The logical choice

Updated: 2012-10-19 08:37

By Hu Haiyan (China Daily)

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 The logical choice

A bird's eye view of Zhangjiagang Free Trade Zone. Provided to China Daily

 The logical choice

Dow Corning (Zhangjiagang) Co Ltd chose Zhangjiagang for its convenient location. Provided to China Daily

A small city founded 25 years ago is making its mark on the map with help from the logistics industry

When Shu Hui recalls his job transfer in 2000 from Beijing to Zhangjiagang, a city in East China's Jiangsu province, he says it was a choice that needed a lot of determination and courage.

"None of my friends could understand why I was doing it, because Zhangjiagang lagged a long way behind Beijing then, in economic development and living standards. There was not even a supermarket in the city at the time," says the general manager of Dow Chemical Zhangjiagang Co Ltd.

After living and working in the city for more than 10 years, Shu says it was the right move to make, not only for him but for Dow Chemical, one of the world's largest chemical products manufacturers.

According to the company's annual report, its sales grew 12 percent to $60 billion (45.8 billion euros) last year, of which $10.5 billion came from the Asia-Pacific market.

Peter Sykes, president of the company in Greater China, says that up to 43 percent of sales in the Asia-Pacific region last year were in China, the second-largest international market for the company.

With Zhangjiagang's excellent location, efficient infrastructure and logistics network and forward-looking leadership, it has played a vital role in Dow Chemical's expansion in China, Shu says.

Dow Chemical's Zhangjiagang base, set up in 2000 as its largest manufacturing site in China, had turnover of 2 billion yuan ($319 million; 246 million euros) last year, making it a key production base for many high-end products, such as epoxy resin, which is used in plastics and adhesives.

"Zhangjiagang has had tremendous success in the past 10 years, especially in logistics, which is continuing to drive our company's development, Shu, 37, says.

"What we have achieved since launching here proves that coming here was the right choice."

Dow Chemical's rapid development in Zhangjiagang has gone hand in hand with the city's efforts to develop itself into a modern international logistics and freight center.

Located on the southern bank of the lower reaches of the Yangtze River, Zhangjiagang has enjoyed phenomenal economic growth since it was founded in 1986.

The logical choice

Named after Zhangjiagang Port, one of the important freshwater trade ports along the Yangtze River, the city covers about 1,000 square kilometers and has a population of 900,000. Last year its per capita GDP was $33,000, on par with developed countries such as Portugal.

Zhangjiagang is now seeking new growth engines, including logistics, as the country grapples with the challenges posed by sluggish foreign trade.

According to local government figures, exports rose 2.2 percent to $8.38 billion in August year-on-year, while imports fell 0.8 percent to $13.45 billion.

Zhangjiagang is not alone with its problems, says Tao Fengde, deputy director of the city's service industry development office.

"With rising labor costs and a sluggish market, companies need to move to the higher end of the value chain if they want to make more profit. It's the same with a city. That's why we are making huge efforts to boost our logistics industry."

Those efforts are helped in no small way by the Yanjiang Expressway, Wuxi-Zhangjiagang Expressway and the 204 Highway, which run through the city, helping it form what has been branded a "one-hour traffic network" to Shanghai, Nanjing, Suzhou and Wuxi in the heart of the Yangtze River Delta area, one of the country's most developed regions.

It has abundant port resources. Along the banks of the Yangtze River, stretching over 72 kilometers, there are 112 berths, of which 65 have handling capacity of more than 10,000 metric tons.

Last year the value of the city's logistics industry output was 9.3 billion yuan, 29 percent higher than the previous year.

The area's favorable logistics have attracted a number of foreign investment projects, and several well-known companies, including Dow Corning and Dupont from the United States, now have operations here.

Dow Corning, which makes silicone-based products and is the world's largest supplier of silicone, is a joint venture between Dow Chemical Co and Corning Inc. Since 2006, with its manufacturing partner, it has set up four plants making silicone materials in Zhangjiagang.

The project, with a total investment of $1.8 billion, is one of the largest programs globally for Dow Corning.

"With a pyrogenic silica plant, a siloxane plant and two downstream finishing plants, this is an integrated silicone manufacturing site," says Cai Yuhao, deputy general manager of Dow Corning Zhangjiagang's site.

