By WU MEILING & XIAO QIAO

The Kerry Center Hotel.

TOWARDS the end of 2004, one of the world’s largest international consultancy firms, PricewaterhouseCoopers (PWC), set up shop in Beijing’s central business district (CBD). The site it selected is the company’s largest property in the Asia-Pacific Region. Executive chairman of PWC China Silas Sin Shun Yang says that Beijing is the engine room driving China’s economic development, and PWC’s presence in the nation’s capital would indicate that it plans to channel more funds towards China. Other international financial institutions have also mushroomed in Beijing’s CBD, in the city’s Chaoyang District. By October 2004, 17 of the 24 foreign bank branches and 68 of the 91 foreign bank representative offices in Beijing appeared in and around the CBD. Six of the world’s ten most competitive banks have entered Beijing, and more are expected to follow this year, as China enters the latter stage of the post-WTO transitional period, and accelerates opening up of its financial sector.

Evolution of Beijing’s CBD

Chaoyang District is located in eastern Beijing, and was once referred to as the “eastern suburban district.” It has since become the largest of all Beijing’s urban and suburban districts, and its population exceeds 1 million. All foreign embassies, other than those of Russia and Luxembourg, are located in Chaoyang, and this area has the city’s densest foreign population. During the era of the planned economy, Chaoyang was famed for producing vegetables and grains. In today’s era of economic globalization, however, modern skyscrapers tower over the streets where the vegetable seller once plied his trade. In 2004, Chinese web portal Sina.com conducted an online poll to determine Beijing’s top ten new landmarks, and 80 percent of the 40 candidates were located in Chaoyang District. One third of the capital’s star-rated hotels, and more than half of its five-star hotels are located in Chaoyang. Each year, more than 100 international exhibitions and 40,000 international conferences are held in venues in this district. As the area gradually became home to more and more foreigners, the Panjiayuan antique market and Sanlitun Bar Street emerged, and are now thriving cosmopolitan hotspots.

In 1993, Beijing Overall City Planning proposed the establishment of the CBD. Enthusiastic real estate developers jumped in and built large numbers of office blocks and hotels. However, these new buildings were mostly scattered around Beijing. Ke Huanzhang, chief architect of Beijing’s CBD, said that if one-fifth of these projects were concentrated in one district, it would resemble another successful CBD in China – Shanghai’s Lujiazui. Five years later, a 4-square-kilometer area in Chaoyang District was earmarked to become the capital’s Central Business District.

A night view of Jianguomenwai Street.

Now that Beijing’s CBD has taken shape, there is a continuing boom in construction of office buildings and luxurious apartment buildings in Chaoyang. Real estate developers are undaunted by the large number of construction projects – they are confident that supply will never exceed demand. There are three price ranges: high-end property comes at 18,000-23,000 yuan per square meter, middle-end space is valued at between 13,000 and 18,000 yuan per square meter, while low-end property in this area costs less than 13,000 yuan per square meter. According to a market research report by DTZ Debenham Tie Leung, a leading real estate advisory company in the Asia-Pacific Region, in the third quarter of 2004, the average vacancy rate of A-class office buildings in Beijing was 13.4 percent, while in the CBD the figure was just 3.8 percent. Meanwhile, rent went up by an average of 5.0 percent.

Li Shixiang, Party secretary of Chaoyang District, says, “The basic functions and development trends of all CBDs in the world follow a similar pattern. Their leading industry is generally a modern service industry with finance and insurance at the core. The orientation of Beijing’s CBD is also to emphasize its function as international financial zone through developing the financial sector, thereby making it a regional or even global economic policy-making center and financial control center.” Li adds, “The CBD should become Beijing’s international financial service zone, a concentration of modern culture, a modern office location for the world’s top 500 enterprises, and a leading contributor to economic growth.” Li is not in favor of short-term successes or quick profits. He says, “Those who invest in projects that match our industrial planning will see very positive services; while those who normally invest in get-rich-quick projects will be persuaded to change their minds.”

Beijing’s CBD aims to encourage both domestic and international business powerhouses to establish their headquarters, research and development centers, as well as operation and procurement centers in the Chinese capital. The financial services sector there generates some 16-17 percent of Beijing’s total GDP growth, a similar statistic to that of Shanghai’s CBD. Since the year 2000, Chaoyang District has held an annual International Business Festival, aimed at bolstering links between Beijing’s CBD and the world. During the festival, high-ranking officials from Chinese and foreign governments and CEOs of global companies are invited to participate in theme exhibitions, forums, and investment promotion conferences. The festival has become a window on the growth of Beijing’s CBD and the improvement in related government services.

Actions Taken by the District Government

Jingguang Center.

The emerging CBD also brought about the industrial restructuring of Chaoyang District. While the financial sector remains the area’s pillar industry, its high-tech sector has also seen significant developments. The district’s Wangjing Sci-tech Park and Jiuxianqiao Electronic City High-tech Park are now two of Beijing’s major high-tech zones. Well-known enterprises, including the BMW Auto Electronic Technology Research and Development Center and the Sony Ericsson Asian Research and Development Center, have recently burst onto the scene in the Wangjing Sci-tech Park.

