Tianjin – A key destination for investment

Most Australians haven’t heard of the port city of Tianjin, but tucked away 137km southeast of Beijing is a flourishing metropolis which has been growing at an annual rate of 16.5% since 2007, and is home to over 13million people.  Prior to the founding of the People’s Republic of China, Tianjin (meaning, ‘a port for the emperor’) was the economic and financial centre of Northern China. Currently, Tianjin’s architecture is a culmination of its history as a colonial city mixed with its modern Chinese culture, a plethora of colonial buildings, modern skyscrapers and stylish suspension bridges. Now, an ultra-modern bullet train connects the city to Beijing, a journey taking less than half an hour, and plans for the next Beijing International Airport development show that it will be conveniently located halfway between the two cities.

Tianjin is the sister city of Melbourne and is one of the four municipalities that has “provincial status” level and therefore reports directly to the Central Government in Beijing. It is the sixth largest city in China in terms of urban population and the fifth largest by urban land area. Manufacturing represents approximately 60% of Tianjin’s economy and the Binhai New Area development zone has attracted many global giant to its ports, for example, Airbus and Caterpillar. Tianjin is also an important industrial base in China, with its major industries including petrochemical, metalworking, car manufacturing and textiles. Furthermore, the Chinese government has identified the Binhai New Area in Tianjin as the future hub for ‘vocational training’ in China, which is a fast growing industry in China as companies further understand the value of  vocational training for the long term development of their organisation.

Tianjin is one of the country’s leading destinations for Foreign Direct Investment. In the first quarter of 2013, the city approved 141 FDI programs which attracted USD5.1billion into Tianjin’s economy and was an 18% increase from the previous year. These figures are even more impressive when compared with the whole of China, which attracted USD29.9billion in the first quarter, only a 1.44% increase on that of the previous year.

Tianjin, the fourth largest port in China, has attracted 110 of the world’s top 500 companies. The Tianjin Economic-Technological Development Area (TEDA) which is located within the Binhai New Area, is located 40km from Tianjin’s city centre and is consistently ranked as China’s best performing free trade zone and has become one of the preferred manufacturing bases for foreign multinationals. TEDA focuses on four key industries: (1) electronics and communications; (2) biomedicine and biotechnology; (3) advanced manufacturing; and (4) food processing. In fact, Scandinavian pharmaceutical company, Novo Nordisk, has selected Tianjin to build the largest insulin production plant in the world, with investments totalling USD400million. In addition, Motorola’s Tianjin manufacturing facility is one of the biggest in the world and Samsung’s current Joint Venture with Central Tianjin Electronics Corp has seen the establishment of the biggest mobile manufacturing and R&D base outside of Korea.

Tianjin’s geographic location and economic significance has seen it become a major communications hub for Northern China. With the largest man-made port in the world, the largest air-freight facility in the region and railways linked in all directions (and into Europe), it is no wonder that the significance and importance of the development of Tianjin is reflected in the nation’s five year plan. Often described as living in the shadow of Beijing, Tianjin workers are actually slightly better off than their Beijing counterparts with a minimum wage that is 4% higher than that of Beijing and a lower cost of living.

An approach that was pioneered in the 1980s, saw Chinese authorities choose Tianjin as a “proving ground” for policy experiments including those surrounding financial services. If successful in Tianjin, the policies may be carried out nationwide. As an example, in late 2006, the Chinese government established the country’s first equity fund heavily reliant on bank lending, the Bohai Industrial Investment Fund, with an initial investment of RMB6billion, which was expected to reach RMB20billion within 15 years. As a result of this experiment, the growth of the funds industry has exceeded many expectations and is forecast to become one of the largest in the region.  

With respect to the banking sector, the total credit issued in Tianjin has grown faster since 2009 than anywhere else in China mainly as a result of the post GFC economic stimulus package. In addition, ANZ currently holds a 20% ownership in the Bank of Tianjin and is the second biggest shareholder. The Bank of Tianjin is valued at $2.3billion.

Yujiapu Financial District

The Yujiapu Financial District, which has been described as the “future Manhattan of China” is currently under construction in Tianjin and is set to be the world’s largest financial district (9.5million square metres). The financial district represents a RMB200billion dollar investment by the Tianjin government and will be built in four stages. The city will comprise of 47 skyscrapers that will be constructed on the salt flats in Tianjin. The first dozen buildings constructed in the new financial district will have four times the combined floor space of the Empire State building! The Government has strategically created incentives for businesses to transfer their legal residency and offices to Tianjin. In particular, tax incentives to private equity funds has seen over 50% of the country’s private equity funds relocate their office space to Tianjin. This strategic move has also attracted many of China’s “princelings”, the sons and daughters of current and former senior Chinese officials, who are highly involved in the private equity industry in China.

The Tianjin government provides a great variety of investment incentives to attract companies and their capital to Tianjin. Incentives cover a range of industries including: financial institutions, Agricultural technology companies, Science and Technology R&D and to a variety of incorporation structures including Sino-Foreign Joint Ventures and establishment of Headquarters/Regional Headquarters.

The Tianjin story is a very important one in the past, present and future of China. As a key destination for foreign and domestic investment, as a city with world-class infrastructure that has attracted some of the brightest minds in the country to its opportunities for strong growth and development – it’s time for businesses looked beyond Beijing to the role that Tianjin can play in connecting China with the rest of the world.