The shift in development from the major Chinese metropolises to smaller emerging cities is a trend with serious implications for global businesses.
Until recently, companies planning to develop operations in China honed in only on the areas around Shanghai, Beijing, and Guangzhou. These large Westernized cities, often referred to as Tier 1 cities, offered labor at bargain prices as well as the infrastructure to support development. Both the Chinese and the foreign companies have come to understand each other’s business practices, and that has lowered the hurdles for outside developers. However, the dramatic social and economic changes that have rippled through China in the past few years are now reshaping the landscape for industrial, commercial, and retail facilities development.
“Although industrial investment seems close to levels we were seeing before the 2009 recession in China,” says Andrew Kwok, SSOE’s General Manager of Asian Operations,” new foreign investment is experiencing a geographic shift.” Attracted by lower development costs (including land, labor and materials), operating costs, and more aggressive government incentives, some investors are opting to develop in more dispersed regions in China. Corporate giants like Ford, GM, Borg Warner, Coca-Cola, Cummins, Goodyear, and P&G are among them.
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