LI Donghong - PPT2 - China's Construction of Industrial Parks

Department of Innovation, Entrepreneurship and Strategy LI Donghong
Topic Two：
China’s construction of
industrial parks
Li Donghong
Department of Innovation and Entrepreneurship and Strategy, School of Economics

and Management, Tsinghua University
Institute for Global Industry, Tsinghua University
lidh@sem.tsinghua.edu.cn
8610-62772193; 86-13426498317
July 29, 2016-1

01 Review of historic development
Content Operation mode and case

02 study
03 Analysis
July 29, 2016-2

Review of historic development of

Chapter 1 China’s industrial parks
July 29, 2016-3

1.1 37 years of development
1979 1984 1988 1992 1994 Now

• 1979：Shekou Industrial Park in Shenzhen, the first outward economic development
zone, was established, which is also the first park mainly operated by enterprises
• 1984：Ministry of Commerce (MOC) established the first high-level economic
development zone—Dalian economic development zone
• 1988：Ministry of Science and Technology (MOST)established the first national high-
tech industrial park
• 1992：General Administration of Customs(GAC) began to authorize national bonded
zones, MOC began approving national border economic cooperation zones, GAC
began approving national export processing zones
• 1994： Tuspark, the 1st technology park of key university in China
• Now : By 2015, China has approved 364 national industrial parks. Among them, 145
are national high-tech zones, and 219 are national economic development zones.
July 29, 2016-4
1.2 4 stages of development
Diversified
development
Development 2009-Now
Exploration and
features innovation 1.The rise of innovative
2003-2008
Development parks
1992-2002 1.Multifunction of the 2.Multiple function of the

Incubation
industries parks
1978-1991
1.Driven by both 2.Diversified development 3.Parks integrate together
1.Guidance of national government and of emerging industries
policy enterprises 3.Industrial clusters develop
2.Pure industrial parks 2.Chain oriented in a coordinated manner
away from cities
development
3.Production elements
are gathered inefficiently 3.Industrial parks and cities
4.Low cost oriented are linked together during
the development
July 29, 2016-5
Chapter 2 Operation models and case study
July 29, 2016-6

Operation models
model 1 model 2 model 3
Government-led Enterprise-led University or research

institutes
July 29, 2016-7

2.1 Government-led（1）
 meaning：
It is also called management committee-led model, and is the most
popular one in the construction of industrial parks in China. Under such
model, a provincial or municipal team is usually established to be in
charge of major decisions and coordination in the parks
 features：
Government plays a big role, with very strong administrative functions
July 29, 2016-8

2.1 Government-led （2）
Management model
2. In terms of organizational
1. Set up management committee
structure, a labor committee (or Party
for the industrial park as the
committee) and the management
representative office of the local
committee cooperate to conduct
government to be in charge of
indirect legal and political
economic management and some
management on the enterprises, to
administration, including projects
establish sound socialized service
approval and location planning
system and provide services for
enterprises
July 29, 2016-9


1. Government can provide macro control for overall planning and
 advantages and landscape.
2. It can help the park to get more favorable policies and finance.
disadvantages 3. It can use the authority of the government to coordinate the
relations between the park and other organizations and
advanta departments to improve efficiency.
ges 4. When attracting investment, local government can minimize
investors’ doubts and improve the success rate.
5. Sound socialized service system can facilitate enterprise
development.
1. Market regulation can hardly play its role as it lacks flexibility,

innovation and vigor
2. Government has time lag in planning, the managers are not
disadvan sensitive enough to development direction and trend
tages 3. The government may take over to improve the economic benefit
and competitiveness
4. It may lead to excessive expansion of organizations, and one
cannot tell enterprise and government apart
July 29, 2016-10

Case study—
Suzhou
industrial park
It was approved in 1994 by the State Council, and was jointly developed by
Chinese government and Singaporean government, and is an important
cooperation between the two countries
July 29, 2016-11


Introduction of
the park
• In 2015, the annual major economic indicator
projected 30% of growth rate, bringing in 207
billion RMB for regional GDP, a year-on-year
growth of 8%.
• The first batch of eco-industrial demonstration

.
park, and the first batch of new industrialization
demonstration base.
• Top of all the industrial parks in China in terms of

foreign investment utilization for several years,
2nd in terms of complex development index
(CDI), and top in terms of competitiveness.
July 29, 2016-12

2.1 Government led（6）
Reasons for success • The park divides

enterprises with
manage
• Finance ment
government
mode; • Learned from Singapore
• Technology
• Talents pro- government organization
business
policy and management
experience
• Learned from Singapore
city planning experience
July 29, 2016-13

