China Market Guide

Chongqing
(Municipality)

(1) General Background

Chongqing has a total area of 82,400 sq.km. Total population stood at 31.0 million based on China's 2000 population census.

Chongqing is the youngest but the largest centrally administered municipality in China. The establishment of Chongqing municipality represents a major breakthrough of China's initiatives to speed up economic development in the central and western regions. It is called the locomotive of southern and western China economy. The Yangtze River's Three Gorges Project will be very important in the development of Chongqing's economy.

(2) Industries



In 2002, Chongqing's industrial output totaled RMB122.8 billion, an increase of 19.8% over 2001. Chongqing is one of the six old industry bases of China. It is one of the four major automobiles and one of the main military production bases of China, at the same time it is one of the nine biggest iron & steel production centers and one of the three major aluminum production bases of China. In terms of output in 2002, the leading industries include automobiles and transport equipment, metallurgical and chemicals. Other major industries include food and food processing, machinery, medical products, textiles, electronics and building materials.



Polyvinyl Alcohol Fiber, Natural Gas, Red Vitriol Natrium, Motorcycles, Glacial Acetic Acid, Microwave Communication Equipment, Refined Methanol and Motor Vehicles are the major products with large share of all the country. Each product accounted for at least 10% of the national total in 2002. The highest, Polyvinyl Alcohol Fiber, reached up to 34.3%.

Chongqing's industry is dominated by heavy industry. While output value of the light industry had just a growth rate of 15.4% in 2002, heavy industry grew by 23.2% to RMB74.9 billion, accounting for 61% of the total. Besides, heavy industry obtained more foreign investment than light industry. In 2002, the ratio of foreign capital to total capital in the heavy industry was 9.5%, and that in the light industry was 5.2%.



State-owned and state-holding enterprises played an important role in Chongqing's industrial development. However, as a result of sate enterprises reforms, the share of state enterprises, particularly large-sized enterprises has dropped. Though large-sized enterprises accounted for more than 50% of Chongqing's total industrial output in 2002, small-sized enterprises recorded the most rapid growth, thanks largely to the development of the private enterprises and the township enterprises in recent years. In 2002, output of small-size enterprises grew by 30.2% to RMB34.1 billion.

Private enterprises grow rapidly since 1990. In 2002, output of private enterprises increased by 34.4%, 14.6 percentage points more than the average. Many private enterprises have developed a strong brand name in their specialized areas and become market leaders in China. These include Longxin, Zongshen, and Lifan.

(3) Foreign trade

Total imports and exports amounted to US$2.0 billion in 2002. Exports declined by 4.7% to US$ 1.1 billion. Major export markets were Vietnam, the US, Japan, Iran, Germany, South Korea, and HK, of which Iran has become the largest market of Chongqing's motorcycles. Exports to Brazil, Thailand, Hong Kong, Canada and Italy increased by more than 100% in 2002.

Imports decreased by 6% to US$ 0.9 billion in 2002. Major import sources were Japan, the US, South Korea, Germany, Sweden and Taiwan. Imports from Iran, Burma, India, The Philippines, Hong Kong, and the US recorded a rapid growth. Machine and electronic products accounted for 76.8% of Chongqing's total imports and 56.7% of total exports in Jan-Sep 2003. Major imports included machinery, automobiles and parts, driver parts and steel, which accounted for 80.8% of total imports and developed faster than others in Jan-Dec 2003. For example, imports of automobiles grew by 106 times to US$ 40 million. Major export goods were machinery, chemical and related products, vehicles and related transportation equipment. Paper, jewelry, mineral materials, mechanical and electric equipments are the four fastest growing exports in 2002.

Ordinary trade (non export-process trade) is the main pattern of foreign trade in Chongqing, which accounted for 88.8% of Chongqing's total foreign trade in 2002. Processing trade, the second important, recorded a rapid growth rate of 35%. Contracted projects with foreign countries grew by more than 47 times in 2002, the fastest growth among all patterns of trade.

Chongqing's foreign trade was mainly conducted by state-owned enterprises. But contrary to the rapid growth of foreign trade of FIE and private enterprises, the share of stated-owned enterprises in foreign trade continues to decrease. In Jan-Sep 2003, imports of stated-owned enterprises accounted for 49.4% of the total, dropped to a level below 50% for the first time, 8.5% percentage lower than the previous year. FIEs' imports reached US$ 2 billion, increased 6.1 percentage points from 40.1%. Meanwhile, foreign trade conducted by private enterprises recorded remarkably rapid growth -- 260% for imports and 80.8% for exports.

(4) Foreign investment

The contracted amount of FDI increased by 13.5% to US$ 0.5 billion in 2002. In Jan-Sep 2003, FDI increased further and the number of contracted FDI above US$10 million reached 18, a number that is larger than any whole year figure recorded before.



An increasing number of multinational companies have set up operation in Chongqing. These include Nokia, ABB, Ericsson, American Standard, Rockwell, Honda, Suzuki, Isuzu, Yamaha, Mobil, China Bank Group, Hutchison Whampao, Gold Lion Group and Samsung. Reportedly, more and more existing foreign companies have committed in investment expansion in recent years. For example, BP, giant petrochemical company in England, reinvested RMB1.2 billion in 2003.

Hong Kong is the largest source of investment. By end-2002, there were 1,522 HK-invested projects with contracted and utilized foreign investment of US$2.6 billion and US$0.5 billion, accounting for 46.1%, 49.1% and 17.1% of the municipality's total respectively. Other major investors included the US, Japan, the UK, Taiwan and Singapore. Investment from Australia, UK, Thailand and Singapore has developed faster in recent years.

Foreign investment mainly flows into Chongqing's secondary sector, accounting for 78.2% of FIEs' contracted amount and 67.9% of FIEs' utilized amount in 2002. Areas that attracted the largest share of foreign investment included industry, construction, real estate and social services.

The Chongqing government would like to attract foreign investment in the following five areas: transportation, hydropower station, charged wire fence, construction and real estate. It is noticeable that construction has become attractive to investors with the fastest growth in 2002.

To boost development of the central and western regions in China, the State council has granted further tax incentive to foreign-invested enterprises (FIEs) in China. Under the existing policy, FIEs are entitled to a three-year tax reduction and exemption. The new policy allows foreign-invested enterprises in the central and western regions to enjoy another three years of preferential tax rate when the current preferential term expires. The tax rate can be further reduced to 10% if an enterprise is proved to export more than 70% of its annual output in terms of value.

(5) Consumer Market

Retail sales of consumer goods reached RMB 76.3 billion in 2002, increased 9.1% from 2001.



Chongqing is the retail center of southern and western China. The retail industry of Chongqing is very competitive, particularly with the establishment of a number of local and foreign retail enterprises including Carrefour from France, Metro from Germany, the local company-Beijing Gome, and the two famous indigenous retailer-Chongqing General Trade Group as well as Chongqing Department Store Co, Ltd.