Chengdu (China): Located on a fertile plain surrounded by mountains which, to the west, lead to the Tibetan plateau, Sichuan is often described as the land of abundance. Its capital Chengdu is an ancient city described by many names — the Hibiscus City, the Turtle City (because of its shape), the Mahjong Capital of the World (you can see people playing mahjong in the streets and tea houses every evening).
Life is supposed to be leisurely and full of contentment, largely because in ancient times the mountains prevented invaders from sacking it, and agriculture was very productive.
Chengdu is also New China’s “Science and Technology Base”. It has the top nuclear and missile research centers and a concentration of heavy precision engineering industry.
But in recent years it has emerged as one of the world’s IT hubs. Every fifth PC in the world is running on a chip processed in Chengdu, as is every second laptop. All the world’s top IT companies, including India’s Wipro and even NIIT, have bases here. Two-hundred seven of the Fortune 500 companies have facilities in Chengdu.
And, the very epicenter of its massive IT industry is the Chengdu Hi-Tech Zone, set up in 1991. The nuts and bolts of this Zone tell the story of how China builds and powers forward its industrial growth.
At its administrative centre, a battery of officials present the case for the Zone. Land is sold by open auction. Rents are regulated and relatively cheap — from 18 yuan per square meter for workshops to 50 yuan psm in the software park. For industries, water is available at 4.3 yuan per cubic meter and electricity at a maximum of 0.8 yuan per kwh. Water charges include wastewater treatment costs. So land use and utilities are dirt-cheap.
Chengdu is connected to the rest of the world by eight highways and has 129 international flight connections, including a flight to Bangalore. Freight charges are low — just 25 yuan per kg to Europe by air and even lower by container via Shanghai, some 1600 kms away. There are connections even to ports on the Yangtze 144 kms away.
But it is in labour costs that the Chinese model clearly gains a decisive advantage. A low skilled new entrant in manufacturing or service sector gets 11107 yuan per year or 926 yuan per month. That is about Rs 8000 or $145 per month.
Clearly, wage rates are much lower than those in advanced countries, but much
more than in India, where the highest available minimum wage would be about Rs 5000 or about $90. In the US, the federal minimum wage is $1740 per month and in France it is about $1734. China’s neighbor, Japan has a minimum wage of about $937 per month.
Official figures supplied by the Zone officials reveal that enterprises contribute only about 14.5% of the employees’ comprehensive social security payments that include medical, pension, injury or maternity benefits. The bulk of it is borne by the government.
In the Zone, the most glaring divide is that between employees of the state-owned and private enterprises. A highly skilled service sector employee in a state-owned enterprise will get 9091 yuan (Rs 79,902) per month while an equivalent worker in the private sector will get just 40% of that — 3738 yuan (Rs 32520). Officials of the Zone were at a loss to explain this mismatch. But they agreed that these figures help attract private investment, especially foreign.
What the Zone officials were not saying is that there are hardly any new jobs offered by the state sector. The private sector has expanded considerably. According to the latest data provided by the State Administration for Industry and Commerce (SAIC) quoted by the Communist party’s official newspaper People’s Daily, the private sector includes more than 10 million private enterprises and nearly 40 million self-employed businesses.
It contributes over 60% of the gross domestic product and creates about 90% of the country’s new jobs.
“Socialism with Chinese characteristics”, as the economy is described by the ruling Communist Party, seems to be rapidly converging with a regulated capitalism — with all its benefits, and all its ills.
Life is supposed to be leisurely and full of contentment, largely because in ancient times the mountains prevented invaders from sacking it, and agriculture was very productive.
Chengdu is also New China’s “Science and Technology Base”. It has the top nuclear and missile research centers and a concentration of heavy precision engineering industry.
But in recent years it has emerged as one of the world’s IT hubs. Every fifth PC in the world is running on a chip processed in Chengdu, as is every second laptop. All the world’s top IT companies, including India’s Wipro and even NIIT, have bases here. Two-hundred seven of the Fortune 500 companies have facilities in Chengdu.
And, the very epicenter of its massive IT industry is the Chengdu Hi-Tech Zone, set up in 1991. The nuts and bolts of this Zone tell the story of how China builds and powers forward its industrial growth.
At its administrative centre, a battery of officials present the case for the Zone. Land is sold by open auction. Rents are regulated and relatively cheap — from 18 yuan per square meter for workshops to 50 yuan psm in the software park. For industries, water is available at 4.3 yuan per cubic meter and electricity at a maximum of 0.8 yuan per kwh. Water charges include wastewater treatment costs. So land use and utilities are dirt-cheap.
Chengdu is connected to the rest of the world by eight highways and has 129 international flight connections, including a flight to Bangalore. Freight charges are low — just 25 yuan per kg to Europe by air and even lower by container via Shanghai, some 1600 kms away. There are connections even to ports on the Yangtze 144 kms away.
But it is in labour costs that the Chinese model clearly gains a decisive advantage. A low skilled new entrant in manufacturing or service sector gets 11107 yuan per year or 926 yuan per month. That is about Rs 8000 or $145 per month.
Clearly, wage rates are much lower than those in advanced countries, but much
more than in India, where the highest available minimum wage would be about Rs 5000 or about $90. In the US, the federal minimum wage is $1740 per month and in France it is about $1734. China’s neighbor, Japan has a minimum wage of about $937 per month.
Official figures supplied by the Zone officials reveal that enterprises contribute only about 14.5% of the employees’ comprehensive social security payments that include medical, pension, injury or maternity benefits. The bulk of it is borne by the government.
In the Zone, the most glaring divide is that between employees of the state-owned and private enterprises. A highly skilled service sector employee in a state-owned enterprise will get 9091 yuan (Rs 79,902) per month while an equivalent worker in the private sector will get just 40% of that — 3738 yuan (Rs 32520). Officials of the Zone were at a loss to explain this mismatch. But they agreed that these figures help attract private investment, especially foreign.
What the Zone officials were not saying is that there are hardly any new jobs offered by the state sector. The private sector has expanded considerably. According to the latest data provided by the State Administration for Industry and Commerce (SAIC) quoted by the Communist party’s official newspaper People’s Daily, the private sector includes more than 10 million private enterprises and nearly 40 million self-employed businesses.
It contributes over 60% of the gross domestic product and creates about 90% of the country’s new jobs.
“Socialism with Chinese characteristics”, as the economy is described by the ruling Communist Party, seems to be rapidly converging with a regulated capitalism — with all its benefits, and all its ills.
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