2.1 Government led （7）
Operation model
Operator：China-Singapore Suzhou Industrial Park Development Co

Function ： Responsible for land development and operation, property
management, project management, council, industrial and infrastructure
development, and investment and launching of enterprises in the park
July 29, 2016-14

2.1 Government led （8）
Project
Investment Management
Sell or rent investment Government
and capital and service
projects/land and subsidy
operation fees
operation
July 29, 2016-15

2.2 Enterprise-led（1）
 Meaning：
Enterprises serve as the developer and manager of the parks
to plan, develop and manage them. The enterprises are all
responsible for the capital pool and use, land development,
infrastructure construction, land use and transfer, property
operation, establishment of enterprise, investment
environment creation, attraction of domestic and foreign
capital and technology, product trade and the process of
comprehensive business. The major goal is to gain profit.
July 29, 2016-16

2.2 Enterprise-led （2）
Major functions of enterprises
• Investor of capital for land development, infrastructure construction, etc.

• Positioning and attracting investment
• Settle comprehensive equipment
• Adjust industrial landscape according to government’s industrial planning
• Set up long term system to guarantee the benefits of farmers and to ensure
the employment of farmers who lost their land
July 29, 2016-17


 advantages & 1. It can help solve the financial problems.
disadvantages 2. It can help promote the operation and management service
level, improve the quality and benefit of development and
advanta
projects, enhance competitiveness and sustainable momentum
ges
3. It can help with technical innovation.
4. It can help attract business and investment.
5. It can help separate enterprise and government to promote
government’s ability of macro control and monitoring the
market.
1. Development enterprises lack necessary administrative

disadva power of the government.
ntages 2. The enterprises may pursue excessive profit and ignore the
long term benefit of the regional economic development.
July 29, 2016-18

Case study—Dalian
software park of
Yida Group
It is a typical enterprise led park, one of the first “private fund supported by the
government”. Dalian software Ltd. Co was responsible for land development,
property construction, attracting business and human resource added service, etc.,
while the government was responsible for planning and approving, policy support,
leading the business attraction and infrastructure construction, etc.
Since 1998, when Dalian software park was developed and operated till the end of
2015, the park development operation business has expanded and covered many
cities and parks, including Dalian software park, Dalian eco-tech innovative city,
Wuhan Guanggu software park, Suzhou high tech software park, Tianjin Binhai
Service Outsourcing Industrial park, etc.
July 29, 2016-19

Dalian
Tianjin Shenyang Dalian software park
Beijing Tianjin Binhai Multifunction Yida information
Hangzhou Multifunction Service Outsourci al residential software park
al residential ng Industrial park program Dalian Tengfei
China Smart
Chengdu program software park
information industrial
Dlian Tiandi
Multifunctional park
Dalian eco-tech
residential Hangzhou Yingfeite
innovative city
program technology park
Suzhou
strategic landscape Suzhou high-tech software park
Suzhou Yangcheng lake digital
Yida plans to use 5 to 10 cuture innovative industrial park
years to consolidate the Suzhou Yida Shangjinwan
economic park
foundation of Dalian, and
Suzhou Tiancheng building
quickly expand to first
class cities like Beijing, Shanghai Shanghai
Shanghai, Shenzhen, and
plan for Beijing-Tianjin- Shanghai Yida north
Hebei, Yangzte River Delta Hongqiao Innovation city
and Pearl River Delta Shenzhen Wuhan
regions. It plans to ShenZhen Haike
Changsha
explore deeply 10 cities, Wuhan software city
xingSinovac Strat Changsha
Wuhan Guanggu
operate 20 parks, and to egic Emerging technology city
software park
become the best industrial park
commercial park operator Shenzhen Yida
in China, and to use the Innovation city
One Belt One Road
initiative to explore
overseas markets.
Development
• Dalian software park is a typical enterprise led park. It is a
core industrial park of Dalian’s higher education and
机场 research.
• It was awarded “demonstration region of China’s

service outsource base” and “special contribution to
innovation of Chinese software”. In 2009, it was awarded
大连老城区 “golden prize for livable community in the world” by
.
UN, and was the only Chinese commercial park to receive
this award.
软件园
连
大区 • Dalian software park attracted more than 700 companies
海湾景
星 from home and abroad and more than 100 thousand
employees, including more than 60 enterprises from top
500 enterprises like IBM and HP. The value of the park
accounts for more than 50% of income from software
information industry in Dalian.
July 29, 2016-21


