China established its Western Development Program, or better known as the “Go West” strategy. The idea behind this program is to develop an economic base inland similar to manufacturing and services based in Shanghai, Guangdong and other coastal cities.
In response to economic incentives and labor supply Intel, built an assembly and test center in Chengdu. More recently, the company has shut down its Shanghai assembly and test facilities and moved all of its operations to the Chengdu plant. Another electronics manufacturer, Foxconn, has added manufacturing facilities in this region, Chongqing. With Foxconn’s move, it brought along its customers such as HP and Cisco to the area.
I traveled to the the city of Chengdu in July of this year. I am surrounded by on-going construction of high-rise office buildings, apartment units, hotel and conference halls, all going up at the same time. Satellite towns, as it is called, are sprouting up surrounding the older city center.
The resulting development outcome has impact on the overall economy. Government services, social services, city infrastructure all must improve to meet the overall economic growth. In the article, Has China Lived Up to Its “Go West” Strategy?, in Supply and Demand Chain Executive, the author cited the Chongqing government improving it’s airport system with longer runways with capabilities for cargo, volume increased by ten-fold in one year.
Top social priorities for second tier regions, such as Southwest China, include housing, female education, salary demand, and jobs. Reportedly, income levels is 60% that of major cities (or about one-third less costly then in top tier cities such as Beijing, Shanghai and Guangzhou). Housing costs is two-thirds less costly than compared to top tier cities.
The above figures were reported by a business development team from the Tianfu Software Park, located in Chengdu. They were in Beijing recently promoting the business opportunities in Chengdu. A good number of multinational and local companies have made their presence at the location. Amazon houses its operations center at the software park and also is the headquarter of it’s China customer support center. SAP and IBM also have significant presence.
Human Resources Implications
The Tianfu business development representations duly cautioned that senior level human resources are still lacking. There isn’t a sufficiently large pool of resources to tap from and thus, companies setting up in the region are still required to “import” senior talent. However, entry to mid-level talent are relatively easier to hire. Companies can tap into surrounding cities to relocate staff. The business park representatives also cautioned new companies entering the market from poaching from competitors. The technology park management will set up meetings with competing company CEOs to meet and agree on orderly process to hire from competitor companies.
There is a strong supply of entry-level talent. The regional has a number of top technical and engineering universities. I looked at technical majors.
- Xidian University
- Xi’an Jiaotong University
- Northwestern Polytechnical University
- University of Electronic Science and Technology
- Southwest Jiaotong University
- Sichuan University
On a Global Stage
The Southwest region continues to make strong economic development progress. Chengdu is now competing with Tier 1 cities of Beijing and Shanghai for its share of international conferences. Earlier this year, Technode, a leading blog on technology start-ups and internet in China, hosted a technology tour in 5 cities and a stop included Chengdu. This next year, Fortune’s Global Forum 2013 will be hosted in Chengdu and present will be CEOs of the Fortune Global 500 companies, along with the most important leaders from China. This region is establishing itself front and center in technology and progress.