Given the size of the investment, Dow Corning invested a lot of time and effort in choosing the location before coming to Zhangjiagang, Cai says.

"For Dow Corning, an international expansion like this would be regarded as an aggressive move. It was crucial that we found a safe, professional entry point. Zhangjiagang met those requirements."

The main reasons for Dow Corning choosing Zhangjiagang was the convenient transport and the local government's efficiency, he says.

"The majority of our products have been sold in the domestic market. Most of our business is for China, which is how we've always grown. The Zhangjiagang base, by virtue of the good transport, particularly with the ports, offers big savings with logistics."

Cai graduated from Tsinghua University, majoring in the chemical engineering in 1995, then studied at Michigan Technological University, obtaining a master's degree in 1997.

After working for Dow Corning in the US for about 10 years, he returned to Zhangjiagang in 2007, helping with the construction of the plants.

Cai, 40, a native of Beijing, says he is impressed by the efficiency and entrepreneurial spirit of Zhangjiagang's government in attracting businesses.

"Even on Saturdays government officials work and meet investors, something you would be hard pressed to see elsewhere in the world," he says.

With several big chemical-manufacturing companies moving to the area, the Yangtze River Chemical Industry Park was set up, giving another fillip to the chemical industry's growth.

The logical choice

The steel industry is another local economic pillar, and it too owes its growth to the rapid development of the logistics industry, says Shen Wenrong, chairman of Jiangsu Shagang Group, China's largest private steelmaker.

"The good transport here helps us control our logistics costs, which has been a key reason for us in developing our business," Shen says.

The group brought in revenue of 207.5 billion yuan last year, an increase of 16 percent on the previous year, and it is ranked 346th in the Fortune Global 500 for 2012.

Gong Li, an analyst with Industrial Securities, based in Fujian province, says booming local industries are also serving as powerful engines for Zhangjiagang's logistics industry.

"The logistics industry cannot be separated from trade. Several industries, including metallurgy, petrochemicals, food and oil, construction materials and energy sectors, have a strong foothold in the city, which will give a further boost to the logistics industry," Gong says.

The presence of Dow Corning and Dow Chemicals in Zhangjiagang has drawn world-class logistics services providers to the city, including Royal Vopak of the Netherlands, the world's largest independent tank storage provider.

Since 2007, it has already put in $64 million yuan of the planned $140 million to set up its Zhangjiagang branch in the Yangtze River Chemical Industry Park of Zhangjiagang Free Trade Zone. The branch is the first wholly owned subsidiary of Royal Vopak in China.

Global Logistics Properties, Singapore's major logistics service provider, also plans to establish its presence here. It will build a logistics zone covering 80,000 square meters by the end of next year.

"It will be one of the largest in our global network," says a local senior manager of the company's Zhangjiagang branch.

As the epicenter for East China, one of the major trade centers and a key port on the Yangtze River, Zhangjiagang is ideal for logistics, she says.

"That, combined with our expertise in logistics, will give local and multinational companies in the country better options," says the manager who has more than 10 years' experience in logistics.

However, the development of logistics in Zhangjiagang also faces many challenges.

The demand for logistics has shrunk as some export-oriented businesses have reduced production and cut spending in response to weaker markets, says Liu Zheng, an analyst with Citic Securities of Beijing.

Shu of Dow Chemical points out that Zhangjiagang port is inland, and some chemical raw materials cannot be transported on the river because of safety concerns.

"But challenges come together with opportunities. The constraint forces us to further expand our product lines and capacity and move up the value chain to produce more energy-efficient products," he says.

"As we aim to produce high value-added products, we are looking for better logistics services. Zhangjiagang meets these requirements with its comprehensive logistics network."

The company operates its own wharfs in the Zhangjiagang Port, which can handle 45,000-ton freighters, he says.

Shu, a Beijinger graduated from Tsinghua University in 1998 and in his current position since 2010, says Zhangjiagang allows him to make the most of his potential.

"As a student majoring in chemical engineering, if you work in first-tier cities such as Beijing you rarely get the chance to head a team building and operating large-scale plants like this base in Zhangjiagang," he says.

"At a class reunion 10 years later, it is no exaggeration to say that my career was one of the most colorful and fulfilling. Zhangjiagang is a paradise where aspiring people can realize their dreams."

(China Daily 10/19/2012 page12)