Shunde’s Business Environment
Photo: Foshan News
By Henry Hing Lee Chan

Shunde’s Business Environment

Jul. 22, 2019  |     |  0 comments


Since the reform and opening up, Shunde has continuously built an excellent business environment. In the late 1970s, Shunde pioneered township enterprises and the ‘three-plus-one’ cooperative trade enterprises. In 1987, Shunde took the lead in delegating four management rights, namely personnel management, institutional setup, internal distribution and product pricing, to the company. From 1992 to 2018, Shunde was selected four times as a reform pilot county by the central government and Guangdong Province. In 1992, a series of comprehensive reforms focusing on property rights was introduced. In 1999, Shunde was the first pilot city in China to experiment on means to become a modern city, so as to build a service-oriented government suitable for the market economy. In 2009, Shunde implemented a large-scale administrative reform to streamline government operations further.  In 2018, Shunde was chosen as a ‘high-quality administrative development and innovative reform experimental zone’. The main content of each reform included improving the business environment in Shunde.

 

The excellent business environment has cultivated a large number of outstanding local enterprises, and has also attracted business from all localities to invest in Shunde. The number of enterprises in Shunde increased from about 2,000 state-owned or collectively owned enterprises in 1978 to 218,132 at the end of October 2018, among which 103,083 were domestic-funded enterprises (97% or more are private enterprises), 2,520 were foreign-funded enterprises (of which nearly 50 were established by 28 Fortune 500 companies), 112,456 were sole proprietorships  and 73 are farmers’ cooperatives. In April 2018, Shunde had an average of 1,350 new domestic-funded enterprises per month, ranking high in the country in terms of regional population.

 

There are more than 12,000 manufacturing factories in the region, with large, medium and small enterprises coexisting with one another. They include Midea—a world’s top 500 company with annual sales of more than 200 billion yuan, 73 benchmark private enterprises with annual sales exceeding 1 billion yuan, as well as numerous family-owned spare parts manufacturers. Private enterprises accounted for nearly 80% of the industrial output value of large-scale enterprises.

 

The flourishing development of private enterprises and the coexistence and co-prosperity of large, medium and small enterprises in Shunde illustrate the success of Shunde’s excellent business environment.

 

To examine the business environment of a region, the following factors are generally considered: government economic policies and corporate support policies; supply and costs of production factor, industrial clusters, market conditions, and ways to promote the business environment.

 

Government economic policy


In the past, the Shunde people implemented the integrated mulberry tree and fish pond agronomy model. From there, they accumulated knowledge of the commodity economy, and understood the importance of the business environment in the market economy. This economic and cultural gene flourished after the reform and opening up. (See ‘Shunde’s Innovations’ for details).

 

In the early days of the reform, Shunde took the lead in promoting the ‘three-plus-one’ cooperative trade enterprises and township enterprises. Shunde, an agricultural county with no money, no technology and no talent at that time, took the first step in exploring the business environment. The people of Shunde have a consensus—economic development must be carried out by the whole district, and it has never changed in the past 40 years. The strategy of industrial-led development and focusing on key enterprises established in the early days of Shunde’s reform has not changed.

 

In recent years, Shunde is adapting to the new economic environment and promulgating economic policies to support emerging industries. Through the creation of innovative systems, increased investment in scientific research, establishment of industry-university-research platforms, public platforms, Technology Shunde, and tax incentives, Shunde wants to encourage and foster corporate innovation capabilities and enterprise growth. (See ‘Shunde’s Emerging Industries’ and ‘Shunde’s Industrial Parks’ for more details.)

 

Shunde’s government and its services have been praised by entrepreneurs for years. The reform of the administrative approval system in Shunde started from the 1992 reform of the administrative system. In 2011, the Shunde government again took the lead in launching a new round of administrative approval system reform among the county towns. Both rounds of reform were at the forefront of the country. In 2015, Shunde followed Foshan to develop a one-stop service for enterprise registration, business license and investment construction. This service is in operation now and greatly reduces the approval time for enterprise registration and investment construction. At present, Shunde is stepping up the reform of the one-stop service and creating a digital-enabled government.

 

Foshan city takes the lead in implementing a 365-day 24-hour business registration service. Through the self-service terminal, a new company can be registered via paperless submission, one-time review and on-site instant registration. A business license can be obtained in 5 minutes.

 

In 2018, Shunde district implemented an approval service that does not require face-to-face meetings and a government service model that promised dealings are approved in one go. The focus is on advancing service-oriented government functions and improving the business environment.


