Suzhou: A Tale of Two Parks

The years of economic reform have seen Suzhou go from being the fabled "City of Gardens" at the heart of China's fertile "Land of Fish and Rice," to being one of the world's leading "new high-tech cities." Throughout this process of transformation the city has striven for a balance between tradition and modernity, East and West, and tourism and technology. The famed walled gardens are still there, and the landscape of lakes and canals is as lovely as ever. Looking across the city from on high you see a patchwork of neatly ordered houses, with their architecture of flying eaves and corbelled beams, but on closer inspection you find that in street after street the houses are period reconstructions, built by the city government. From outside they retain the appearance of traditional dwellings, homes of "three buckets [one for collecting water, one for emptying the bladder, and one for washing feet] and one stove," but inside they are equipped with all mod cons.

"New District" vs. "Industrial Park"

The average income in Suzhou today is around US$3,200 per year, and in terms of economic scale the city is the seventh largest in China. So what gave this ancient city the impetus for its modern-day rebirth?

According to Xie Min'er, deputy director of the Taiwan Affairs Office of Suzhou City Government: "Suzhou is supported by two major assets-it's like a bird with two wings." On one side of town is the Suzhou New District (SND), and on the other is the Suzhou Industrial Park (SIP). Between them, they form the "wings" that have enabled this ancient city to take flight at the start of the new century.

First let's consider the story of Suzhou New District. It is actually the older of the two development zones, having been approved by the State Council back in 1992 as one of China's 53 National Development Zones for High Technology Industry. Soon afterwards Singapore premier Lee Kuan Yew visited the city and agreed to cooperate in the development of another industrial zone, to the east of the city. This led to the establishment, in 1994, of Suzhou Industrial Park, in the form of an official joint venture between China and Singapore. Progress on the SIP was slowed by a host of difficulties, and meanwhile, outsiders came to assume (unfairly, according to the city government) that Suzhou New District had been set up in a deliberate effort to rival the Industrial Park.

But that's all in the past. On January 1 this year, majority control over the project passed from Singapore to China. The director of the SND took over at the SIP, and the two development zones became formally affiliated. With both "wings" working in harmony, it is expected that Suzhou will reap even greater benefit from the two parks in the future.

The chairman of the SND administrative committee, Zhao Junsheng, says: "From the start there were two chief objectives for the establishment of the New District." First, the city center was too old and crowded, and a new-town area was needed to provide space for housing development. Second-and it was a subsidiary consideration-there was the idea of founding a modern industrial park.

Zhao frankly acknowledges that with the mixing of the two objectives, and given the city's lack of development experience at the time, much of the planning was carried out on the hoof, as the project developed. This led to a certain amount of overlap between the zone's residential and industrial areas. Later, the SND was able to draw on the example of the Singapore-backed development zone across town, with its "integrated planning and integrated development," to revise its own approach.

Taiwanese cluster

With regard to attracting commercial tenants, the SND administrative committee's investment promotion director, Sang Qian, explains that Japanese firms were the primary target from 1992-96, followed by companies from Europe and America. To date, more than 470 foreign enterprises have set up factories in the SND, including 13 of the world's top 100 corporations, companies such as DuPont, Philips, Siemens, Seiko and Fujitsu.

The Asian financial crisis of 1997 and the prolonged slump in the Japanese economy put a brake on Japanese investment in the SND. But then Taiwan's Acer Peripherals (now Acer Communications & Multimedia) arrived, leasing a record 840,000 square meters of land for a new plant. It was then that the SND administration came to realize the potential for investment from Taiwan's IT sector, and the focus for new business shifted from Japan to Taiwan.

Says Sang Qian: "Acer led the way for the Taiwanese, opening the door for a long line of other firms." These included companies like resistor and capacitor giant Yageo Electronics, and printed circuit board makers GCE and Chin-Poon Industrial. Last year Taiwanese motherboard producer Asustek moved into the park, giving the Taiwanese presence a further big boost. The Taiwanese are now a major force in the SND, alongside groupings from Japan and from the West.

