suzhou vs wenzhou

Suzhou vs. Wenzhou:Enterprise in China

Presented by Meaghan Barbin

China’s Recent Economic Status

FDI and the “Suzhou model”

Domestic Venture Capital◦ “Wenzhou model”

Enterprise to Progress the Economy

Agenda

2007

• 13% growth

2008

• 9% growth

• 4Q08: only 6.8% growth

2009

Economic OutlookChina swells to 3rd largest economy!

1980s◦ Incentives given to foreign investors◦ Set up Special Economic Zones (SEZs)

“Open Cities”◦ Permit joint ventures using foreign capital

Expectations of FDI◦ Global recession means few are able to invest◦ Is this the time to reform?

Foreign Direct Investment

1980s◦ Industrial reforms allow new model of business◦ Chinese production with foreign financing

Suzhou welcomes foreign investment◦ 2001-2005: Suzhou boasts US$20 billion

Most of any city in China China totaled US$286 billion

◦ 2006: 16,000 companies run on foreign investment

Poverty and pollution

“Suzhou model”

Economic stabilization and sustainable growth◦ Less reliant on foreign direct investment

Financial gains◦ Profit at the point-of-sale◦ Financial gains from ROI in Chinese companies

Future of Enterprise?

2007: Enterprise Income Tax Law Adopted◦ Domestic and foreign investment

All companies will pay 25% tax rate

◦ "It marks the maturity and standardization of China's economic system.” Minister of Finance, Jin Renqing

Domestic Venture Capital

Sources for Domestic VC:◦ Government

◦ Large state-owned, cash heavy enterprises

◦ Private enterprises Wenzhou Donghai Venture Capital Limited

Partnership Initial funds reaching RMB500 million

Domestic Venture Capital

Government◦ Largest source of funding◦ Funds are earmarked for economic guidance

Regional Industry

◦ Rigid management and oversight limits profitability

Private Enterprise◦ Relatively small means◦ Short-term focus on profits and control

Hurdles for Domestic VC

Independently run businesses◦ “Biggest manufacturer of small-scale goods”◦ Little government intervention, little FDI

Private sector makes up 95%

3rd highest disposable income in China

Recession: entrepreneurs seek new enterprise◦ RMB$140 billion of private capital to VC◦ Real estate, mineral, cotton, stocks and energy

“Wenzhou model”

China must foster professional domestic venture capital investments.

Lack of VC management institutions◦ VC firms finance and build business◦ Successful entrepreneurs pursue other asset

classes Stock market Real estate

Future of Chinese Enterprise

Suzhou vs. Wenzhou

China Becomes 3rd Largest Economy

FDI

Setting up in Suzhou

Pollution and the Huangpu River

Corporate Taxation

Domestic VC Sources

Domestic VC Sources Chart

Appendix

My paper

http:/www.france24.com/en/20090114-china-becomes-world-third-largest-economy-overtakes-germany-growth/

News release upon China surpassing Germany

China Becomes 3rd Largest Economy

http://www.hiebs.hku.hk/working_paper_updates/pdf/wp1049.pdf

A paper on China’s FDI policies and how FDI has affected China’s industrial growth

Foreign Direct Investment

http://www.chinaeconomicreview.com/cer/2008_01/Setting_up_in_Suzhou.html

Suzhou welcomes FDI General figures on Suzhou’s FDI

Setting up in Suzhou

http://www.who.int/water_sanitation_health/resourcesquality/wpccasestudy2.pdf

Case study of the sanitary conditions of the Yangtze River basin.

Includes maps of the Huangpu and Suzhou River waterways.

Pollution on Huangpu River

http://www.china.org.cn/english/government/203171.htm

Domestic capital on the same level as foreign, with regards to corporate taxation

China & the WTO

Enterprise – One Tax Rate

http://www.zero2ipo.com.hk/china_this_week/detail.asp?id=7230

Much of domestic VC is expected to come from Chinese government

Sources of Domestic VC

Sources of Domestic VC

http://knowledgenetwork.thunderbird.edu/globalcitizenship/2009/01/30/eyeglasses-cigarette-lighters-and-italian-shoes-in-china/

Wenzhou is explored as a supplier and city of entrepreneurship.

Wenzhou: City of Entrepreneurs

http://www.zibb.com/article/4510961/Wenzhou+Private+Capital+Eyes+VC+PE+Investment

Wenzhou’s private entrepreneurs move to make more profits in the global recession

Wenzhou turns to VC