The area encompasses a population of around 100 million people (6% of the total Chinese population) and is accountable for around 20% of the entire GDP of China, which makes it one of the largest population and economic center in the world (Han, et al., 2017, p. 1041). The current dynamic growth of the area is reflected in the ranking of the top 30 innovative cities where 15 spots are all occupied by cities in this economic area. It demonstrates how the cities in the Shanghai-Nanjing corridor have become its own growth engine itself.

In the heart of the region lies the metropolitan of Suzhou with 10 million inhabitants. Its total economic output is among the top 7 cities in China (Phb123 (排行榜), 2018). It is made up of the central city districts as well as several townships including Kunshan & Taicang which both also made it onto the top 30 list of innovative cities (Rank 11 & 19) (Forbes (福布斯), 2018). It is especially notable because the greater metropolitan area of Suzhou is the only one on the list that occupies multiple spots.

Thanks to its geographic location, Suzhou has a unique competitive advantage to other areas in terms of transportation. It only takes 20-30 minutes to reach Shanghai and 45 minutes for Nanjing. This means that 12 out of the top 30 innovative cities of the list are reachable from Suzhou within less than one hour by high-speed rail or car.

Why is Suzhou surging so fast?

Apart from the key geographic and demographic features of Suzhou, its success can also be attributed to pragmatic approach of its public policy and the effective cooperation and distribution of resources by the different levels of governance.

Suzhou’s plan of economic development has revolved around targeted measures that ease the burden of regulation, lower the barrier of entry into the Chinese market and has been providing resources for assistance in landing and taking off. The second aspect of its development plan has been to foster spill-over effects and increase the efficiency of collaborative endeavors. To that end, the government of Suzhou designs each district to have a distinct focus and cluster of ventures to maximize the utility of its proximity. Additionally, Suzhou prioritizes the construction different infrastructure for the needs of each district, by building test facilities and office spaces that is designed for dynamic interaction with community spaces.

Where is the future growth potential of Suzhou?

Despite not having reached the size of one of the top four cities in China, Suzhou’s economic output is impressive and there is still plenty of room to grow in terms of space and potential. Whilst Suzhou has already reached a level of the GDP per capita of around USD22 000, which is comparable to the one of the Czech Republic, the surrounding area has yet completed the transition from agriculture to fully fledged urbanization (CEIC, 2017) & (Worldbank, 2019).

In this whole process, one development zone stands out in its growth potential: High-Speed Rail New Town (HSR). HSR has the unique advantage of a new major high-speed railway station, Suzhou North, that enables its population to reach Shanghai in 23 minutes and Beijing in less than 5 hours.

At the same time, it is just at the start of its rapid development and is prioritized by the government of Suzhou for economic development of R&D and innovation in software applications for the industrial process, new materials, advanced automation in the manufacturing process and new forms of transportation and energy saving. These efforts have already yielded results and a number of autonomous driving companies have set up a strong presence in the zone, such as Plus AI, Momenta, Singulato and others. Moreover, Huawei, Tencent, Alibaba and other companies have set up their R&D centers in Suzhou.

Quo Vadis China and Suzhou?

The national government’s at times complex domestic and international policies towards foreign owned enterprises and residents, has yet to be integrated into the international system. Currently, it remains an open question, whether it will level the domestic playing field for investing and doing business in the Chinese market.

However, China’s cities such as Suzhou can and are partly alleviating that concern by providing tailor-made conditions for foreign skills and capital to set up a presence in its boundaries and continuing the trend of China’s economic integration with liberal market economies.

To explore the incentives to set up and have a gateway into the Chinese market, EU Sino can assist new businesses on how to maximize these benefits. EU Sino furthermore provides a team of Experts that are from a foreign background for the needs of foreign companies, with extensive knowledge and resources to help them guide the jungle of local ecosystem in China.

Bibliography

CEIC. (2017). China CN: GDP: per Capita: Jiangsu: Suzhou. Retrieved from https://www.ceicdata.com/en/china/gross-domestic-product-per-capita-prefecture-level-city/cn-gdp-per-capita-jiangsu-suzhou

Forbes (福布斯). (2018, 04 15). 创新力最强的30个城市 (the 30 most innovative cities). Retrieved from http://www.forbeschina.com/lists/15

Han, J., Meng, X., Zhou, X., Yi, B., Liu, M., & Xiang, W.-N. (2017). A long-term analysis of urbanization process, landscape change, and carbon sources and sinks: A case study in China’s Yangtze River Delta region. Elsevier, Journal of Cleaner Production, 141, 1040-1050.

Phb123 (排行榜). (2018). 2017江苏各市GDP排名:苏州南京无锡3城GDP超万亿(附完整榜单) (Top largest cities by GDP in Jiangsu Province). Retrieved from https://www.phb123.com/city/wenhua/21751.html

Wang, L., Shen, J., & Chung, C. (2015). City profile: Suzhou – a Chinese city under transformation. Elsevier Cities, 44, 60-72.

Worldbank. (2019). GDP per capita (current US$). Retrieved from https://data.worldbank.org/indicator/NY.GDP.PCAP.CDw