World Winning Cities Profiles , Jan 2008 QINGDAO January 2008 Emerging City Winners Profiles: China • Qingdao is home to some of China’s best- Qingdao known brands • Chosen as one of the venues for the 2008 Olympic Games • Boasts the 3 rd largest sea port in China • Attracts 27% of South Korean investment in China • One of China’s most famous travel destinations • Logistics offers the best short term real estate opportunities. Strong demand also exists for Grade A offices. World Winning Cities Profiles , Jan 2008 QINGDAO CITY SUMMARY • Qingdao is home to some of China’s best-known brands, including Haier, Hisense, Tsingtao Beer and Aucma • It has been chosen as the venue for the Sailing Regatta in the 2008 Olympic Games • It boasts the 3 rd largest sea port in China after Shanghai and Shenzhen • Almost 50% of China’s professional marine experts are located in Qingdao • It is the Chinese city with the highest level of South Korean investment • ECONOMIC DASHBOARD It is one of the most famous travel destinations in China • The logistics sector offers the best short term real estate Population (million 2006) 7.5 opportunities • In the office sector, there is strong demand for Grade-A office Size GDP (USD billion 2006) 40.2 buildings Employment (million 2006) 2.4 Qingdao is best known for its highly successful indigenous brands (such as Haier, Hisense, Tsingtao Brewery and Aucma) Population (% pa 2000–2006) 1.01 and as an area of outstanding natural beauty. More recently, this city on the banks of the Yellow Sea has caught investors’ Growth GDP (% pa 2000–2006) 19.6 interest due to its role in the 2008 Olympics. It is one of the few Air Passengers (‘000 2006) 6,791 cities in China co-hosting the 2008 Olympics with Beijing 1. If the Olympics and well-known brands have been the external Freight Traffic (million tons 2006) 224 drivers of Qingdao’s development, then its key asset has been Infrastructure its strategic location. Japan and South Korea are just an hour’s FDI (USD billion 2006) 3.7 flight from Qingdao, putting it firmly on the radar screen of Japanese and South Korean investors. Strong cooperation Exports (USD billion 2006) 23 Openness Openness between Qingdao and South Korea has been a significant driver of the city’s growth. GDP/Capita (USD 2006) 5,367 The city’s port, which is the 3 rd largest sea port in China after Wealth Wealth Disposable Income /Capita (USD 1,923 2006) Shanghai and Shenzhen, has provided Qingdao with tremendous opportunities for developing the logistics and Higher Education Institutions (2006) 25 shipbuilding sectors. Qingdao attracts logistics and marine Total Enrolments (’000s 2006) 245 experts from all over the country. Indeed, almost 50% of total Chinese marine talent is today located in Qingdao. Unemployment (% 2006) 2.96 Drawn by the city’s strategic advantages and strong prospects, Education and Labour Labour and Education a growing number of international investors and developers are Average Wage Rates (USD 2006) 2,330 rushing to the scene. We believe that with the further opening of Business Business Environment (Score) B the city, Qingdao will quickly become a rising star in the Greater Bohai Rim region. Quality of Life (Rank) 7th Lifestyle • Please refer to Definition of Terms, Exchange Rate in 2006: 1 1US$=7.9719RMB Other cities include Hong Kong, Shanghai, Tianjin, Shenyang and Qinhuangdao. 1 World Winning Cities Profiles , Jan 2008 QINGDAO ECONOMIC BACKGROUND chain. IT has been one of the main sectors to be targeted, with Qingdao being named a “National Software Industrial Base” by GDP is growing rapidly on the back of the strong marine the central government in 2002. This has facilitated the creation and tourism industries of a sound business environment for IT corporations. Lucent Qingdao boasts the fastest economic growth over the past 5 Technology (now Alcatel-Lucent), for example, has set up its years out of China’s 12 key secondary cities. Qingdao’s GDP R&D centre in the Qingdao Software Park. This is one of its 9 growth rate for 2000-2005 was 19.6%, almost 200 basis points global R&D facilities. higher than the group’s average. The strong momentum is Qingdao going forward fostered by the marine and tourism industries, which benefit from Qingdao’s strategic location on the Yellow Sea and long Going forward, Qingdao is seeking to position itself as the coastline (the longest in China). In 2006, the value added output “International Shipping Centre, Regional Logistics Centre, of the marine industry amounted to USD 5.2 billion, accounting Service Centre, Financial Centre and Hi-tech Industry Centre” of for 12% of the city’s GDP. The tourism industry is also booming; northern China. its growth triggered by the 2008 Olympics. The tourism industry accounted for 10% of GDP in 2006, and the number of foreign tourists, currently 0.85 million, is expected to reach 1.3 million