Reasons for
success
Internation
alization
Private fund
supported Integration
by of industry,
government universities
and
research
July 29, 2016-22

Operation model
Land reorganization
 planning
Land development
 infrastructure  customize
buildings
 park design
Communication with Launch schools

operation
the government model  nuesoft college
 Positioning  cultivate talent
 Acquiring land 5 6
Property management
Industrial  Integrate  maintain and add value
policies  reduce cost
support  Finance
July 29, 2016-23

Profit sources
Leasing of property
management Housing development
Profit sources
Government
Professional service
subsidies
and council
Equity investment in
enterprises that enter
the park
July 29, 2016-24


Case study—Gu’an City of China Fortune land
development(CFLD)
CFLD was established in 1998, and is a leading operator of industrial cities. By 2015,
CFLD has planned more than 20 cities in the country, covering more than 25 million
square meters. Its model of “government support, enterprise operate and win-win
cooperation” has received full recognition from all levels of government. Gu’an city
is an outstanding example.
July 29, 2016-25


Development state
strategic developme
park
region nt stage
invest in Gu’an Park in Langfang, Dachang Park in Langfang, Huailai Park in Heibei, Sujiatun in
operation Shenyang, Xianghe park in Langfang
Beijing-Tianjin- start Fengtai region, Wen’an park, Changli park, Bazhou park, Yongqing park, Baiyangdian
Hebei construction technology park in Baoding, Renqiu region
planning and
Fangshan in Beijing, Jinshanling in luanping, Zhulu in Hebei, Tiexi in Shenyang
positioning
invest in
Wuxi of Jiangsu
operation
start
Jiashan of Zhejiang
Yangtze River construction
Delta
planning and
Fengjing of Shanghai, Zhenjiang of Jiangsu, Lishui of Nanjing, Renshou of Sichuan,
positioning
Pengshan of Sichuan, Lai’an, Hexian and Shucheng county of An’hui
planning and
One Belt One
positioning Jakarta district of Indonesia, Haryana of India
Road
July 29, 2016-26


Shenyang regional
metropolis
• Eco-tech innovation city
of Shenshui
• Shenyang equipment
manufacturing park
supported by China and
Germany
Beijing-Tianjin-Hebei
• Guan industrial new • Baiyangdian technology
city of Baoding
Yangtze river Delta city
• Chaobaihe economic • Xiongxian industrial city
development zone of • CFLD innovative center
• Gaotie new city of Jiashan • Fangshan sport and
• Jinshanfengjing region of Shanghai Dachang
• Xianghe industrial city recreational town
• Riverside city of Wuxi South • Huailai north
• Wenquan new district
• Technology city of Lishui, Nanjing of Bazhou international eco city
• Chuzhou Laian hanhe city of Anhui • Economic • Zhulu region
• Renshou region of Meishan, development zone of • Beidaihe region of
Sichuan Wenan Qinhuangdao
• Pengshan region of Meishan, • Renqiu region • Jinshanling eco culture
Sichuan • Konggang city of tourism economic zone
• Hexian region of Maanshan, Anhui Langfang of Shenping
• Shucheng region of Liuan, Anhui • Changli industrial park
July 29, 2016-27

Gu’an industrial new city
The industrial city model proposed by CFLD is in line with the development trend. The
PPP model provides comprehensive solution to the industrial park development and
regional economic development, and is an outstanding example of new cities.
July 29, 2016-28

Park introduction
• Gu’an city is an outstanding example of

CFLD’s development. It is located at 50
miles south of Tian’anmen Square. There
are 5 industrial clusters in the park:
aerospace, bio-medicine, electronic
information, auto spare parts, and high end
equipment.
• By the end of June, 2015, the city has
attracted about 440 enterprises, with
projects worth about hundreds of billions
of yuan. CFLD invested more than 27
billion yuan in it.
July 29, 2016-29

Changes of economic growth under the PPP

model in Gu’an in 2013
15.97 billion
4.014 billion
2.103 billion
0.12 billion
regional GDP fiscal revenue
July 29, 2016-30


Reasons for
success
North
South
advantages in talent
advantages in
with Tsinghua
development
University, Peking
space in
University and
Yongqing, Bazhou
Zhongguancun
attract business in a
professional and
PPP model global manner to
operation in replace national
bidding, accumulate
Gu’an high end projects to
achieve something
great
July 29, 2016-31

