Spotlight Lands on Binhai CBD as Nexus of New Tianjin FTZ

TIANJIN, China--()--Since Deng Xiaoping launched the economic reform and opening up of China in the late 70s, much of the success story has focused on the South and East of China. Shenzhen sprung up to become a powerhouse of production across the water from Hong Kong, while Shanghai has marched towards becoming an international finance center.

“Secondly, it is the largest trading-service port in the Beijing-Tianjin-Hebei Area. If the integration plan for the region reaches its next tipping point, Tianjin will inevitably become a key gateway for international-oriented trading and investment activities in the north of China.”

However, with the recent launch of China’s “One Belt, One Road” policy and a new wave of FTZs, the Northeast port city of Tianjin - which itself has seen unparalleled economic growth - is set to become the poster star for the next chapter of China’s economic rise.

Tianjin, along with Guangzhou and Fujian, was recently announced as being part of the second-wave of FTZs launched by the Chinese government. The first was Shanghai’s, launched in 2013 in the city’s Pudong New Area.

The Tianjin FTZ will be established in the city’s Binhai New Area. At the center of this is the Binhai CBD, which is part of a cluster of sibling zones within Binhai New Area that will serve as the engine for the Tianjin FTZ, attracting capital and talent, and stimulating economic activity and growth through the Tianjin-Hebei-Beijing area and beyond.

Those zones around the 46.8-sq-km CBD include TEDA, Dongjiang Port Zone, High- and New- Tech Zone and Lingang Economic Zone. It gives CBD unparalleled proximity to full-circle industrial clusters in those zones. Some of these are among China’s longest-standing industrial parks, covering sectors such as electronics, telecom, automobile, pharmaceuticals, machinery manufacturing, new energy and new material.

“I think so many tenants are attracted to the CBD because of the trends they see in us,” said Mr. Zheng Weiming, Chairman of TBNA CBD’s Administrative Committee. “These tenants are market-oriented and are actively pursuing development opportunities. This makes me optimistic that the development will be along the same lines as that of Shenzhen and Pudong in Shanghai. The progress in product innovation, business models and service brands will help instill a lot of dynamism and robustness. It will also serve as a showcase for national financial innovation and service sector development.”

As with the other FTZs, the Tianjin FTZ will feature relaxed customs, trade and foreign exchange rules. Company registration will be simpler and have fewer requirements.

It will also employ the “negative list” initiative, which clearly states in which sectors foreign-backed enterprises are barred from investing. The number of items on the list is now at 122, down from the 139 featured on the 2013 list. It is expected to fall below 100 by the end of the year.

China's Ministry Of Commerce recently issued 20 measures aimed at facilitating and managing foreign investment in the new FTZs and the expanded Shanghai zone.

These include removing the requirement that foreign enterprises must put their contracts on government record in order to register their businesses. However, foreign firms in the zones will still be required to submit annual reports.

One of the main functions of the zones is to act as a testing and proving ground for economic liberalizations. If successful, these could be expanded across the country.

According to Niu Shaofeng, Bureau Chief, Financial Markets Policy Bureau at CBD, advantages of the Binhai CBD include the large amount of preferential policy support it enjoys from the government. “The CBD has been built from the ground up to provide state-of-the-art buildings, facilities and infrastructure. In turn, its mature service system, including schools, healthcare, recreation and commercial services, will help attract and retain talents,” Niu said.

Affordable housing options will also help in this respect, with residences aimed at white collar workers, serviced apartments, and special discounts for those with particularly in-demand talents.

Meanwhile, the opening of the Yujiapu Station on the Beijing-Tianjin inter-city high-speed rail line has cut commute times between the capital and CBD to just 45 minutes. By the end of August, there will be more than 30 pairs of high-speed trains commuting between downtown Beijing and Yujiapu each day.

The area’s low cost of living is also attractive to both individuals and companies, with costs in Tianjin as little as a third of those in competing areas such as Shanghai.

All these advantages are reflected in the growth stats for the CBD. In 2014 alone, it attracted 987 new tenants, up 262% YoY. Incremental registered capital amounted to RMB 13.1 bln with YoY growth of 152%, while industrial output was RMB 7.5 bln, up 31% YoY.

And this growth is accelerating. In 2015 Q1, new tenants amounted to 501, equivalent to 2.8 times the number of new tenants in the same period of the previous year. Of these new tenants, 36 had registered capital in excess of RMB 50 million. Actual GDP growth rate for the period was 70% YoY.

A more recent batch of 28 tenants to register covered key sectors such as headquarters, innovative financial services, international trading and R&D services, and e-commerce and management consulting. Together, they had total registered capital of more than RMB 11 bln. These companies include sector leaders such as Hua Insurance, ranked among the top four insurers in China with over 400 branches across the nation. In 2014, Hua Insurance’s total policy income was RMB 71.5 bln. The company started its operation in Tianjin CBD in 2012. Other new tenants include KinCheng Bank of Tianjin (KCB), which specializes in serving science and technology micro-, small- and medium-sized enterprises and internet finance service providers; Lion Capital Management, which as of March 2014 managed 37 public funds and assets exceeding RMB 65 bln; China Citic Financial Leasing, which is committed to providing leasing services to clean energy, smartcity building, healthcare for the elderly, and other burgeoning industries.

Of such tenants, Mr Zhang Ruigang, Vice Governor, Binhai New Area said, “I believe they will capitalize upon the unprecedented historic opportunities triggered by such initiatives as Beijing-Tianjin-Hebei integration, the Tianjin FTZ, and the cross-Bohai economic development blueprint.”

Meanwhile, five pillar industries have been prioritized for development in the CBD. They are innovation-oriented financial services; headquarters; new generation ICT; cross border trading and e-commerce; and the cultural, media and creative industries.

The CBD is also ideally placed to play a pivotal role in the Chinese government’s new One Belt, One Road initiative, which seeks to build infrastructure and promote trade through the countries and regions along the historic Silk Road belt, as well as promote a maritime corridor boosting trade between China’s East Coast with ports in the Indian and Mediterranean Oceans.

“Tianjin is a strategic pillar city in this national master plan,” said Zheng. “It is home to the fourth-largest port in the world. In terms of rail, heading west, the railway system can reach Europe directly. Heading north, the road system connects Tianjin with Mongolia and Russia.”

These advantages were echoed by Mr. Cao Zhixiu, Post-doctoral Researcher at the Research Institute of Binhai Area Development, Nankai University. He pointed out that Tianjin is currently the only port in China that operates three direct routes to Europe.

“Characterized by its free-trade port model, Tianjin is uniquely positioned to support international-trade warehousing and logistics, harbor handling, port real estate development, and comprehensive services,” Mr. Cao said. “Secondly, it is the largest trading-service port in the Beijing-Tianjin-Hebei Area. If the integration plan for the region reaches its next tipping point, Tianjin will inevitably become a key gateway for international-oriented trading and investment activities in the north of China.”

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Release Summary

With the launch of China’s new wave of FTZs, the Northeast port city of Tianjin - which has seen unparalleled growth - is set to become the poster star for the next chapter of China's economic rise.