'Ghost town' greets new industries
Updated: 2015-07-03 07:14
By Wang Chao and Andrew Moody(China Daily Europe)
Zhengdong New District, a new area built in east Zhengzhou, is witnessing an influx of enterprises to expel the "ghosts", including some emerging and trendy businesses such as e-commerce and retail.
Lyu Bo, general manager of German supermarket group Metro, which is located in Zhengdong, is well qualified to speak about the ghost town story.
When the market of 20,000-plus square meters was opened in 2005, the one-story building, less than 20 meters tall, was the highest structure in the area, Lyu says.
From left: Lyu Bo, general manager of Metro in Zhengdong New District; Yao Hongchao, president of ZGW.com; and Hou Jin, director of human resources with Black Spider E-commerce Co.
Lyu has worked for Metro for eight years. He explains why the company decided to open such a big store in Zhengdong: "When Metro was looking for a place for a new store in Zhengzhou, we learned that this area would be a logistics center in Zhengdong New District, which is exactly what Metro needed to do our business."
He has seen the number of orders double from fewer than 1,500 a day to 3,000 now. The store has expanded to its full capacity, with 16,000 types of products, and its clients are expanding as well - every year more hotels, restaurants and other corporate clients are joining.
On the eastern edge of Zhengdong, not far from Metro, a national e-commerce park is situated among dusty construction sites and roaring machines. ZGW.com is one of the 57 e-commerce companies that have moved in. The online steel trading and financing company, headquartered in Beijing, is the biggest steel e-commerce company in Central China and among the top three of 200 similar companies in China. This year, it is expected to earn revenue of 50 billion yuan ($8.1 billion; 7.2 billion euros).
The e-commerce park is inside the part of Zhengdong called the comprehensive transportation and logistics zone. The second phase of the park, designed to be 510,000 sq m, is already under construction. Companies will be able to move in 2017.
Yao Hongchao, president of ZGW, explains why he moved the main operation from Beijing to Zhengdong: "Zhengdong is the most dynamic area in the whole of Henan province, and the government services are by far the best in the province."
Yao, who was born in Henan, was always willing to move his business back home, but he says he didn't do it earlier because the business environment was not mature enough until he was invited to Zhengdong.
Several years ago, the Zhengdong government offered him reduced tax, a rent rebate and other incentives to attract him to the new area.
Another factor was personnel cost. In a trading company, a lot of work must be handled manually, so staffing costs are significant.
"Here, the salary is much lower because Henan is a place with a big population," Yao says.
The company has moved virtually all of its operations to Zhengdong, leaving only top managers, technicians and higher-level marketing people in Beijing.
More than 90 percent of the company's 400 employees are younger than 30, and 95 percent of them have bachelor's degrees.
Another reason for the relocation is that Henan is a big steel producer, which makes it easier to stay close to suppliers, Yao says.
He only has a small complaint to make. Because the area is still developing, many support facilities are not yet in place, Yao says, especially in the remote edge of the new area. "It is not very convenient to shop, dine or entertain in the town, but it is getting better as more retailers move in," he says.
Another company, a startup named Black Spider E-commerce Co, serves companies in Henan with annual revenue of more than 10 million yuan. The companies that Black Spider helps with e-commerce are mostly from traditional industries such as machinery, says Hou Jin, director of human resources.
Before joining Black Spider, Hou worked in Zhuhai, Guangdong province, for a shoe exporting business. He says he has witnessed the coastal cities' growth momentum slow down.
"But in central and western China, people don't have enough information and the economy has just begun to take off, so there are a lot of opportunities. By starting Black Spider, we can feed e-commerce information to companies in Henan, and we also benefit in this process."
It also provides consulting services to companies in the province. By October, the company expects to have 120 employees.
"Now most major companies in Henan have moved their headquarters to Zhengdong, as the local government offers good services and there are so many financial institutions to support our business."
The company's location, between the east third and fourth ring roads of Zhengzhou, was once considered the eastern edge of the city. But now Zhengdong has grown so much that the suburban area has become a new frontier for the city. "Now the sixth ring road is already on the blueprint," Hou says.
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(China Daily European Weekly 07/03/2015 page7)