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China Industrial Park Site Selection

 

A Fortune 500 auto parts producer sought to place its first wholly-owned factory in China. Where to put the factory in such a vast country? There were numerous options, based on where the major centers of car production were in China. The South of China, in the Guangdong region, represents about 2% of China’s car manufacturing power. Chongqing, in the mountainous central portion of the country, has about 5% of the automobile market. The North of China, around Beijing and Tianjin, represents about a third of China’s automobile manufacturing capability.

 

 Meanwhile, the central east coast of China represents the lion’s share of activity in China’s burgeoning car market. Within a 200 km radius of Shanghai is more than half the total manufacturing activity in China’s automobile industry. Companies like Shanghai VW, Shanghai GM, Fiat, Geely, and SAIC provide the engine of growth for the fast-paced car market in China.

  

Silk Road Advisors (SRA) consultants decided that since this was the company’s first and primary investment in China, it would be best to seed it in the heart of the Chinese market – the Yangtze Delta region. Silk Road Advisors focused the site survey on two provinces: Jiangsu Province and Zhejiang province. The provinces are like butterfly wings to Shanghai: Jiangsu Province to the north; Zhejiang Province to the south. The Silk Road team considered including Anhui Province in the search for a time, but then felt the economic development level and infrastructure conditions would not be able to support a relatively large ($10 million) investment of a progressive technology company. Further, Silk Road felt the client’s first investment would have enough of a learning curve without challenges being compounded by a “Wild West” environment.

 

Silk Road worked closely with executives of the client company to tailor a survey to the company’s specific requirements both in America and according to the strategy it had laid out for itself in China. SRA staff then translated the 20-question survey into Chinese language. Silk Road consultants contacted the government officials of more than thirty China Industrial Parks in Jiangsu and Zhejiang and asked them to complete the survey. The survey was a profile of the Industrial Park that would give the Team some idea of whether the Zone merited a visit. All but one of the zones completed the survey and returned it to SRA.

 

SRA ranked the surveys by the viability of the China Industrial Park each survey presented. SRA Chinese staff in America and in China then coordinated a schedule with twenty-two of the China Industrial Parks for visits by SRA staff (see Figure 3). Armed with the completed surveys, a video camera and a notebook, SRA researchers visited the twenty-two China Industrial Parks in eleven consecutive business days.

 

The SRA survey team interviewed scores of government officials in the China Industrial Parks and the local city governments, walked the land proposed for its client’s investment, and met company representatives that had already invested in the China Industrial Park. SRA collected literature and Powerpoint presentations and videos each of the China Industrial Parks offered SRA staff to educate the staff about the China Industrial Park.

 

SRA team members in Beijing and in Chicago assembled the team’s findings to present its “top picks” to Client executives. The Team developed a weighted ranking of the China Industrial Parks, using an expanded list of 30 criteria it developed refined while visiting the China Industrial Parks.

 

Client executives confirmed the top picks and asked SRA to arrange a trip that would involve their seeing the top eight China Industrial Parks with their own eyes.

 

Within four months of originally commissioning SRA to identify potential sites for their investment, the Client had settled on three China Industrial Parks in which it was willing to invest.

 

Within six months of initiating the search it signed an agreement with one of the China Industrial Parks to launch its investment in the location.

 

For more information about this or any other case, email SRA at: sradvisors@gmail.com .