Overseas firms flock to Chengdu

Multinational companies drawn by its 'can do' spirit, innovative capacity

In December 2012, pharmaceutical company Roche Holding AG unveiled its regional headquarters: West China Management Center in Chengdu, its first full-function regional headquarters, to boost its presence and sales in the west.

Western China contributes about 11 percent of Roche's sales in China. The company expects that to grow much more quickly than developed regions in the country, said Luke Miels, regional head of Roche Pharmaceuticals Asia-Pacific.

Roche is seeking to seize the initiative amid a general shortage of medical services and relatively low accessibility to innovative drugs in the western region. It has also joined up with local hospitals and medical institutions to help raise their laboratory testing techniques.

Roche is not alone. Dozens of multinational companies, including IBM and Siemens, have also set up regional offices or moved research and development centers to Chengdu. Chengdu is now home to more than 230 other Fortune Global 500 companies.

The city in June will host the prestigious Global Fortune Forum, which will see several Fortune Global 500 firms and their top brass, along with State and industry leaders.

The word "Chengdu" has often proved to be a tough nut to crack for those who are not too comfortable with speaking Chinese - so much so that Chengdu often ends up being pronounced as "can do". But that is exactly the attitude the city has adopted in the past few years.

It is the steadily increasing foreign direct investment from multinational companies that has propelled the lesser-known Chinese city into the big leagues. It is currently the only inland Chinese city that appears in the 2011 and 2012 Annual Top 10 Best Foreign Investment Strategy Cities in Asia and the Pacific Region lists from FDi - a magazine owned by the UK-based Financial Times.

Industry experts say that Chengdu's success can be best summed up in three words - "China's New Future".

The real success of Chengdu, however, can be measured in the vast range of high-tech industries that have bases there. Companies in sectors as diverse as IT, new energy, new materials, bio-pharmaceuticals, aviation and aerospace, automobile, equipment manufacturing and petrochemicals are in Chengdu.

For example, Chengdu is growing to be an automobile production hub in China. But the industry barely took off until a decade ago.

In 2011, FAW-Volkswagen Automotive (Chengdu) Co produced 59,888 vehicles, generating 438.13 million yuan ($71.4 million) in revenue. The revenue is expected to reach 44 billion yuan in 2015. In October 2012, the company set up a factory to make vehicle engines. The arrival of FAW-Volkswagen was like a magnet for car-parts suppliers and later a drawing card for global rivals like Toyota Motor Corp and AB Volvo, who have set up operations in Chengdu.

Longquanyi District - covering 556 square km and 13 km east of downtown Chengdu and 28 km from Shuangliu International Airport - has attracted more than 500 major industrial projects involving nearly 140 companies from the United States, Germany, France, Canada, Japan and other countries. City officials are proud to note that investors include 41 Fortune Global 500 companies.

Karl-Thomas Neuman, president and CEO of Volkswagen China, has predicted that the southwestern city will become a Chinese version of Germany's Wolfsburg, the home of the VW empire.

But why is Chengdu so attractive? The city's efforts on intellectual-property creation and protection are certainly part of the equation.

The capital of Sichuan is also known as the country's model city for IP creation.

It launched a "Week IP Protection" between April 19 to 26, the World Intellectual Property Day, aiming at further raising IP protection awareness across the city.

Chengdu filed 48,901 patent applications, with more than 32,500 of them approved in 2012, according to official figures.

The total number of invention patent filings was 10,886, up by 46 percent. A total of 26,008 patents came from companies, an increase of 48 percent over 2011.

More than 110,000 trademarks were registered in Chengdu in 2012.

The significant IP achievements have helped the city enhance its capacity for innovation that boosts growth in the local economy.

A story in the newspaper alliance European News Agencies said Chengdu has "the lowest investment risks as well as the best IP protection across the country".

The writer also called on European companies to seize the opportunity to locate their projects in the city for faster growth.

During the past 13 years, Chengdu has been at the forefront of western development in China, and its average annual economic growth rate is the best among all 12 provincial capital cities in central and western areas.

Chengdu's GDP last year reached 813.89 billion yuan, making the inland city the third-largest economy among China's all 15 deputy provincial level cities.

The city's total trade volume with foreign countries reached $47.54 billion in 2012, up 25.5 percent compared with the year before.

Per capita disposable income rose 13.6 percent to 27,194 yuan, greatly outpacing inflation, which was 3 percent last year, according to official figures.