China Market Guide

Beijing
(Municipality)

(1) General Background

Beijing has a total area of 16,808 square kilometers. Total population stood at 13.56 million with the number of household at 4.4 million according to the 2000 population census.

Beijing is the capital of China and the country's political, cultural and international exchange center. Beijing is one of the four centrally administered municipalities along with Shanghai, Tianjin and Chongqing, which enjoy similar economic and administrative autonomy as a province.

In order to host the 2008 Olympic Game, the Beijing government will invest a total of about RMB 230 billion to improve the city's infrastructure by 2008. These would include Olympic Stadiums and related facilities, transportation and telecommunication infrastructure, etc.

Beijing has the largest number and the most prestigious institutions of higher learning and scientific research in the country. There are 62 institutions of higher education (including the Beijing University and Tsinghua University). At the end of 2002, there were about 348 scientific research institutions with 76,221 persons engaged in research activities. This strength in human capital is expected to help development of the Beijing-Tianjin-Hebei economic region.

(2) Industries

Service industries grow rapidly in recent years. During 1996 to 2001, the city's tertiary sector grew at an annual rate of 13%, higher than that of the primary and secondary sectors. The tertiary sector is now the biggest economic sector in Beijing. In 2002, it accounted for 62.2% of the city's GDP, which was ranked the first in China and 11.2% more than the second.

Social services and real estate are the two fastest growing service industries, both increased by more than 30% in 2002. To further develop and upgrade the service sector is one of the policy objectives of Beijing's 10th Five-year Plan, especially in information technology services, financial services, transportation and tourism.

Beijing also has a strong industry sector. Beijing's industrial production is dominated by heavy industries and large enterprises. In 2002, heavy industries accounted for 77.1% of Beijing's gross industrial output and large enterprises accounted for 61.6% of the output. Major industries include electronics and telecommunications equipment, chemicals, automobiles, machinery, metallurgy and food making.

Beijing is keen to develop hi-tech industries such as electronics, information technology, biological engineering, pharmaceutical and new materials. In 2002, value-added output of hi-tech industry amounted to RMB 25.2 billion. The share in total value-added industrial output increased from 25.4% in 1999 to 28.9% in 2002, which is expected to continue to increase.



Beijing's hi-tech industry is now one of the most competitive in China. Beijing had the highest transaction value in technical market in 2002, accounting for 13.8% of national total. Additionally, in terms of number of enterprises, gross output value, and total income of high-tech enterprises in Development Areas, Beijing is all ranked the first in China. Thanks to its ability in scientific research, Beijing's hi-tech industry will continue to grow stronger.

Beijing has the highest spending on R&D among all provinces and municipalities. In 2002, Beijing's expenditure on R&D reached 22 billion, equaled to 6.8% of its GDP. Beijing took the lead by accounting for 14.5% of the national total number of invention patent application granted. Beijing is trying to build a Chinese Silicon Valley, in this connection, more than US$30 billion will be invested to build a "Northern Micro-Electronic Technology Base" in Zhongguancun, the famous High and New Technology Development Zone.

Tourism is also an important industry in Beijing. The city has been the Capital of China since the founding of the Yuan Dynasty. Its tourist attractions feature its rich palatial heritages. In 2002, 2.7 million overseas tourists visited Beijing (19.8% of national total) and generated revenue of US$3.1 billion (15.3% of national total).

The private sector in Beijing has developed rapidly. According to Guangmin Daily, as at end-2003, the number of private enterprises of 6 provinces and municipalities (including Beijing) exceeds 200 thousand, i.e., nearly 60% of national total. The number of private enterprises in Beijing increased by 21.5% in 2002, 1.5% more than the national average.

(3) Foreign Investment

Among the world's largest 500 enterprises, 160 or so have invested in Beijing. In addition, more than 40 enterprises, such as NEC, SUN, P&G and Schlumberger, have set up R&D center and production facilities in Development Areas in Beijing.

Inflow of foreign direct investment recorded faster growth in recent years. In 2002, the utilized amount of FDI increased by 1.1% to US$1.8 billion, equivalent to 7.8% of the cumulative amount from 1991 to 2002.



Foreign investment mainly flows into Beijing's tertiary sector, accounting for over half of the total foreign investment. Areas that attracted the largest share of foreign investment included real estate, trade, banking and insurance, telecommunications, information and consultancy service, etc.

It is noticeable that retail trade and consultancy services have become more attractive to investors in recent years. In 2002, while number of contracts of computer application decreased, that of trade and consultancy services rose significantly. The former increased from 2 in 2001 to 21 in 2002, and the latter from 119 to 236. In 2003, retail stores such as Walmart, Dia and B&Q opened for business in Beijing. Other big names, for example, Metro, Ikea, OBI and 7-11, are also expected to open before long.

Hong Kong is the largest source of overseas investment in Beijing. In 2002, Hong Kong investors signed 308 contracts with contractual amount of US$2.3 billion. In terms of investment capital, large investment projects are concentrated in the property sector. In recent years, Hong Kong investors have invested in the renewal of old cities. Hong Kong property developers such as Sun Hung Kai and Kerry Group have invested in the projects of reconstruction of the dangerous old building located in Xidan and Wangfujing. Besides, many Hong Kong developers (including Sun Hung Kai, Cheung Kong and New World) have signed joint ventures contracts to develop shopping centers, as well as commercial and residential complexes in Beijing.

Other major investors came from Korea, US, Japan, Singapore, and Germany.

Since 1996, Beijing has given priorities to attract overseas funds for infrastructure development, industrial restructuring, urban renewal, hi-tech industries and service industries. In the coming years, priority areas for foreign investment will be in the modernization of old enterprises and hi-tech industries, as well as the development of the tertiary sector, including such areas as export promotion, infrastructure development, finance, education, and land development.