As well as moving in numbers into the SND and dramatically raising the park's IT output, the Taiwanese are also spurring development in Wujiang, another town within the Suzhou administrative district. When a group of 14 Taiwanese firms, originally due to supply subsidiary materials for the Acer operation, were blocked from setting up in the SND because their projects weren't deemed sufficiently important, they made a collective move on nearby Wujiang, where costs were lower. The town was quick to learn the benefits of hosting Taiwanese investment and has focused on attracting Taiwanese firms ever since, its latest "scalps" being Arima Computer and Delta Electronics.

The effort to attract Taiwanese investment into Suzhou, combined with the natural clustering tendency of Taiwanese firms, means that in many cases the companies up and down the supply chain are all Taiwanese. Suzhou's indigenous enterprises are still relatively small-scale, and are thought to be three to five years away from breaking into the ring of Taiwanese firms and competing with them.

As one Taiwanese businessman says: "Suzhou is like Taoyuan and Hsinchu, with Shanghai as the local Taipei."

Building a new Singapore

In contrast, Taiwanese companies are few and far between in the Singapore-backed Suzhou Industrial Park. The main factor keeping the Taiwanese back is the SIP's higher level of prestige, and correspondingly higher land costs.

Driving into the SIP along Xinggang Boulevard, you pass through a neat landscape of low, Western-style industrial buildings. There is more sense of space than in the SND, and even the air seems fresher. The park's water supply is piped in from deep under the middle of Lake Tai to ensure that it's clean, and the palm trees lining the boulevard were brought in from Singapore. Enclosed within the park is Lake Jinji, which glitters prettily and adds to the modern atmosphere of the place. It's a far cry from the traditional scenery of the Suzhou environs, and you could be forgiven for thinking you were in Europe.

Your first impression on entering the SIP might be that you have just stepped into a "foreign concession," but in fact there's no mistaking that this is 21st-century China, especially at the weekend when families from the city swarm to the park to take advantage of its green open spaces. Thanks to the region's growing prosperity, some locals are even able to afford houses in the park. This has pushed property prices up, in contrast to elsewhere in China where house-price trends have been downwards for several years now.

Yang Jianzhong, vice chairman of the SIP administrative committee, says that when Singapore premier Lee Kuan Yew first set his sights on this 70-square-kilometer plot of land, his intention was to help transplant the Singapore experience at infrastructure development to Suzhou. To date, the Singaporeans have only developed an eight-square-kilometer "sample" section of the park, but this section alone has made a great impression on people. As to whether there will be a decline in standards now that the Chinese have taken over the reins, Yang says: "Events will prove [what we can do], just wait and see."

Carte blanche

Yang Jianzhong explains that there are over 200 foreign enterprises in the park at the present, including plants set up by 37 of the world's top 500 corporations, and that Singapore's close business ties with the West mean that Western companies account for the park's largest share of foreign investment. On the subject of the Taiwanese, he says that although 75 firms from Taiwan are theoretically represented in the park, the majority of those have not in fact moved into the "China-Singapore Cooperative Zone" and are instead scattered among five towns in the surrounding area, also under the park's administrative jurisdiction.

Because of the high land costs within the park's phase-one development zone-a non-negotiable US$40 per square meter for a 50-year lease, compared with US$25 in Suzhou New District-the park administration has decided to lower property prices to attract more Taiwanese firms, and to offset the difference by raising house prices. Yang Jianzhong says that the Taiwanese share of foreign investment coming into Suzhou has been growing year by year, and the SIP has to conform with the trend of the times, making the Taiwanese one of its primary targets for inward investment. However, in order to differentiate the SIP from Suzhou New District, the SIP will focus more on attracting high-end projects such as those producing TFT-LCD displays and semiconductors, the kind of sectors for which the SIP offers distinct advantages.

