Forming overseas industrial clusters

At the beginning of 2008, the State Council issued Reply to Opinions on Approving the Building of Overseas Economic and Trade Cooperation Zones, which encouraged the building of comprehensive overseas economic and trade cooperation zones, established the principle of “government-guided, enterprise-centered and market-oriented operation”, and explored and practiced the development modes of cooperation zones. It has created a new way of foreign investment and cooperation, and explored and established a relatively mature model. Industrial parks are regarded as an important driving force for China’s rapid economic growth since the reform and opening up. It is seen as an important feature of the “China model". As the pace of China’s going global campaign accelerates, China began exporting its experience in building industrial parks, building up its influence and impact. Due to the successful examples of development zones in China and the positive impact of cooperation zones abroad in recent years, there has been a growing attention among relevant countries on the development of cooperation zones. In recent years, more than 60 countries have proposed cooperation zones with China. Through in-depth cooperation with the host countries in the fields of economy, politics, society and culture, the development zone model has been recognized by the host governments and the public. It has become an important channel for China to export its soft power, such as development modes, management concepts, culture and values and a perfect example of China’s going global campaign.

Industrial parks, overseas economic and trade zones, special economic zones and other industrial clusters arc important platforms for enterprises to go global in groups, and a significant means for China to promote international capacity cooperation. It is necessary to support Chinese enterprises to build industrial clusters on the basis of commercial operations and in line with local conditions, and facilitate the going global of domestic enterprises in groups. On the basis of existing industrial clusters, we will guide well-prepared capacity cooperation projects to further settle in overseas industrial clusters, strive to sign agreements for a number of new industrial clusters, and support Chinese enterprises to participate in bidding for overseas special economic zone development.

Mode and significance of industrial park cooperation and co-construction

The co-construction of industrial parks refers to the comprehensive cooperation in the construction and management of the park, the transfer and acceptance of industries, and the sharing of information and brand, etc. among the main bodies belonging to different areas (generally areas with a gap in economic development) during the construction of the development park. It is a regional economic cooperation mode realized through the cooperation in planning, construction, management and tax distribution, and aims at complementing resources and achieving a win-win outcome and coordinated development. In terms of international cooperation, Singapore Suzhou Industrial Park is a perfect example of co-construction for China and Singapore. The Sichuan government is working with Singapore to build the Singapore-Sichuan High-Tech Innovation Park. Under the impetus of the BRI, substantial progress has also been made in the construction of industrial cooperation zones in the core BRI cities. The numerous economic and industrial cooperation projects China is now building in BRI countries and regions can create hundreds of thousands of job opportunities for local people. The China-Malaysia Qinzhou Industrial Park and Malaysia-China Kuantan Industrial Park have entered the stage of infrastructure construction and investment invitation.

Modes of cooperation

Demand is the basis of joint development of parks overseas. The cooperation needs vary among different regions. Some need mainly investment, some need industrial upgrading and innovation capacity building, and some need brand promotion and service improvement. It is necessary to consider different needs, strengthen targeted guidance and explore new cooperation modes targeting different requirements (sec Table 39.1).

The ultimate goal is to meet the various demands of the different parties involved in a cooperation project as much as possible with targeted methods.

Mode of investment and development

We will participate in the development of various overseas industrial parks, industrial clusters, special economic zones, etc., solve the problems of insufficient supporting facilities and infrastructure in overseas investment, improve the service capacity supporting overseas investment and facilitate the going global of enterprises in groups in the medium and long term.

Public-private partnership

Public-private partnership (PPP), a cooperation mode between public and private organizations, is often applied in public infrastructure construction projects.