Chaoyang District’s modern service industry generated revenues of 69.69 billion yuan in 2003, making up 73 percent of the district’s service sector, and 94 percent of the CBD’s total. This is three percentage points higher than the international average, and 13 and 42 percentage points higher than the municipal and national averages respectively. Such impressive statistics indicate that as a CBD, Chaoyang District is now in line with international standards. However, the district government says there is more work to be done, and local officials are striving hard to further boost information services, computer services, software development, scientific research and education.

Li Xiangwei, former vice-chairman of the board of Hefeng Fund Management Co., Ltd., a joint venture with Dutch finance giant ABN Amro, says that when an international financial institution or transnational company chooses its offices in the Chinese mainland, the price is not the most important factor. It is transport and the environment that are the first considerations. Li Shixiang, Party secretary of Chaoyang District, says the development of the CBD’s infrastructure and a fluid traffic network is his top priority. Five of Beijing’s seven radiating expressways run through Chaoyang District, forming a network with the city’s ring roads. The district government has come up with a three-year plan to iron out any creases in the road system, and upgrade the network in and around the CBD. When the project is completed, the CBD will have one urban expressway, two trunk roads, six sub-trunk roads and 80 branch roads. What’s more, an additional four subway lines will have a great impact on improving the traffic situation in Beijing’s CBD.

The Computer Partner World.

Chaoyang District’s acid test will come during the 2008 Beijing Olympic Games. Apart from the construction of the necessary sports facilities, the district has set higher standards for the efficient use of water resources, waste management, air pollution control, landscaping, and traffic facilities.

Compared with many other districts of Beijing, Chaoyang District boasts a good natural environment. The sky often seems bluer in Chaoyang, and its greening rate, which includes the city’s largest public park, has reached 41 percent. Chaoyang is now working hard to improve its ecological environment. Two significant projects in the pipeline are the 7.6-square-kilometer Olympic Forest Park and the Wenyu River Ecological Corridor. These projects will be financed by the invitation of international bids.

A Service-oriented Government

Luxurious office buildings and apartments do not guarantee a successful CBD. The investment environment plays a large role in deciding just who occupies these properties. According to statistics released by the Beijing Economic and Social Development Research Institute, just 24 international companies have set up their regional headquarters in Beijing, compared with 42 in Shanghai. As many companies perceive Beijing’s soft investment environment as inferior to Shanghai or Guangzhou, some have uprooted their regional headquarters from the Chinese capital and transplanted them elsewhere.

Lujiazui, Shanghai’s CBD, has a well-established business culture, excellent business service facilities, and an increasing trend towards internationalization. However, as China’s political, cultural and economic capital, Beijing has certain advantages over Shanghai. Li Yang, president of the Institute of Finance of the Chinese Academy of Social Sciences, says, “All policies are made in Beijing. So each province, autonomous region and municipality has an office in Beijing, as have various large businesses. Even if a company moves outside Beijing, it will retain an office or an agency in the city. This indicates that Beijing’s CBD has unique advantages.”

However, in terms of establishing a successful “headquarters economy,” that includes all commercial and economic benefits resultant from an operational headquarters, this advantage is far from enough. Lu Hao, vice mayor of Beijing, points out that economic development cannot rely on headquarters that have no substantial economic activities or that do not generate direct economic returns. It vitally imports that the municipal government provides guidelines on developing the headquarters economy and works out policies that attract companies and their headquarters. An internationalized CBD needs the government to provide stable, transparent and fair policies, as well as a city management system and a level of service that is in line with international standards.

Compared with other CBDs, the number of international financial institutions in Beijing’s CBD is low in view of its status as the birthplace of national financial policies. Beijing’s CBD currently has 160 international financial institutions, compared with 156 in Shanghai’s CBD and 380 in New York’s CBD. Roger K. Heng, executive officer of the Bank of Montreal in China, says, “The CBD provides the venue for a convergence of foreign-funded financial institutions. A CBD needs reliability, quality, predictable polices, and overall planning to attract the flow of people who can do good business.”

Party secretary Li Shixiang says, “The formation of an industry needs a specifically targeted service from the government. As government officials of this district, we are not blindly optimistic -- we feel extraordinary pressure. The influx of international giants is an overall, multi-faceted test of the CBD’s investment environment and the government’s efficiency, a test of all leaders, policy-makers and functionaries. The government should provide corresponding policy services for investors, especially in infrastructure facilities, which are an investor’s basic guarantee of economic returns.” Chaoyang District officials have streamlined policies and procedures governing company registration and certification, access to information, legal support, and the protection of intellectual property rights.

Annual inspection of foreign-funded enterprises has been shortened from 10 to three working days, and taxation registration has been reduced from five working days to just a few minutes. New records systems make it much easier for enterprises to change their address or appoint a new chairperson.

Relevant government departments have also compiled tax payment and credibility ratings to be referenced by financial institutions in the CBD, thereby reducing their policy-making risks. The government aims to safeguard banks’ interests by cracking down on and punishing bad debtors, and by ensuring safe capital operations and transactions. It has formed a tight safety net geared towards the protection of lenders’ rights.

The district government also holds hearings and releases regular, timely information on policies and measures concerning investors and their interests. Roger Ericsson, president of Sony Ericsson Mobile Communications (China) Co., Ltd., commends highly the CBD’s facilities and services, saying that they have greatly benefited his company’s development.