Table 1. Services provided by Shunde government


Shunde’s excellent business environment has attracted entrepreneurs. In 2017, Shunde attained 121 projects with each investment exceeding 100 million yuan (with more than 10 million US dollars in foreign capital), with a total investment of 131.367 billion yuan; 28 projects with each investment exceeding 1 billion yuan, with a total investment of 94.967 billion yuan. The number of investments of over 100 million yuan and over 1 billion yuan is the highest among the five districts of Foshan.

 

In the 2018 China Credit Health Index, the China Business Environment Satisfaction Survey introduced the newly-launched China Top 100 Business Districts and Counties, in which Shunde was ranked seventh in the country, only lagging behind Nanshan district in Shenzhen in the whole of Guangdong Province.

 

In September 2018, Shunde was chosen as a ‘high-quality administrative development and innovative reform experimental zone’, creating a first-class business environment was one of the important contents. Today, Shunde is preparing to launch a new round of administrative approval system reform.

 

Supply and costs of production factors


The supply and costs of production factors are the most important factors determining the success or failure of enterprises. Shunde district has been continuously improving the supply conditions and controlling the costs of production factors. At present, Shunde’s production factor prices are at a medium level in the whole of the Guangdong-Hong Kong-Macau Greater Bay Area.

 

In terms of human resources, Shunde District has established a multi-level talent supply system to provide a good human resources environment. Shunde is utilizing migrant workers to solve the problem of insufficient local labor, and is also controlling labor costs and continuously improving the cultural quality of the workforce.

 

In the multi-level talent supply system, the middle, tertiary and post-graduate education institutions of Shunde can provide more than 13,500 higher- and middle-educated vocational technicians every year. At the same time, Shunde’s vocational education is closely integrated with the strong manufacturing industry. Professional courses can be adapted based on the needs of enterprises.

 

Shunde is close to Guangzhou, and talent resources from the surrounding areas can be accessed to supplement the gap in local high-end talents. Foshan city with 7 normal colleges, 6 adult colleges, 3 higher vocational and technical colleges, 40 middle vocational and technical colleges, with a total of 150,000 students. At the same time, due to its location advantage, Shunde can also share the talent resources of nearly 20,000 graduate students and 250,000 college students in 37 colleges and universities in Guangzhou.

 

At the same time, the ‘Satellite City’ of Guangzhou University is being built in the northern part of Shunde. It aims are to establish a talent cooperation mechanism with 10 well-known higher learning institutions at home and abroad, establish 100 innovative platforms to integrate the financial and technological industries, attract more than 1,000 talents with leadership potential and attract more than 10,000 high-end talents (master’s graduates or senior executives).

 

The Robotation Academy Foshan, which is newly established in the Sino-German Industrial Service Zone, and the Guangdong Aachen Industry 4.0 Technology Application Research Center, are nurturing talents for Shunde to promote emerging industries such as smart manufacturing, industrial robots and future equipment manufacturing.

 

To provide a good human resources environment, Shunde Talent Development Service Center actively builds a variety of labor employment platforms and regularly organizes on-site job fairs in the region to provide recruitment platforms for enterprises and reduce recruitment costs. In 2016, the Talent Development Service Center held 70 job fairs, and about 2,980 companies participated in the recruitment, with an attendance of about 110,000 people.

 

The Shunde Talent Development Service Center also sends a Shunde delegation to universities outside the district to encourage fresh graduates to visit Shunde to explore the employment opportunities.

 

Shunde has 19 re-employment training institutions to carry out skills training for more than 50 types of work. In 2016, more than 60,000 people participated in vocational skills training.

 

In recent years, Shunde has successively launched high-level industries, medical and health systems, and the identification and importing of educational talents to provide convenience for enterprises to employ high-level talents. By the end of 2017, Shunde has imported 6,956 high-level industrial talents, including 151 first-, second-, and third-class talents; 3,361 high-level education talents, including 56 first-, second-, and third-class talents; and 1,953 high-level health personnel, including 7 first-, second-, and third-class talents.

 

Faced with the shortage of local labor force, Shunde began to introduce migrant workers in the 1990s to control the rising labor costs. At present, indigenous residents and ‘new Shunde people’ (migrant workers) each account for half of the labor force. By the end of 2017, the number of highly-skilled migrant talents in Shunde reached 64,000. The talent structure is continuously optimized and the types of work have gradually changed to electricians, mold workers, CNC lathe workers, CNC milling machine workers and others.

