SUZHOU, China--(BUSINESS WIRE)--Suzhou Industrial Park (SIP) has become a leading light in China's mission to modernize and push into high-value industry sectors. As such, it is little surprise that it is also at the vanguard of building an economic strategy around attracting companies to establish headquarters, from both local and international firms.
As Mr Zhou Xudong, Chairman of SIP, points out, the park has evolved to be much more than purely a manufacturing base in its 23 years of development. In that time, SIP has built itself up as a hub for high-tech, high-value industries such as information systems, artificial intelligence, nanotech and biopharmaceuticals.
"In recent years, as part of SIP's endeavor to constantly upgrade its industries and strategically nurture emerging sectors, we’ve seen first-hand the emergence of a new economy, of which the HQ economy is an integral part," he says. "We believe it’s the right route in order to fully transform from a production-oriented development model to a service-oriented one."
According to Mr Zhou, growing the number of HQs in the park impacts the overall well-being of the region. "We believe HQs are particularly significant in terms of tax contribution, stimulating consumption, increasing employment, generating social capital and that they have a 'multiplier effect' on their respective industries," Mr Zhou says.
SIP's wide spectrum of industries also offers huge opportunities to HQ tenants in integrating their manufacturing, R&D, marketing and professional services, and in building relationships with those in the supply chain.
Another selling point for SIP is its transport network, consisting of expressways, high-speed rail, aviation and waterways. The park is just 20 minutes from Shanghai and 5 hours from Beijing by rail.
Recent corporations to have established HQs at SIP include Apple, Hutchinson, Bridgestone, L'Oreal, Johnson and Johnson, Adidas, GCL-Power, Philips, Chow Tai Fook, Samsung, Panasonic and CEIBS.
Organic growth from solid foundations
SIP has lately set up a new Enterprise Headquarters Base at an allocated area just close to the railway station. The park is targeting transnational and local corporations with the hope of attracting HQs for investment, R&D, settlements and sales among other areas. Innovation and growth-type enterprises are particularly expected to flourish in the SIP ecosystem. There are four types of building on offer, with standard floor area ranging between 1,300 and 2,000 square meters.
In terms of entry criteria, companies looking to establish an HQ must have a parent company with assets of more than 2.5 billion RMB, and the HQ must generate tax revenue of no less than 30 million RMB per 10,000 square meters.
Tenants of the Enterprise Headquarters Base can also expect an unparalleled environment in what SIP terms a "vigor ring," which will see the railway transfer junction, Zhujing River leisure corridor, offices and other functional spaces festooned with business, entertainment, culture, sport and conference facilities.
Those qualified to establish HQs at the base are entitled to a whole set of incentives including rent subsidies of 50% for up to three years with a 1 million RMB cap per year; a one-time building purchase subsidy of 10%, capped at 2 million RMB; land use right guarantees; tax-contribution based bonuses; and a customs support system.
The base also offers talent attraction and retention programs that include subsidies, healthcare, and schooling for dependents.
This combines with SIP's “higher education lake zone”, a talent pipeline which is host to leading domestic and international universities including Oxford, Cambridge and MIT.
Within the SIP system, there are currently 81 HQs, of which 38 are from multinational corporations (MNCs).
While the park has had a formal policy of nurturing the HQ economy since 2003, HQs were already beginning to cluster in SIP from its establishment in 1994.
With the rise of tech-oriented sectors, and a large number of IPOs, many companies saw one or more of their core divisions elevated to HQ status, according to Mr Zhu Huan, Deputy Director of the Economic Development Committee at SIP.
"There are three main sources for the emergence of HQs at SIP: holding companies set up by manufacturers; functional offices added on top of the manufacturing component; and high-tech companies that reach a certain height in terms of capital or valuation," he explains. "All of these came about through organic growth, and not just our efforts to attract HQs externally."
The flourishing of HQs is a win-win for firms and authorities, as the HQ economy contributes around seven times more tax revenue per square meter of space compared to average industry.
Setting the scene for an HQ ecosystem
Mr Zhu points to the balanced development environment of SIP as being one of its key draws to companies and their HQ operations.
Mr. Yu Zhongyuan, Deputy Director-Chief, Promotional Department, SIP Enterprise Headquarters Base, agrees. "Suzhou stands out for its outstanding advantage in the unique combination of a robust economy and a relatively slower pace of life - compared to its metropolitan neighbor Shanghai - which serves as an attraction to many."
Other major draws, he says, include SIP's world-renowned brand equity, its efficiency, and the high quality of urban facilities.
However, while stressing that Suzhou is not in direct competition with Shanghai and Beijing, Mr Zhu notes that there is still value in differentiating SIP.
"What sets us apart is the manufacturing foundation that has been built up. Companies who like their HQs to be close to their manufacturing bases tend to pay more attention to us," he says. "We also devote a lot of effort to creating an environment that is attractive to elite talent, is pro-business, and has a high level of livability. A city is a place where human beings gather, so our first step is to make the city itself more appealing.”
“We want to pave a more unique path for Suzhou that sees its HQ economy develop an identity that differs from Shanghai and Beijing," he adds.
Managing the wider issues
Of course, with the emergence of the HQ economy, there have been accusations regarding their efficiency. For example, some claim that in a number of instances, such HQs are operated at relatively "lower energy" levels, or fail to fully function as the brain for MNCs. Meanwhile, there are more China-specific issues, such as problems related to the nation's foreign exchange controls.
"From one angle, it’s fair to say that if an MNC is serious enough about the China market, such problems can be avoided," notes Mr Zhu. "Admittedly there are policy issues, for example, with RMB convertibility. China is still on the road to getting globalized. However, MNC HQs are much more active and successful than 10-to-20 years ago. So in the future, these types of problems should diminish as well."
Mr Zhu also points towards the new prioritized direction of setting up free trade ports, evolving from free trade zones, as examples of the unchangeable trend for restrictions and regulations that exist now to eventually be suspended.
China Europe International Business School (CEIBS) established the HQ of its alumni association at SIP in 2017. Mr Jay Ding, Secretary-General, CEIBS Alumni Association, says SIP stood out due to its highly globalized talent and organizational resources.
"It was a great fit, as many CEIBS alumni are executives in MNCs," says Mr Ding. "Also, the high concentration of world famous MNC HQs at SIP makes for a great base for our future course, seminar and event clients and partners."
Mr Ding also highlights SIP's highly-efficient government administration, fully-developed urban structure, and proximity to its main campus in Shanghai as advantages.
Another HQ tenant is ARTS Group, the first company in China's architectural design sector to go public in 2014. The group's interests span city planning and landscape design, engineering design, engineering supervision and management, and EPC.
Xu Haiying, Deputy General Manager of ARTS Group, notes, “We benefit a lot from SIP’s incentive policies and support system regarding the HQ initiatives. This gives us much valued confidence and resources, as a homegrown company in Suzhou, in expanding our footprint across China and beyond.”