"At present there are five IC packaging plants in the park, whereas there are none in the SND," says Yang Jianzhong. The fundamental reason for this is that while the New District is a national-level industrial zone, requiring State Council approval for projects worth over US$30 million, the Industrial Park is China's one and only international-level development zone, with no cap on the value of incoming projects. For the developers of semiconductor wafer plants, the cost of which can run to over US$1 billion, the fact that the SIP has carte blanche to accept such projects means savings in time and money, and less red tape. "Even a company like Shanghai Grace Semiconductor Manufacturing Corp. has to do the rounds in Beijing before it can set up a wafer plant in Shanghai's Pudong New Area," notes Yang with pride.

In a Suzhou state of mind

Another important draw for Taiwanese firms coming to Suzhou, apart from the planning and infrastructure available at both parks, is the city's civilized ambience.

"Suzhou produces brilliant scholars, rather than brilliant generals," says Li Zhongqiu, deputy section chief at the city's Taiwan Affairs Office, "and it doesn't spawn big corporations." Suzhou people are easygoing and attached to their home region, and they prefer to work with people they know well. At the SIP, for example, the rate of staff turnover is only 3%. There is little industrial conflict in Suzhou, and dangers faced by Taiwanese businessmen in Guangdong province, such as kidnapping and murder, are unheard of here.

Suzhou is a highly cultured place, and its famous sons include the likes of Nobel laureate Li Zhendao. To get into university, students in Suzhou have to score a full 100 points higher in the admissions examination than their counterparts in Shanghai, which gives some idea of the competitiveness of the educational environment. In order to attract yet more talent into the area, approximately 300 graduates from top-flight universities in Sichuan are due to be allowed to settle in Suzhou while they look for jobs. This contrasts with the more usual way of doing things in China, where graduates generally have to arrange for a job before they are allowed to move somewhere.

With Suzhou reaching out to the world, and particularly to Taiwan, for investment, Zhao Junsheng hopes that Taiwanese firms will seize the opportunity and hurry to set up operations in the city. Once China joins the WTO, policies favoring Taiwanese companies will have to be phased out, so Taiwanese firms that want to take advantage of their dual status as "foreign investors" and "special domestic investors" had better be quick about it.

That's not to say that the Taiwanese haven't been quick off the mark already, as evidenced by the long string of Taiwanese projects in Suzhou. However, so long as the "no haste, be patient" policy remains in force, companies that jump the gun in their eagerness to build factories in China face condemnation back home. No wonder so many high-tech firms are vacillating between the "new attraction" represented by Suzhou, and the "old love" that is Hsinchu

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Suzhou's development has benefited from the city's location at the hub of an extensive transportation network. The Beijing-Shanghai Railway, the Grand Canal, the Shanghai-Nanking Expressway, and National Highway 312 all pass through the city.

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Attractive and exquisite-two of the first associations that people have with Suzhou. However, there's nothing little about Suzhou. It is 8,488 square kilometers in area-one quarter the size of Taiwan-and is home to 6.9 million people. Administratively it comprises the city proper and six counties. The city area encompasses the old town, and both industrial parks. The surrounding counties are: Zhangjiagang, Changshu, Taicang, Kunshan, Wujiang and Wuxian. The first three of those have natural deepwater harbors, while the county of Taicang was historically known as one of China's granaries. Kunshan is host to a cluster of Taiwanese companies and has come to be known as "Taiwan Town."

Suzhou is linked directly to Shanghai by both expressway and railway, and it takes about one and a half hours to reach Shanghai by car. The city is strategically located at the mouth of the Yangtze River basin, with more than 200 million people living within a 300-km radius, most of them relatively well-off urbanites. It all adds up to considerable market potential, and an opportunity not to be overlooked.

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The leisurely way of life of times gone by can still be seen in Suzhou's old town district.

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It costs up to US$80 million per square kilometer to develop land in Suzhou Industrial Park, the most prestigious of mainland China's industrial zones. The picture shows Suzhou International Hotel, alongside Lake Jinji.

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As evening falls, workers head home from their jobs in Suzhou New District and Suzhou Industrial Park.