Mainland China consists of 23 provinces, four municipalities and five autonomous regions; within these, there are 22 pilot Free Trade Zones, more than 200 national industrial/economic development zones, more than 170 high-tech zones, and numerous local industrial parks. European investors generally only think about first-tier cities such as Beijing, Shanghai and Shenzhen when trying to enter China; in practice, lower-tier cities might also be very attractive locations for European SMEs.
There are various factors to consider when selecting a location for your foreign-invested company in mainland China, including (but not limited to):
- Target consumer group/suppliers/partners: where are your clients/partners concentrated?
- Infrastructure: different locations are connected in different ways (both domestically and internationally), each presenting different logistics challenges, time and costs.
- Human resources required: highly skilled talents (e.g. top scientists and engineers) are more widely available in first-tier cities and areas with polytechnic universities – but the salary requirements are also higher.
- Incentives provided by the local administration: including tax incentives, support in obtaining subsidies and loans, access to services, reduced red tape, matchmaking with potential partners, etc.
Traditionally, the majority of foreign companies have preferred larger cities along the coast – especially on the Yangtze River Delta and in Guangdong. However, central and western regions have grown enormously and now represent attractive choices for many businesses – also thanks to a large number of investment attraction policies and supporting services offered. It is not anymore uncommon for foreign companies to settle in areas such as Chengdu-Chongqing, Hainan, Anhui, Hubei, and others.