CFLD communicates with the local government

1 and researches the capital credit and operation
state so as to build sound cooperation
Decide on region and area suitable for park

operation model 2
development, and signed contract with the
government to entrust development
3 The government conducted full entrust with CFLD

in terms of development in cooperating regions,
and provide relative resources for cooperation
regional development and construction
July 29, 2016-32

major business and profit model

Property industrial development
development service
 Cost plus model: for non-profit construction,
land organization investment in infrastructure
and public facilities, the government will pay
companies the construction fees, including the
construction cost and investment return.
 division of bidding and investment attraction:
the proportion is 45% of increased investment
of projects in the year of entering the entrusted
land
region
organization
 Property development income: usually 30% of residential area
the park is used as residential area, and it is the in the park
major source of income comprehensive and
 Others: infrastructure operation and basic infrastructure
construction, property
maintenance fees, etc.
management and
others
July 29, 2016-33
2.3 University and research institutes led （1）
 meaning：
With research and talents of universities and research institutes as the core,
universities and research institutes set up specialized organizations and
personnel to manage the academies of science and incubations. By
integrating universities and research institutes and parks, we can facilitate
sharing of resources. The park’s development can bring out innovative
talents, new knowledge, new thinking modes, new technology and new
management model, and accelerate the application of knowledge resources
into industrial fruits.
July 29, 2016-34

management model：
multiple
universities,
one park
one
university,
one park
July 29, 2016-35

management model：
It is mainly managed by the university by establishing technology park
model of “one
management companies with independent legal persons. Tsinghua
university, one park” University and Peking University’s parks both belong to this category.
 Advantages:
• Launched by the university, and is  Disadvantages:
easy to start. • It is hard to divide the
• Human resource, property and responsibilities, rights and
finance all depend on the same profits between the university
university, and it is easy to and the park as it lacks
coordinate and manage. market mechanism
• The application of scientific • The parks are self-protective
research and incubation of and exclusive, so it is hard to
technology companies become share resources
easier. • The park lacks openness,
• It can encourage the teachers and integration, competitiveness
students, so as to promote and socialization
discipline development and
improve education quality.
July 29, 2016-36
management model：
They are mostly managed by management committee composed of
model of “multiple local government officials, but universities play a substantial role.
universities, one park”Nanjing Gulou national universities technology park and Hefei
national universities technology park both belong to this category.
 Advantage:  Disadvantages:
• Diverse operators • Too many departments
• With proper intervention of involved, and is hard to
the government, they can coordinate and manage
improve efficiency of resource • Unclear division of
use responsibilities and rights of
universities, thus increasing
the operation cost and
reducing profit
• It is hard to coordinate
government and universities
in terms of profit distribution
July 29, 2016-37

Case study--Tuspark
Tuspark was built in 1994, and is one of the first university based parks in China. It is
also recognized by MOST and MOE as the first technology park of top universities. It
covers an area of 25 hectares, with building area of 700,000 square meters and 20
buildings
July 29, 2016-38

background
centralized research resources chaotic management of school-based enterpris
explosive growth of school-based enterprises
July 29, 2016-39

Development state
清华大学
Tuspark attracts more than 1000 technology
and research companies, and is developing into
清华清 a comprehensive park with high-tech enterprise
中科技园华北京语言大学
关南 start-up cluster, transnational enterprise
村路
大华清嘉园学
街
地质大学
院 research institutes cluster, financial investment
北四环西路路
中国科学院
保福寺桥 cluster, agency service cluster, etc. Now there
北京航空航天大学
翠宫饭店
are 550 enterprises in the park, among them
北三环西路 380 are technology enterprises with revenues
over 40 billion yuan and more than 2000 IPR
applications per year.
July 29, 2016-40

2.3 University and research institutes led （8)
government Reasons for

02 support success
rich resources of
universities and 01 good location
research institutes
03
rich resources features and advantages:

in finance and ”gather, integrate, focus and fusion”
agents 04
05 sound
infrastructure
July 29, 2016-41

Operation
运营模式
model
Operator: Tus Holdings Ltd. Co (previously Tuspark development center set

up in Aug, 1994).
Function: responsible for the development, construction, operation and
management of Tuspark, with commercial property business and technology
investment as two side-wing businesses.
July 29, 2016-42

Government
Rent or sale of 4 subsidy
land 1
Profit
model
3
Fees charged for
services provided
2
Incubation + investment
July 29, 2016-43

2.3 University and research institutes led（11）
Future profit
未来盈利方向
sources
Direct investment: including angel investment,