Table 39.1 Modes of joint development of industrial parks

Cooperation inode

Major practices

Park within park

Assign a part of the park to a foreign partner for management and operation with agreed investment scale, construction period, rights and obligations

Co-managed park

Regard the development park as a whole, give full play to the advantages of foreign partners in management, funds and brands, to jointly establish management organizations, formulate plans, raise funds, develop and construct, and operate and manage

Foreign partnermanaged park

Entrust a designated area of the park fully to the foreign partner, who shall formulate plans and implement them after approval, and operate independently in a closed manner

Project cooperation

The foreign partner cooperates with the development park through technical cooperation and assistance, project construction and operation, etc. based on high-tech products and industrial transfer projects

Trade cooperation

According to the resources, location, industrial foundation and development direction of the park, the foreign partners transfer part of the orders and service demands from their headquarters to the jointly developed park, and carry out cooperation in processing trade and service outsourcing

Exchange and cooperation

Build a bilateral or multilateral friendship park, exchange information and leaders, assign representatives, share business resources, build a platform for mutual benefits, host communication activities of concept and achievements, organize project promotion and matchmaking activities from time to time, deepen cooperation, seek joint development

It combines government and private capital for project financing and development. Public-private partnership has three characteristics: partnership, benefit sharing and risk sharing. It covers BOT, PFI, BOOT, BT and some other subtypes. In the process of industrial transfer, the recipient is often underdeveloped areas, where the government lacks funds for infrastructure building, professional project management, financing channels and operation personnel and experience. On the contrary, specialized development enterprises often have experience in financing, project management, enterprise operation, investment promotion and other aspects, which can effectively make up for the shortcomings of the government of the recipient area in the development and operation of an industrial park. In view of the advantages and disadvantages of both parties, the government and the enterprise shall cooperate to establish a dedicated project company with capital from both parties or from the enterprise alone; the government authorizes the project development company to provide public products and services such as the design, investment, construction, operation and maintenance of the park; both parties agree on their respective rights and obligations, give full play to their respective advantages, and establish profitreturn mechanisms and risk-sharing mechanisms to realize efficient market-oriented operation.

Mode led by associations or chambers of commerce

The cooperation mode led by associations or chambers of commerce is mainly characterized by the industrial transfer and acceptance with trade associations as an agent or a direct partner, to realize cooperation in industrial park development, investment attraction, etc., instead of forming bilateral partnerships for industrial transfer and acceptance. In this mode, the trade associations and chambers of commerce arc the representatives of enterprises of the same type, and have remarkable information, organization and personnel advantages in attracting investment, and can provide a scries of services and guidance for the production layout of enterprises. They can also provide a catalogue of enterprises suitable for the development of the recipient area, which can effectively reduce the cost of information search for the government in attracting foreign investment, improve the efficiency of investment attraction and make it easier for governments to understand the needs of potential investors so as to build relevant supporting facilities.

Off-site industrial park branches

In their development process, economically and industrially advanced regions arc often faced with the problems of rising cost of labor, energy, land and other factors. Land cost, in particular, depends greatly on the location, which cannot be changed. Therefore, in order to further expand the space for an industrial park, industrially developed areas would build park branches at other locations. With affordable and abundant land resources, the transferee can form direct relations with the transferor. In the process of industrial transfer, the transferor will give priority to the demand of the transferee on undertaking the industrial transfer, which literally grants a quick pass to the transferee. In addition, in the development and management of the park, the administration committee and the investment and development company of the park arc mostly composed of management personnel from both the transferor and the transferee, and a joint conference system is adopted. Tax, statistical index and ratio of capital investment are agreed between the two parties for joint governance and management.

Park-enterprise cooperation

The park-enterprise cooperation mode is very similar to the PPP mode and the association and chamber of commerce-led mode. They all take market-oriented cooperation as the main direction, which will activate the market vitality of the park in development, financing, operation and investment attraction. What

Forming overseas industrial clusters 465 makes the park-enterprise cooperation mode slightly different is that it mainly focuses on specific industrial categories of the local area. The government determines the detailed development direction of the industries, while the cooperating enterprises build the industrial bases with their technology, market and experience in the industry, and introduce their supporting upstream and downstream enterprises. The government provides support to enterprises in terms of infrastructure, laws and regulations, personnel training and market environment, and by maintaining a good production and operation environment.