URBAN FORM & INFRASTRUCTURE by 2010. Economic cooperation with South Korea Qingdao is the city in China with the highest level of South Korean investment. It is home to more than 8,000 South Korean firms and almost 60,000 South Korean nationals, with 10,000 additional South Koreans arriving every year. South Korea has become Qingdao’s most important partner in terms of trade and foreign investment. In 2005, the trading volume between Qingdao and South Korea reached USD 7 billion, accounting for 23% of total trade. The actual utilised foreign direct investment from South Korea was USD 8.6 billion, 27% of total South Korean investment in China. Planned as a leading city in Shandong Province In contrast to many cities which are only on the receiving end of foreign direct investment, Qingdao also has interests in the The newly released ‘Overall Urban Plan for the Shandong South Korean market. Tsingtsao Beer, Hai’er and most of the Peninsula City Cluster’ has confirmed Qingdao’s leading role in well-known state-owned firms have invested in South Korea. Shandong Province. This region is an increasingly popular destination for industries relocating from both South Korea and Nonetheless, since 2006 Qingdao has seen increasingly Japan, as well as for capital from southern China. diversified sources of foreign investment, with a growing number of investors from North America, Europe, Latin America, Africa According to this plan, Shandong province will develop into a and Oceania becoming active in the market. This diversification pole able to compete with the Yangtze River Delta and the Pearl will further unlock Qingdao’s potential. River Delta, the most successful city clusters in China. It covers 8 cities in Shandong including Qingdao, Jinan, Yantai, Zibo, Moving up the value chain Weihai, Weifang, Dongying and Rizhao, whose combined The performance of industries such as electronics and home population amounts to 42.4 million inhabitants and combined appliances, petrochemicals, automobiles and shipbuilding has GDP accounts for 67% of the total Shandong GDP. Qingdao endowed Qingdao with a solid industrial base. However, the and Jinan have been highlighted as the two core cities in this focus to date has been on low value added parts in the supply region, with Qingdao foreseen to play a key role equivalent to chain. To improve the city’s future economic prospects, the that of Shanghai in the Yangtze River Delta and Qingdao municipal government is keen to move up the value Guangzhou/Shenzhen in the Pearl River Delta. 2 World Winning Cities Profiles , Jan 2008 QINGDAO An Evolving Urban Form: From West to East projects have already been built nearby to capitalize on its impact. The central urban area in Qingdao covers four administrative districts, namely Shinan, Shibei, Sifang and Licang with a land Infrastructure Improvements area of 189 sq km and urban population of 2.7 million. In all the Infrastructure improvements have been a major challenge for Qingdao municipality city consists of seven administrative the government due to the mountainous topography and the districts and five satellite cities with a combined population of position of Jiaozhou Bay, which separates downtown Qingdao 7.4 million. from the new port and western industrial zones. However, to The city has undergone cater for the needs of the aggressive city expansion plan, USD dramatic urban transition with 10 billion will be invested in infrastructure over the next 5 years. the municipal government The most ambitious plans are to build an undersea tunnel and a relocating from west Zhongshan bridge connecting Huangdao and the CBD. The Qingdao Road, the old downtown area, Jiaozhou Bay Bridge, with a length of 35.4 km and minimum to East Hong Kong Road in 1992. Since then, Hong Kong Road cost of RMB 9.94 billion, is due to be completed around the has emerged as the key CBD area and now hosts most of the 2008 Olympics; the tunnel is expected to be completed by 2010. Grade-A offices and prime retail space, as well as high-end These two projects will help connect different parts of the city, residential projects. In contrast, the old downtown has gradually turning Qingdao into a true metropolitan area. decayed and its business activities are now limited to residential projects and middle-end department stores. Nevertheless, the old downtown’s suburban area (named Badaguan) remains a BUSINESS ENVIRONMENT prime area for high-end residential projects and travel resorts As a city opened up early in the 19 th century, Qingdao has been given its historic German buildings and beautiful beaches and regarded as one of the five main foreign trade ports together scenery. with Shanghai, Guangzhou, Tianjin and Dalian. Its long history Around the urban area, three industrial regions have emerged, in dealing with foreign investors has taught the government how forming “Big Qingdao”.