opportunities in 2 nd and 3 rd tier cities netherland business support offices bas ovetooom chief...

Opportunities in2nd and 3rd tier Cities

Netherland Business Support Offices

Bas OvetooomChief Representative of the

NBSO in Dalian

May, 2014

Living in the city

2

The Economist 26 April 2014

Source: Economist Intelligent Unit

Upcomings regions

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WHY – 2nd TIER

- Focus of Urbanization - Lower costs

- Less competition- Different needs- Fastest growth

Pos Province Avg. GDP growth (08-12)

1 Shaanxi 14.59%2 Chongqing 14.52%3 Hubei 14.45%4 Ningxia 14.23%5 Anhui 14.23%6 Guizhou 13.98%7 Tianjin 13.92%8 Hunan 13.90%9 Hainan 13.70%10 Sichuan 13.63%11 Inner Mongolia 13.33%13 Jilin 13.19%16 Fujian 12.73%17 Liaoning 12.70%22 Jiangsu 11.78%27 Shandong 10.09%28 Zhejiang 10.06%29 Beijing 9.97%30 Guangdong 9.17%31 Shanghai 7.48%

National average 11.58%

Source: National Bureau of Statistics of China Source: Economist Intelligent Unit

China’s new ‘hubs’

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*Logistic hubs* Knowledge hubs* Retail hubs (middle-class)

* Different timing / stages of development* Overall challenges: Transportation, Education,Pollution & Healthcare

Source: Economist Intelligent Unit

Pro’s and Con’s – 2nd tier vs 1st tier

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Advantages

• “Chinese” investment environment• Even small/medium company receives attention• Lower salaries• Less restrictions on production/manufacturing projects• Lower costs for purchase and rent of land and buildings• Less competition

Disadvantages

• “Chinese” investment environment• Less “foreign-investment friendly” • Less established administration• Less knowledge of law and complex transactions• Higher risk of corruption• Lower qualification of staff• Less legal certainty• Living environment expats

Pro’s and Con’s – 2nd tier vs 1st tier

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Advantages

• “Chinese” investment environment• Even small/medium company receives attention• Lower salaries• Less restrictions on production/manufacturing projects• Lower costs for purchase and rent of land and buildings• Less competition

Disadvantages

• “Chinese” investment environment• Less “foreign-investment friendly” • Less established administration• Less knowledge of law and complex transactions• Higher risk of corruption• Lower qualification of staff• Less legal certainty• Living environment expats

WHERE IS YOUR MARKET

China – Netherlands Business Support Offices

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NBSOs- Hands-on support in new areas- Part of Embassy network- Local government contacts- Local business network- Market knowledge- Language & culture expertise

Location NBSOs in China- Chengdu, Sichuan (8th pos GDP)- Dalian, Liaoning (7th pos GDP)- Jinan, Shandong (3rd pos GDP)- Nanjing, Jiangsu (2nd pos GDP)- Qingdao, Shandong (3rd pos GDP)- Wuhan, Hubei (9th pos GDP)

Liaoning – the North East

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The old industrial baseRevitalization of the North-East program (2003)

Sectors• Equipment manufacturing / heavy industry• Shipping building• Mining• IT Outsourcing• Agri-food • Luxury market (Shenyang & Dalian)• Automotive• Petro-chemical

Current developments• High-speed train• Airport developments• 5 points-one-line program• Shenyang bigger metropolitan area

Heilongjiang

Jilin

Liaoning

Dalian

Shenyang

Changchun

Harbin

400km

300km

250kmPopulation: 27 m

GDP : Eur 138b

Population: 38 mGDP : Eur 158b

Population: 44 mGDP : Eur 287b

Manufacturing – new trends in this sector

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- Focus on development High tech- Up the value chain - Environmental issues start to play a stronger

role- Strong increase labor costs

- Growing automation in manufacturing processes - More focus on the domestic market

- More international collaborations- Collaboration/ownership European R&D

- ‘Branding’ is becoming more important (slowly)

China PMI 2012-2014

Source: Economist Intelligent Unit Source: Markit Economics