Doing Business in Suzhou

Suzhou is the largest economy in the Jiangsu Province , accounting for 19.6% of the province's total GDP.  

"Southern Jiangsu Economic Model" has been used to describe the development of three municipalities in Jiangsu ?Suzhou , Wuxi and Changzhou .  The model generally referred to the economic development in the 70s and 80s with the growth of township enterprises and collective enterprises.  However, the model has already been changed and Suzhou has evolved to become an externally oriented economy.  Nowadays, foreign investment and international trade are playing an important role in Suzhou 's economy.  For example, exports equalled to 73% of Suzhou 's GDP (61% in 1997) while FIEs accounted for 82% of the city's exports in 2002 (68% in 1997).  

Suzhou is now embarking upon two major strategic directions:  to build the city as the ”leading destination of FDI? and the “base for new and high-tech industries.?

In the first half of 2003, the city's GDP grew remarkably by 17.5% while gross industrial output increased by 34.8% in Jan-Jul 2003.

Economic Structure
Suzhou has made remarkable achievement in enterprise reform.  Among the gross industrial output of enterprises of designated size (annual sales above RMB 5 million), the share of state-owned enterprises and collective-owned enterprises dropped from 59.5% in 1997 to 9.4% in 2002.  The share of foreign invested companies (FIEs) increased from 33.2% in 1997 to 55.8% in 2002.  Private companies accounted for 11.1% in 2002 and share stock companies accounted for 23.6%, up from 1.7% in 1997.

Foreign invested enterprises are now one of the major forces of Suzhou 's industrial output.  In 2002, the gross industrial output of FIEs above designated size reached RMB193.3 billion, representing an increase of 260% from 1997, or an average growth at 29.2% per annum from 1997 to 2002.  These are impressive growth rates comparing to gross industrial output of Suzhou at 114% from 1997 to 2002 with an average yearly growth at 16.4%.  The rapid growth of FIEs has pushed the city's industrial development.

The Development of Private Economy
Private enterprises are gaining importance in Suzhou 's economy.  Fixed assets investment by private and sole proprietor companies reached RMB23.5 billion in 2002, increased by 70.1% and accounted for 28.9% of Suzhou 's total fixed assets investment in 2002, compared to 24.5% from 2001.  

In 2002, exports by private enterprises, though only accounted for 1.5% of total exports, surged by 282.7% to US$286 million.

  No. of Private Companies  As % share of Jiangsu  No. of Self-employed individuals As % Share of Jiangsu  
2000 29,914 17.2 148,740 9.9
2001 42,600 18.9 168,900 10.5
2002 59,199 20.7 188,778 10.0
Source: Suzhou Statistical Yearbook, 2001, 2003  


Private companies are mainly engaged in manufacturing sector (about 60%) while the majority of self-employed individuals is in wholesale and retail trade and catering business (about 70%).

Suzhou enterprises are active and receptive to listing.  By end-2002, there were about 30 enterprises waiting to be listed in the stock market.  Currently, there are eight Suzhou companies listed in the stock markets, including one on the Growth Enterprise Market of Hong Kong Stock Exchange.

Industry Structure
Suzhou has the largest gross industrial output in Jiangsu province, accounting for about 25% of the province's total industrial output.  The service sector is also increasing in its relative share in the GDP in recent years.  Financial services are developing fast, in particular, the insurance sector.  In 2002, the total premium income of the insurance sector reached RMB4.7 billion (up 59% from 2001), moved to the top in Jiangsu province from the third position.

The industrial base of Suzhou is rather board, producing a wide range of products both in heavy and light industries.  The ratio of heavy to light industries was 55 to 45 in 2002.  

Composition of GDP (%)
  1990 1995 2002
Primary 17.3 8.9 4.4
Secondary 61.0 60.2 58.2
Tertiary 21.7 30.7 37.4
Source: Suzhou Statistical Yearbook, 2002, 2003  

Although some traditional industries, such as textiles, are still playing an important role, Suzhou is transforming its industrial base from traditional industries to more high tech industries.  Electronics, IT, electrical machinery, bio-technology and medicine, chemicals and household electrical appliances have now become the six pillar industries of Suzhou.

