European companies must get adapted to the change of growth model in China by following their customers to the hinterland of the country, particularly Sichuan and Chongqing, where the most potential of growth can be found and exploited.
"Sichuan is not an earthquake area. Sichuan is an investment area," said Joerg Wuttke, President of the European Chamber of Commerce in China, in the interview with People's Daily Online on Nov. 6 in Beijing.
He believes that Sichuan, as well as Chongqing, will be the best choice for European companies seeking for new opportunities to support their business amid the global financial crisis and China's industrial restructuring. When referring to "Sichuan", he always means both Sichuan and Chongqing municipality which was a part of Sichuan before 1997.
At the end of last month, the European Chamber of Commerce co-sponsored with the Sichuan provincial government a conference in Chengdu, the capital of Sichuan, in a bid to encourage more European investment there. It was attended by senior European and Chinese officials and more than a hundred European investors.
The message is clear: Sichuan is still a place of "stability and progress". The feeling of shock can still be felt even among people in Chengdu even though it was not physically damaged much by the strong quake. There are 60 Chamber members in Chengdu. Most of them were not hit hard by the quake. A French company in Dujiangyan has been damaged a lot and lost one or two lives.
The confidence of the Chamber members is intact. "They say it is a great place to live. It is a great place to invest," said Mr. Wuttke, "Japan has far more earthquakes and some are very severe, but it is still one of the highest industrialized countries in the world". That proves you can be safe and developed at the same time.
The Chamber established the Chengdu office two years ago. Mr. Wuttke has been there for many times, "It always strikes me as a great place to invest."
Geographically, Sichuan has some problems in logistics of export-oriented big items like refrigerators. But it is ideal for "brain-related" projects with its abundant pool of talented people. That is particularly important for hi-tech intensive European companies.
Ubi Soft Entertainment, a multi-billion French video game producer, has found that Chengdu is the only place outside Shanghai to have both IT engineers and artistic talents which are needed by their creative products. Pascal Hermandesse, Chairman of the Chengdu Chamber, is CEO of Atexis Chengdu, a French SME. Both companies are very convinced about the prospect of their business.
Mr. Wuttke's own company, BASF, a Germany-based world's leading chemical company, has big investments of 4 billion USD in a chemical park in Chongqing. The plant under construction is next to the Sinopec-BP project which is the most successful joint venture in chemical industry in China.
People also mean the market. Mr. Wuttke said that the area has a population as large as that of Germany and north Europe as a total. "That is a big market in itself".
Also thanks to its geographical position, Sichuan will be one of the last to be hit by the financial crisis originated from the Wall Street. But its property market, automobile industry have already felt the chill.
Mr. Wuttke is confident that China can weather the financial storm better with its small debt and massive fiscal surplus. Unlike many other market observers, he is not concerned about the impact of China's downward exports on its economy. He thinks the contribution from exports is much less than that from the domestic demand in China's economy.
And that domestic demand for European companies in China is also moving to Sichuan. Labor-intensive manufacturers are motivated to go west to take the advantage of low labor costs there. Then their demand for chemical, machinery, logistics also shifted with their bricks and motors. That means new opportunities for European companies.
Mr. Wuttke urged his Chamber members to be aware and take the advantage of that change. That change, he believes, reflects the similar process of economic development which Europe has experienced. The growth model in China's coastal areas --- particularly Guangdong --- the major manufacturing bases in China, is changing. The highest growth will not be seen in those places, but in Sichuan in the near future.
As an agriculture intensive place, Sichuan is still less developed than costal areas. "Many see it as a disadvantage, I see it as an advantage", said Mr. Wuttke, firmly convinced that there would be "far more potential to grow" in Sichuan.
The only problem of investing there, Mr. Wuttke thinks, is that local governments are sometimes so "overeager" to attract foreign investment that they are "over-promising" --- promising everything without knowing how difficult it probably will be to honor that promise. That is partly caused by cultural difference, although language is not a problem as it is easy to find translators.
When local officials say "no problem" in talks and negotiations, the connotation may be "Take it easy. Let's talk about it later". But their foreign guests will take it as a promise. Wuttke understands that as he has been living in China for many years. But many of his German fellows don't. Then frustrations arise when Chinese officials are shocked by their angry German guests who were so friendly at the beginning.
So Mr. Wuttke hopes that local officials be "more realistic and candid", "That will not scare foreign investors off. Instead, it will make them feel more comfortable."
Anyhow, Sichuan still has to catch up with their coastal peers like Shanghai which has 30 years of dealing with foreign investment. But "Sichuan will be winner of many foreign investments" while those coastal areas have to find a different model of growth to adapt to the change.
"If you close your eyes and pretend it (the economic change) will not happen, you will lose," said Mr. Wuttke.
By People's Daily Online
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