1 venture capital investment, equity investment,
securities investment funds and property funds, etc.
Credit: through debt financing and accounting

2 companies to provide petty loan for enterprises
and to play the role of technology banks
Investment bank business: tech enterprises

3 provide services like M&A, project finance, capital
management, and investment council, etc
Mixed operation: promote the integration of

4 trust, technology bank, finance and leasing and
investment bank
July 29, 2016-44

Analysis of the development of

Chapter 3 Chinese industrial park
July 29, 2016-45

3.1 Functions and roles
1. regional “special area” 2. pilot projects for reform
3. new industrial cluster 4. new economic growth point
July 29, 2016-46

3.2 Core mechanism
local government transnational companies
capital, talent, technology, land and favorable policies
development company of the park
factory, shop, residential area, entertainment facilities, municipalities, school
domestic companies university/research institutes
July 29, 2016-47

3.3 Profit model

Model Revenue items Content
the land is for rent only to acquire added value; to acquire

added value of land
land at low cost in the name of the industry
land rent rental income of industrial housing
operation commercial property development, rent and sale of
commercial property
commercial property
residential property rent and sale of residential property
industrial technical service public technical platform
finance, council, training, information, government relations,
value industrial development service
incubation, knowledge, logistics, etc
added
services accommodation service catering, entertainment, shopping and healthcare, etc.
property management (sewage processing, water supply,
park operational service
heat supply, electricity, gas supply)
industrial investment VC/PE
financial professional company investment IPO invest in professional companies and achieve IPO
investmen explore ways to convert assets into shares without allowing
t capital operation of industrial land
direct sales
capital operation of existing industrial property share, trust fund and securitization
property operation
first level development of land, BOT operation, joint
uncultivated land development
model development of the land with shares
output cultivated land renovation changes of original property and functions
entrusted operation share tax income or service income
July 29, 2016-48
3.4 Main challenges
model at the same level, provide favorable policies competitively
profit property profit drops, housing prices fall
debt large scale construction brings heavy debt
waste waste of land and repeated construction
July 29, 2016-49

3.5 Prospects
 geo-/regional advantage + enterprise advantage
 different industrial choice
 innovative integration of industry and finance
 innovation of profit model
 strong union
July 29, 2016-50

Thank you all！
July 29, 2016-51

LI Donghong - PPT2 - China's Construction of Industrial Parks

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Department of Innovation, Entrepreneurship and Strategy LI Donghong

Department of Innovation and Entrepreneurship and Strategy, School of Economics

July 29, 2016-1

01 Review of historic development

Content Operation mode and case

July 29, 2016-2

Review of historic development of

July 29, 2016-3

1.1 37 years of development

1979 1984 1988 1992 1994 Now

1.2 4 stages of development

1992-2002 1.Multifunction of the 2.Multiple function of the

Chapter 2 Operation models and case study

July 29, 2016-6

model 1 model 2 model 3

Government-led Enterprise-led University or research

July 29, 2016-7

Government plays a big role, with very strong administrative functions

July 29, 2016-8

2.1 Government-led （2）

July 29, 2016-9

2.1 Government-led （3）

1. Market regulation can hardly play its role as it lacks flexibility,

July 29, 2016-10

2.1 Government-led （4）

July 29, 2016-11

2.1 Government-led （5）

• The first batch of eco-industrial demonstration

• Top of all the industrial parks in China in terms of

July 29, 2016-12

2.1 Government led（6）

Reasons for success • The park divides

July 29, 2016-13

2.1 Government led （7）

Operator：China-Singapore Suzhou Industrial Park Development Co

July 29, 2016-14

2.1 Government led （8）

July 29, 2016-15

July 29, 2016-16

2.2 Enterprise-led （2）

Major functions of enterprises

• Investor of capital for land development, infrastructure construction, etc.

July 29, 2016-17

2.2 Enterprise-led （3）

1. Development enterprises lack necessary administrative

July 29, 2016-18

2.2 Enterprise-led （3）

July 29, 2016-19

2.2 Enterprise-led （5）

• It was awarded “demonstration region of China’s

July 29, 2016-21

2.2 Enterprise-led （6）

July 29, 2016-22

2.2 Enterprise-led （7）

Communication with Launch schools

July 29, 2016-23

2.2 Enterprise-led （8）

July 29, 2016-24

2.2 Enterprise-led （9）

July 29, 2016-25

2.2 Enterprise-led （10）

July 29, 2016-26

2.2 Enterprise-led （11）