suzhou vs wenzhou

27
Suzhou vs. Wenzhou: Enterprise in China Presented by Meaghan Barbin

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A presentation on establishing Chinese enterprises through joint ventures, foreign direct investment and local venture capital investments. Part of a broader series of presentations and research I put together while studying at Shanghai University in 2009.

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Page 1: Suzhou vs Wenzhou

Suzhou vs. Wenzhou:Enterprise in China

Presented by Meaghan Barbin

Page 2: Suzhou vs Wenzhou

China’s Recent Economic Status

FDI and the “Suzhou model”

Domestic Venture Capital◦ “Wenzhou model”

Enterprise to Progress the Economy

Agenda

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2007

• 13% growth

2008

• 9% growth

• 4Q08: only 6.8% growth

2009

Economic OutlookChina swells to 3rd largest economy!

Page 4: Suzhou vs Wenzhou

1980s◦ Incentives given to foreign investors◦ Set up Special Economic Zones (SEZs)

“Open Cities”◦ Permit joint ventures using foreign capital

Expectations of FDI◦ Global recession means few are able to invest◦ Is this the time to reform?

Foreign Direct Investment

Page 5: Suzhou vs Wenzhou

1980s◦ Industrial reforms allow new model of business◦ Chinese production with foreign financing

Suzhou welcomes foreign investment◦ 2001-2005: Suzhou boasts US$20 billion

Most of any city in China China totaled US$286 billion

◦ 2006: 16,000 companies run on foreign investment

Poverty and pollution

“Suzhou model”

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Economic stabilization and sustainable growth◦ Less reliant on foreign direct investment

Financial gains◦ Profit at the point-of-sale◦ Financial gains from ROI in Chinese companies

Future of Enterprise?

Page 9: Suzhou vs Wenzhou

2007: Enterprise Income Tax Law Adopted◦ Domestic and foreign investment

All companies will pay 25% tax rate

◦ "It marks the maturity and standardization of China's economic system.” Minister of Finance, Jin Renqing

Domestic Venture Capital

Page 10: Suzhou vs Wenzhou

Sources for Domestic VC:◦ Government

◦ Large state-owned, cash heavy enterprises

◦ Private enterprises Wenzhou Donghai Venture Capital Limited

Partnership Initial funds reaching RMB500 million

Domestic Venture Capital

Page 11: Suzhou vs Wenzhou

Government◦ Largest source of funding◦ Funds are earmarked for economic guidance

Regional Industry

◦ Rigid management and oversight limits profitability

Private Enterprise◦ Relatively small means◦ Short-term focus on profits and control

Hurdles for Domestic VC

Page 12: Suzhou vs Wenzhou

Independently run businesses◦ “Biggest manufacturer of small-scale goods”◦ Little government intervention, little FDI

Private sector makes up 95%

3rd highest disposable income in China

Recession: entrepreneurs seek new enterprise◦ RMB$140 billion of private capital to VC◦ Real estate, mineral, cotton, stocks and energy

“Wenzhou model”

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China must foster professional domestic venture capital investments.

Lack of VC management institutions◦ VC firms finance and build business◦ Successful entrepreneurs pursue other asset

classes Stock market Real estate

Future of Chinese Enterprise

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Suzhou vs. Wenzhou

China Becomes 3rd Largest Economy

FDI

Setting up in Suzhou

Pollution and the Huangpu River

Corporate Taxation

Domestic VC Sources

Domestic VC Sources Chart

Appendix

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My paper

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http://www.hiebs.hku.hk/working_paper_updates/pdf/wp1049.pdf

A paper on China’s FDI policies and how FDI has affected China’s industrial growth

Foreign Direct Investment

Page 21: Suzhou vs Wenzhou

http://www.chinaeconomicreview.com/cer/2008_01/Setting_up_in_Suzhou.html

Suzhou welcomes FDI General figures on Suzhou’s FDI

Setting up in Suzhou

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http://www.who.int/water_sanitation_health/resourcesquality/wpccasestudy2.pdf

Case study of the sanitary conditions of the Yangtze River basin.

Includes maps of the Huangpu and Suzhou River waterways.

Pollution on Huangpu River

Page 23: Suzhou vs Wenzhou

http://www.china.org.cn/english/government/203171.htm

Domestic capital on the same level as foreign, with regards to corporate taxation

China & the WTO

Enterprise – One Tax Rate

Page 24: Suzhou vs Wenzhou

http://www.zero2ipo.com.hk/china_this_week/detail.asp?id=7230

Much of domestic VC is expected to come from Chinese government

Sources of Domestic VC

Page 25: Suzhou vs Wenzhou

Sources of Domestic VC

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http://www.zibb.com/article/4510961/Wenzhou+Private+Capital+Eyes+VC+PE+Investment

Wenzhou’s private entrepreneurs move to make more profits in the global recession

Wenzhou turns to VC