5 Chemical Industry Parks in China

Gunter Festel: Festel Capital, Huenenberg, Switzerland;

Yong Geng: Dalian University of Technology, Dalian City, P.R. China

Many investments, especially by foreign companies, are located in chemical in-

dustry parks. This chapter characterizes chemical industry parks in China, dis-
cusses the main site selection criteria and important aspects for foreign investors,
and provides profiles of selected chemical industry parks.

5.1 Industrial Parks and Their Infrastructures

In late 1984, the Chinese government approved the first batch of development
zones in 14 coastal cities to provide preferential policies for foreign investors who
inject capital into these areas. Since then there has been widespread establish-
ment of larger and smaller industrial zones or high-tech parks. Through indus-
trial parks, firms benefit from economies of scale in terms of land development,
construction, common facilities and infrastructure. The industrial zone's impor-
tance can be distinguished by its backing, being either a development zone at
state level (backed by central government), provincial/municipal level or lo-
cal/town level. It may even be a privately funded development. Today, according
to incomplete statistics from the Ministry of Land and Resources, there are 6,866
development zones across the country (China Daily, August 24, 2004).
Industrial parks have played an important role in the national development
strategies of many countries and have been irreplaceable where economic devel-
opment is concerned (Yang 2001). In China, such parks have become important
showcases and bases for development of an export-oriented economy in the re-
gions. They are the most active areas for foreign investment and serve as bases
for parent cities to readjust their industrial structures and renovate old enter-
prises, as well as providing places where Chinese methods of enterprise man-
agement can adapt to the international management standards (Geng/Côté 2003).
Generally, an industrial park is land reserved by a municipal authority for in-
dustrial development. It usually includes an administrative authority, making
provisions for management, enforcing restrictions on tenants and detailed plan-
ning with respect to lot sizes, access and facilities. Furthermore, in some coun-
tries like China and Thailand, industrial estates have a dual function as produc-
tion and residential areas. This is different from the North American model in
which estates are predominantly manufacturing-based (Geng/Côté 2001;
Geng/Côté 2003). Generally, a typical Chinese industrial estate has an industrial
54 Gunter Festel and Yong Geng

production area, a scientific research area, a residential area, and a business and
service area. Some typical characteristics are as follows:
• Independent: Industrial estates are separated from their parent cities and
equipped with the necessary support infrastructure.
• Comprehensive: Industrial estates have been designed for a variety of purposes
and for different categories of industry.
• Superior: Industrial estates enjoy better infrastructure and investment condi-
tions due to better planning and support.
• Intensive: Their activities are typically intensive in terms of capital, revenue
and technology.
• Concentrated: Industrial estates are concentrated in the eastern coastal areas
and in medium to large cities, usually on the periphery of cities and in subur-
ban areas (Yang 2001). For instance, there are some 100 such industrial parks
in Shanghai Municipality alone. In Zhejiang Province, neighboring Shanghai,
authorities have so far approved more than 800 industrial parks, although only
200 are already operational.
For foreign investors, there are certain advantages to investing in chemical parks
as opposed to establishing their own chemical sites. These include:
1. Reduced costs and risks: Costs are always the biggest concern for foreign in-
vestors. With the increasing price of land and construction, it will cost a lot of
money for foreign investors to rent a site and build the necessary infrastruc-
ture. This is especially obvious in Chinese coastal areas, where the increasing
costs of land rental and construction have discouraged foreign investors. How-
ever, by investing in existing chemical parks, foreign investors can reduce
such expenses and use their funds for other purposes. This is because most of
the existing chemical parks have been equipped with the necessary infrastruc-
ture to state-of-the-art specifications. In particular, some parks have developed
their own emergency response systems which is a key factor allowing investors
to reduce their operating risks.
2. Reduced culture barriers: Once a company invests in a foreign country, it
somehow has to deal with cultural barriers such as language, communication
habits and even ways of thinking. If an investor decides to develop his own
chemical site, this means finding an appropriate way to overcome these cul-
tural barriers in dealing with local governments, communities and other stake-
holders. However, if an investor locates in an existing chemical park, these
problems can be avoided by consulting with park management which is
usually from the local area and knows the local culture.
3. Accessible resources: An existing chemical park usually has good access to
the necessary resources (energy and water supply, logistics services, etc) for
chemical manufacturing. Park management also has good access to human re-
sources since they usually have a suitable database and know how to best re-
cruit the qualified personnel locally.