Tianjin Ranked China's Top Industrial Park

Leading Development: The TEDA is ranked China's top industrial development zone for the 14th consecutive year..

The Tianjin Economic Development Area (TEDA) has been ranked China’s top industrial zone from among 90 across China by the Ministry of Commerce for the 14th consecutive year. TEDA is located about 50 miles southeast of Beijing.

TEDA’s 20% annual growth rate has been supported by the central government’s efforts to shift some of the nation’s industrial activity from the south and east to the north to achieve more balanced growth. It has received intensive investment in heavy machinery and hi-tech infrastructure.

TEDA ranked highest for economic soundness, human resources, and social responsibility and governance. It was also among the top three for infrastructure capability, environmental protection and technical innovation.

Foremost among the 89 other development areas from which TEDA continues to face stiff competition are those in the prosperous Yangtze and Pearl River delta export hubs, according to results published by the Ministry in September.

TEDA was established in 1984 as China’s first economic development area soon after the nation’s economy was liberalized. As of 2010 it had received a total of $62.2 billion worth of international investments from 4,870 projects from 74 countries and regions including Hong Kong and Taiwan. Some 78 Fortune 500 companies have invested in 166 projects there.

TEDA boasts complete industrial clusters involving electronics & telecommunications, automobiles, biopharmaceuticals, food & beverage, machinery manufacturing, aerospace, new energy and new material, petrochemicals and modern service — making it a world-class manufacturing powerhouse. TEDA accounts for 20 percent of the economic output of the city of Tianjin.

But TEDA is facing increasing competition for investments from other development zones mushrooming across China, like the 1,200 square km Chongqing Liangjiang New Area launched last year in the western interior.

“A lot of places focus on the initial cost and give special prices to get companies to come,” says TEDA investment bureau chief Mei Zhihong. “Our initial costs are in the middle. We are paying more attention to the operational costs. We are not encouraging individual companies to come here. We are encouraging industrial sectors to be here.

“We offer a complete environment, including the supply chain, customers and suppliers. Many companies making serious investment look more at these factors. That’s one of our biggest advantages,” she added.

An example of TEDA’s strategy is the way it developed a telecoms cluster by first attracting Motorola, then working on its suppliers to bring down logistics costs. Another TEDA investor is Samsung which brought its own suppliers with it. TEDA has stayed at the forefront by taking cues from its overseas investors as to what their needs are and how to best meet them.

But TEDA faces some big obstacles to continued growth. Foremost is a tightening labor market which drives up labor costs. A shortage of land prevents development of additional industrial space. China’s recent monetary tightening has also raised borrowing costs.

TEDA is urging its tenants to freeze the high salaries of top executives and boost the wages of low-level machine operators in an effort at minimizing the impact of labor shortages. The local government also intends to subsidize part of the wages of operators to boost the overall quality of life in the city.

For the long term TEDA is shifting away from labour intensive industries toward high-end manufacturing which tends to be more automated. One example is the Danish healthcare giant Novo Nordisk which staffs its major production center with only 1,000 workers. The shift is relying mostly on natural attribution of low-end companies that have difficulty meeting TEDA’s relatively higher rents and leave for other regions.

TEDA continues to expand. It has recently established the 200 sq-km Nangang Industrial Zone which is conceived as an all-in-one port complex for the petrochemical industry. It has already signed on Fortune 500 companies like Dow Chemical and Air Liquide. Already about $30 billion of projects like refineries and warehousing logistics are being built.

TEDA hopes Nangang will achieve an annual industrial output of $47 billion by 2015, rising to $78 billion by 2020, by which time it aims to have become China’s main cluster of oil refinery and ethylene production and the main heavy chemical base for north China.

There is also a Modern Service District for finance, trade and logistics services aimed at the manufacturing companies TEDA hopes to lure.

China’s latest Five-year plan designates TEDA as an economic center of north China. But the central government’s focus will shift to less developed interior regions during the coming years.