Significance of building high-level overseas industrial parks

At present, China’s overseas industrial parks are in the stage of expansion from points, large-scale construction and diversified cooperation. According to incomplete statistics, Chinese-funded enterprises have built over 50 industrial parks overseas. However, due to the lack of operational experience, insufficient estimates of relevant risks and difficulty in obtaining uniform policies at the national level, many overseas industrial parks are faced with problems like relatively undiversified functions, high development costs, extensive operation modes, insufficient supporting facilities and loose connections with domestic industries, etc. We should accelerate the construction of a number of high-level overseas industrial parks which can achieve China’s strategic objectives, with outstanding comprehensive functions, complete services and facilities, market-oriented operation and platform-based organizational forms in line with the BRI, so as to energize the development of China and make it into an economic powerhouse.

High-level overseas industrial parks provide practical platforms for the Belt and Road Initiative

Industrial cooperation between China and BRI countries cannot be achieved without the corresponding carrier industries. In order to build a global industrial supporting system, China should give priority to a number of high-level industrial parks in BRI countries and regions. This will not only strengthen the economic ties between China and these countries and regions, and form stronger strategic partnerships, but also extend or even enhance the global competitive edge of China’s industries, which is in line with China’s development strategy.

Building high-level overseas industrial parks is the strategic need for China's industries to go global and carry out international capacity cooperation

Currently, China’s outward direct investment in non-financial fields is growing rapidly, with the growth rate exceeding 14% annually in the past three years. China’s enterprises are going global on a large scale, in clusters and in multiple business models. However, most enterprises arc still faced with all kinds of risks in outward investment, such as financial risks, political and security risks,

property right disputes, ete. Therefore, building a number of high-level overseas industrial parks can not only provide favorable production environment for those enterprises, and reduce investment risks, but also strengthen overall coordination on the national level, carry out substantial international capacity cooperation and promote internal and external cooperation in the industry.

Development of high-level overseas industrial parks is a strategic move for industrial transformation and upgrading in China

China has entered a critical period of industrial transformation and upgrading. The mounting downward pressure in the industrial sector and the accelerating industrial restructuring is bound to drive a batch of mature industries to go overseas for gradient transfer, and promote international capacity cooperation. In line with these trends, China should speed up the development of high-level overseas industrial parks, and develop overseas economic engines in innovative ways, so as to maintain the competitive edge of Chinese enterprises, and make room for domestic industrial upgrading.

Development of high-level overseas industrial parks can create better open development conditions for China

China has accumulated a huge balance of payments surplus over the years, and is closely connected with the global development imbalance. To take China’s industries overseas through the building of high-level overseas industrial parks will not only improve the external environment for China’s economic development, find a way out for economic rebalancing, but also better carry out transnational industrial cooperation and further promote the internationalization of RMB.

High-level overseas industrial parks help spread "China's experience"

Practice shows that since its reform and opening up, China has made remarkable achievements in industrial development. A wide range of industrial parks have been set up and grown rapidly, providing a powerful engine for industrial development. The development history and experience of industrial parks show that “China’s experience’’ has been polished in the process of continuous innovation. This valuable experience is a worthy reference for other developing countries.

By 2015, overseas cooperation zones have brought more than 2,000 Chinese enterprises overseas, accounting for about 10% of the total number of Chinese enterprises making outward direct investment enterprises, involving USS 9.55 billion of investment and sending close to 30,000 people from China to work overseas. At the same time, the overseas cooperation zones are playing an increasingly important role in promoting the going global of Chinese enterprises. For example, from 2005 to 2009, 34 overseas cooperation zones were

Forming overseas industrial clusters 467 built, each attracting an average of 15 Chinese enterprises; from 2010 to 2014, 57 overseas cooperation zones were built, each attracting as many as 29 Chinese enterprises on average.

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