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Chengdu zone at heart of car parts industry

By Chen Tian (Global Times)

10:43, June 08, 2013

A technician works at an automotive parts factory inside the city's Longquanyi district on May 31. Photo: Chen Tian

Newly planted trees, carefully decorated gardens and artificial rivers make the Longquanyi district in southeast Chengdu city, Sichuan Province, a public park-like place that attracts hundreds of downtown residents for dining and nightlife.

However, serving as a destination for affordable leisure is not Longquanyi's only role. The district has also been the center of a different and rapidly-growing industry in southwest China: the car manufacturing and auto parts industry.

The Economic and Technological Development Zone in Longquanyi is a 56-square-kilometer area that hosts three production bases of FAW-Volkswagen Automotive Company, a plant of Chengdu Toyota Boshoku Automotive Parts Company, a factory of Chengdu Gaoyuan Automobile Industries Company, and more than 200 other industrial enterprises.

The zone, approved by the State Council in 2000, has generated a total output of 24.82 billion yuan ($4.05 billion) in the first four months of 2013, an 18 percent increase from last year, and it has produced a total tax revenue of 45.76 billion yuan during that same period, up 40.8 percent from 2012.

"This zone has laid the foundation for Chengdu and Sichuan to become the national center for automobile production and consumption," said Li Hua, a senior engineer and the standing deputy director of the zone's administrative committee.

The zone is able to produce 1.25 million vehicles a year and is also conducting research on electric cars, according to the administrative committee.

Massive-scale production

The Chengdu branch of FAW-Volkswagen Automotive launched its first manufacturing base, which specialized in producing the Volkswagen Jetta, in Longquanyi in 2007, hoping to tap into the abundant market potential of southwest China, said Liu Junrong, president of the branch.

"There's huge demand in Chengdu and the entire Sichuan in purchasing cars," said Liu. "The rate of vehicle ownership is high, but it could be even higher."

Within six years after the first base was launched, two other bases focusing on higher-end automobiles, such as the New Jetta, Audi A3 and seventh-generation Golf, haven been put into operation.

"We now produce 350,000 cars out of these three bases each year, and a new car is completed and comes off from the assembly line every 60 seconds," said Zhou Guanglin, the head of production scheduling of the bases.

FAW-Volkswagen's fast expansion is a result of Chengdu's abundant talent pool, Liu said.

"Chengdu has many universities that are more than able to feed our demand for well-educated human resources in company management as well as engineering," he said, adding that the three bases now produce 1,500 cars a day, and they plan to produce 450,000 vehicles annually beginning next year.

Wang Lixin, deputy manager of the marketing and strategy department of Chengdu Toyota Boshoku Automotive Parts, which produces car seats, doors and other auto parts, told reporters that the company has been benefiting from the highly efficient local government since they began operations in 1999.

"We hold meetings with the government every day, and the officials do try to solve most of our problems as soon as possible," Wang said.

What's in a name?

Although Chengdu has over 3 million vehicles on its roads as of late May, as reported by Chengdu Business Daily - a figure topped by only Beijing - the Sichuan capital still faces obstacles to faster growth.

Because Chengdu is not well-known among overseas automakers and is shifting from labor-intensive to capital-intensive industrial structure, the city is having a hard time attracting quality projects to the economic development zone.

"Chengdu is experiencing a dramatic change in its industrial structure," Li Hua said. "Attracting capital investment has always been a challenge for us."

Liu told reporters that FAW-Volkswagen does not have a research and development center in Chengdu, and it does not plan to launch one in the near future. The lack of strong research institutes and infrastructure for other modern service is challenging Chengdu's economic and technological development zone, Li Hua said.

"Our modern service industries are not concentrated enough; we are missing vital links on car manufacturing to make the zone a full-fledged production chain," he noted.

The modern service industry is an emerging sector with a new service pattern and management system that is focused on modern technologies and information network technologies in particular.

One of China's signature vehicle production zones is the Anting Shanghai International Automobile City, located in Shanghai's northeast Jiading district. The zone is known for its research center, which covers 2.6 square kilometers and hosts the Shanghai Automobile Industry Company's Automotive Engineering Research Institute and the research center of German auto parts producer Schaefller Group.

However, Li Hua was confident that Chengdu will catch up in the future. "We have laid a solid foundation by attracting world-class automakers to the zone and many great developments will follow. It will become a first class automobile production center worldwide in two to three decades."

Branding boost

Yet still, Sichuan is late in the game of manufacturing cars and auto parts compared with China's coastal regions and northeast provinces, Li Hua told reporters on May 31, adding that the southwest province is in need of a boost in recognition.

The three-day Fortune 2013 Global Forum, which closed in Chengdu on Saturday, offered such a boost by gathering senior executives of the world's largest companies to discuss trends and forces shaping the global economy and businesses.

Chengdu is the fourth city in China that was chosen to host the conference. Shanghai held the conference in 1999, Hong Kong in 2001 and Beijing in 2005.

The attendees included Li Shufu, the founder and chairman of Zhejiang Geely Holding Group, which acquired Volvo Cars from Ford Motor Company in 2010. Geely, China's largest privately owned car firm, launched Chengdu Gaoyuan Automobile Industries Company, which located to the Longquanyi zone in 2007.

A roundtable on the future of transportation, presented by Volvo Cars, was held Friday. The discussion centered on sustainable transportation, with a focus on how road, rail, air and water transportation should evolve.

With many high-level executives attending, the forum helped to put Chengdu and its economic development zone in the spotlight and catch the attention of investors from around the world, Li Hua said.

"We are not just eyeing those investments made by top 500 companies, but also the technology and talent resources offered by small and medium companies," he said. "We also hope companies with which we are already cooperating, such as Volkswagen and the Kobelco Construction Machinery, will put more investments into the region."

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