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Chongqing faces three major challenges as overseas investment heating up

CHONGQING
2016-06-03 09:06

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An inland highland for opening up to the outside world has in recent years basically taken shape in southwest China's Chongqing Municipality as the municipality has made efforts to get involved in the Belt and Road Initiative and the Yangtze River Economic Belt, open up toward the east and the west domestically and accelerate the building of a new open economic system.

This has provided good conditions for overseas investors in Chongqing and even the whole of southwest China area, boosting their confidence in Chongqing. Despite all these, the municipality still faces three major knotty problems that cannot be ignored: investment conditions that lag far behind the eastern coastal areas, the fierce competition from neighboring provinces and the high logistics cost.

Optimized investment environment

Chongqing has seen optimized investment environment in recent years. First, an inland open platform has taken shape. The municipality boasts three major air, rail and Yangtze waterway communications hubs, three state open ports and three bonded areas. It is accelerating the open platform spearheaded by the Liangjiang New Area.

Second, the outgoing passage has been improving, with the Chongqing-Xinjiang-Europe railway serving as a main passage for trade with Europe and an important supporter of the Silk Road Economic Belt. The Jiangbei airport boasts a throughput capacity of 30 million passengers; the waterway container throughput capacity has broken the one-million-TEU mark. The railway, road, waterway and air communications network has been improving. A national class Internet backbone node has been opened.

Third, the level of customs declaration facilitation has been greatly upgraded, realizing all-in-one card for customs of all countries along the international through train of the Chongqing-Xinjiang-Europe railway. The municipality has become part of the national and regional integrated customs declaration and the integrated inspection and quarantine service and established regional customs cooperation mechanism.

Fourth, export-oriented industrial clusters are taking shape at an accelerated pace. An inland processing trade system has taken shape.

Fifth, the general climate for opening up has been further optimized. This includes "one-stop" service, "on-record" management, holding of trade fairs, annual meeting of mayor's advisory group, Chongqing-Taiwan Week and other economic and trading activities, 10 foreign consulates and more than 40 international air routes.

Sixth, the vehicles for foreign exchange and cooperation have been enriched. This includes the successful visit by French President Francois Hollande, economic and trade cooperation with 16 central and eastern European countries, the economic and trade cooperation with countries along the Belt and Road, the opening of the Vietnam trade promotion office in Chongqing, and the two new direct air routes to Rome and Kuala Lumpur.

Rising Enthusiasm of overseas investors in Chongqing

Data from the Chongqing Municipal Economic and Trade Commission show that the amount of overseas investment actually used in Chongqing has stayed at 10 billion U.S. dollars for 5 years running, with 260 of the world's top 500 settling in Chongqing. The foreign trade has grown by more than five-fold, advancing its national ranking from 23rd to 10th to become No. 1 in the central and western areas. Its service trade has grown by nearly four-fold. The amount of overseas investment actually used has increased by 1.4 times. In the first quarter of this year, 158 foreign capital enterprises were set up in Chongqing, with total investment increasing by 2.118 billion U.S. dollars and the registered capital reaching 1.357 billion U.S. dollars, including 856 million paid in by overseas inventors. In the first quarter of this year, the sources of overseas investment assumed the following features: overseas investors mainly came from Asia, including Hong Kong, the Republic of Korea and Japan, with the number of new entities accounting for 69.6 percent; the overseas investment was concentrated in wholesale, retail sales, leasing, commercial service and manufacturing, accounting for 65.2 percent; overseas investment was concentrated in the city proper, with the Liangjiang New Area ranking first in terms of the number of new enterprises set up and the amount of registered capital; agricultural became a new hot spot for investment, with four new enterprises and 349 million in registered capital, accounting for 25.7 percent of the increased investment in the whole city.

Three main challenges

The challenges to Chongqing as a municipality directly under the central government in attracting overseas capital mainly manifest themselves in the following aspects:

Firstly, it still has a large gap to bridge with the eastern coastal areas in terms of investment environment. The infrastructure is yet to be improved; local laws and regulations are yet to be optimized; preferential policies remain to be put in place; the financing channels for enterprises are not varied; the capital market is in urgent need of improvement; the government lacks transparency and the service level needs to be raised.

Secondly, it faces fierce competition from other places in the central and western parts of the country. All the provinces in these parts of the country are vying with one another to offer preferential policies to attract overseas investors, posing grave challenges to Chongqing. Sichuan province, in particular, boasts greater advantages than Chongqing in terms of scientific research, technology and personnel reserve and enjoys much better environment and industrial foundation. Thirdly, it has high logistics cost. Situated deep in the inland, Chongqing has the nearest outlet to the sea 2,200 kilometers away. Such the long haul by either waterway, road or rail will entail high transport charges. Take Shanghai port as a destination, the cost is more than 3,000 yuan per TEU container by waterway, more than 10,000 yuan by road and more than 5,000 yuan by rail, 20 percent, 100 percent and 50 percent respectively higher than the city of Wuhan in the middle reaches of the Yangtze River. The high logistic cost is the tender spot of Chongqing in attracting overseas capital. But with the building of the Belt and Road, the transport costs between Chongqing and coastal areas may be narrowed and Chongqing will enjoy more conveniences in terms of air transport to Southeast Asia and Europe.

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