 

Shunde’s per capita GDP is at the upper-middle level of the Pearl River Delta. However, Shunde effectively controls labor costs through the introduction of migrant technicians and implementation of social security payment ratios. Compared to other cities in the Pearl River Delta, Shunde’s salary is at a medium level.

 

Table 2. Comparison of wages and per capita GDP in major regions of the Pearl River Delta



Table 3. Payments to various social security items in 2018


Shunde constantly improves the cultural quality of the labor force. According to the government of Foshan city, the average education period of the working-age population is 12 years, the proportion of workers with higher education is over 20%, and the average education period of new labor is 14 years.


Table 4. Education level of workers in Foshan City


As for other production factors such as industrial land use fees, industrial electricity charges, water fees and so on, Shunde’s costs are similar to the industrial cities around the Pearl River Delta. However, Shunde’s policies have flexibility, especially for land use fees.

 

When confirming a land bid, the Shunde government generally formulates the final land price based on the industrial direction of the investment project, environmental impact, energy consumption indicators, investment plans, economic benefits, investor credibility in conjunction with land transfer criteria. For high-quality projects with large industrial driving effects and obvious economic and social benefits, Shunde will formulate land prices according to the specific conditions of the project.

 

Industrial cluster situation

 

The modern industry emphasizes division of labor, and the degree of interdependence between upstream and downstream enterprises is increasing. A good industrial cluster can effectively improve economies of scale, reduce costs, promote the speed of technological innovation, offset rising R&D costs and reduce increased R&D pressure brought about by technological advancements. Shunde’s eight pillar industries (household appliances, machinery and equipment, electronic information, fine chemicals, furniture manufacturing, packaging and printing, bio-pharmaceuticals and textiles and garments) are famous for their excellent industrial clusters, while the six pillar industries (except bio-pharmaceuticals and textiles and garments) are closely interdependent and interlocked. Emerging industries that Shunde wants to support and encourage, such as smart manufacturing, robotics and e-commerce trade, are related to the current pillar industries. (For details, see the article ‘Shunde’s Economic Phenomenon’.) These favorable conditions are an important attraction for investors.

 

Market situation

 

The transportation network in and outside of Shunde is quite developed. It is thus very convenient for the transportation of goods out of the district, regardless by sea, land or air (for details, please refer to the article ‘Introduction to Shunde’). Shunde led the country into international trade through the ‘three-plus-one’ cooperative trade enterprises in the 1980s. Hence, the business community in Shunde is in a comparatively advantageous position in China, as they are armed with knowledge of integrating into the international market, promoting international business cooperation, and protecting intellectual property rights. At the same time, Shunde’s home appliances and furniture industries, which were developed in the 1990s, also occupy leading positions in the market. The Shunde government and entrepreneurs have understood and mastered the domestic and foreign markets, and have created an excellent business environment for Shunde.

 

High standards to improve the business environment

 

Shunde is once again acting as a leader in improving the business environment. Shunde has benchmarked itself with World Bank standards and is striving towards the goal of having a first-class business environment. It is aiming to be the best and the most advanced in both domestic and international markets, further delineate the boundaries of market and government, create a fair and efficient government, and build an open, active and orderly market environment. It is also aiming to attract high-quality industries, enterprises and talents to Shunde by developing an international, legalized and convenient business environment.

 

The ‘1121’ program launched in 2018 took the first big step in the whole of China towards a streamlined and lean government. Under the ‘1121’ program, Shunde is working on creating a business environment with the least approvals, the shortest process time and the best service. The program wants to set up a trust approval model of ‘clear policy, corporate credibility and effective supervision’. Specifically, general industrial projects would only need 11 working days, including registration of project to the acquisition of construction permits (excluding public announcement, project reviews, hearings and other special procedures), to complete; housing construction projects would only take up to 21 working days to complete.

 

Shunde proposes to strengthen the rule of law in the business environment by building a nation-leading intellectual property protection system. Works to be done include setting up intellectual property circuit courts and procuratorates, enhancing IP custody and risk warning, improving government management and services with big data, and building a coordinated management and service mechanism across systems, departments and services in the government.

 

Conclusion

 

Shunde is working towards improving its business environment by analyzing the actual situation, borrowing from past experience, and benchmarking itself with the country’s and the world’s leading standards. Shunde will continuously optimize its business environment and provide a good foundation for future economic development. Currently, Shunde’s emerging industries are facing the shortage of a large number of high-level talents. Through the implementation of the Guangdong-Hong Kong-Macau Greater Bay Area, there will be in-flow of high-level talents, thereby helping to improve Shunde’s business environment.

 

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