Major Industrail Output  
  2002(RMB bn) % share of tatal  
Electronic & telecommunicationsequipment 72.0 20.8
Textile 39.8 11.5
Electrical equipment & machinery  25.6 7.4
Chemical materials  22.9 6.6
Ferrous metal products  22.9 6.6
Ordinary machinery  15.2 4.4
Garments 14.3 4.1
Non-metal mineral products  13.5 3.9
Source: Suzhou Statistical Yearbook, 2003  


Over the years in the 90s, Suzhou has adjusted its development strategy, leveraging on its state level  development zones ( Suzhou Industrial Park , Suzhou Hi-tech Development Zone,   Kunshan Hi-tech Development Zone, Zhangjiagang Bonded Zone, Taihu State Tourist & Resort Development Zone) to attract a large amount of foreign investment and speed up the development of an externally oriented economy.  Nowadays, within the driving distance of one hour between Suzhou Industrial Park and Shanghai, there is already a cluster of leading IT parts and components producers (such as TSMC, UMC, Macronix, Foxconn, GSMC, Samsung , Hitachi, Phillips) forming the so called "silicon corridor ?  

The gross industrial output of new and high-tech products reached RMB154 billion, accounted for 30.3% of the gross industrial output in 2002, up from 19.5% in 1997.  Suzhou 's output of new and high-tech products nearly accounted for 40% of that of Jiangsu province in 2002. Exports of these products reached US$8.6 billion, up 81%, accounted for 46.2% of Suzhou 's total exports in 2002.

Suzhou has also built a number of renowned brands in consumer goods, such as Goodbaby   (children's bicycle), Bosideng (garment), Chunhua (electrical appliance) and Menglan (bedding).

Suzhou is a famous tourist destination and it accounted for 26.5% of Jiangsu 's total foreign exchange income generated from tourism in 2002.

  2001 2002 % change  
Number of domestic tourist (million) 16.7  20.1 20.2
Income generated (RMB bn)  17.1 19.8 15.6
Number of international tourist (million)  7.8 8.9 14.5
Foreign exchange income (US$ mn)  234 278 18.8
Source: Suzhou Statistical Yearbook, 2003        

Domestic Market

In 2002, the total retail sales value increased by 15.3% to reach RMB45.2 billion. Sales of certain items are showing remarkable growth.  For retail enterprises above designated size, sales of construction and decoration items increased more than 3 times, sales of automobiles grew by 126.4%, furniture up 88.4% and telecommunications equipment up 75.8%.   In the first seven months of 2003, retail sales continued to grow by 15.2% despite the SARS epidemic.

The rapid growth in sales of furniture and decoration items can partly be attributed to the robust housing sector.  In 2002, capital investment in real estate development grew by 56.4% and sales value of commercial housing increased by 30.8%.  By end-2002, the number of mobile phone users reached 2.66 million, an increase of 38.3%, representing a penetration rate of 45.5% of the population.  The popularity of mobile phone and innovative design of new models have contributed to the rapid growth of sales of telecommunications equipment.

Suzhou is also a trading and distribution centre having over 800 commodity markets for both consumer goods and industrial goods.

Exports

Suzhou is the largest export base of the Jiangsu province and the percentage share has continued to increase in recent years, partly reflecting the healthy industrial development and rising external orientation of Suzhou .  In 2002, Suzhou accounted for 48% of Jiangsu province's total exports, compared to 41% in 2000.   In the first seven months of 2003, exports of Suzhou surged by 64%.

Suzhou is exporting to more than 140 countries or economies.  The US is the leading export market which accounted for 25.2% of Suzhou 's exports in 2002.  Other major markets include the EU (19.7%), Japan (18.2%), Hong Kong (8.1%) and ASEAN (8.6%).

Machinery, electronic products and related parts & components accounted for 59% of Suzhou 's exports in 2002.  Other leading export items include textiles (16%), optical and medical instruments (4.7%), base metal products (3.3%) and chemical products (2.9%).

It was reported that the top ten exporters in 2002 already accounted for nearly 30% of the total exports.  These top ten companies are all foreign-invested companies and they are all in electronics and/or telecommunications high-tech industries.

Foreign Direct Investment

Currently, there are over 5,500 foreign enterprises operating in Suzhou . Up to 2002, the cumulative utilised FDI reached US$28.2 billion, accounting for 25% of the Jiangsu province's total.  Over the last few years, inflows of FDI have been growing rapidly as reflected by the fact that cumulative utilised FDI surged by 140% comparing 2002 to the level in 1997.  Investments in the industrial sector accounted for 83% of the cumulative contracted FDI.  In Jan-Jul 2003, utilised foreign investment increased by 68.9%.

Currently, among the world's top 500 multinational companies, 85 of them already have presence in Suzhou , and more than 30 have set up R&D centres in Suzhou .

There are 5 state level economic development zones and 11 provincial level development zones in Suzhou . In 2002, these development zones have accounted for 64.9% and 74.3% respectively of the city's total contracted and utilised foreign investment. For example,   Suzhou Industrial Park has been successful in attr