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Invest Hangzhou: Inormation Technology | 1
Content
Preace 3
Industrial overview 5
Major industrial segments 8
Investment environment 14
About Hangzhou 20
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Invest Hangzhou: Inormation Technology | 3
Preface
This report aims to provide an overview o the investment climate in Hangzhou, Zhejiangprovince, or investors interested in China.
Hangzhou, the capital city o Zhejiang province, was once regarded as the Best Zhou (anancient Chinese administrative unit) in southeast China. As a pivotal city in the Yangtze River
Delta, Hangzhou contributes towards the rapid growth o the economy. From 2005 to 2010,Hangzhous gross domestic product (GDP) surged rom RMB 294.4 billion to RMB 594.6
billion, representing a compound annual growth rate (CAGR) o 15.1%. The proportion othe tertiary industry also climbed rom 44% to 49% over the period.
The industrial structure o Hangzhou has evolved over recent years. The cultural and creative
industry, fnancial services, e-commerce, sotware and IT services, Internet o things (IOT),and the tourist industry are becoming the key drivers o economic growth. The Inormation
Technology (IT) industry has been expanding ast in Hangzhou. In 2010, revenue rommajor activities in the IT industry amounted to RMB 192.8 billion, rising by 36% over the last
year. Hangzhou plays a key role in Chinas IT industry.
Hangzhou has won the recognition o the government and investors or its remarkableachievements in economic development. For six straight years rom 2005 to 2010, Hangzhou
has been rated by Forbes magazine as the best mainland city or doing business. In 2009,Hangzhou was ranked frst in the World Banks survey o investment climates in 120 Chinese
cities. In 2010, Hangzhou was rated frst in the China Institute o City Competitiveness
rankings o the Top 10 Chinese Cities with the Best Investment Environment.
In a ast-changing market like China, various enterprises and industries may fnd themselves
in dierent situations. It is recommended that investors who are operating or planning tooperate in China should seek the latest inormation and specifc advice rom experienced
proessional consultants, and conduct due diligence when appropriate. This report aims toprovide inormation about the investment climate in Hangzhou through our independent
analysis o publicly available inormation. It should not be used as a substitute or adequatedue diligence beore any investment.
Sources o inormation are indicated in the report. We would like to thank the Hangzhou
Municipal Foreign Trade and Economic Cooperation Bureau or its kind assistance. This reportadopts an exchange rate o USD 1 = RMB 6.57 (based on the Bank o Chinas benchmark
rate on 14 March 2011), and includes data up to March 2011.
Sources: Hangzhou National Economic and Social Development Report 2010 ; hzstats.gov.cn; Hangzhou Municipal Information Office; China
Daily website (http://www.chinadaily.com.cn/dfpd/zhejiang/2010-10-13/content_998674.html); Zhejiang Online (http://3n.zjol.com.cn/05sn/system/2011/01/24/017257961.shtml); chinacity.org.cn (http://www.chinacity.org.cn/csph/csph/59201.html)
2011 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in China.
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Scale and industrial structure
Foreign investments
Industrial overview
In 2010, revenue from major activities in the IT industry amountedto RMB 192.8 billion, rising by 36% over the last year. According toan article on the China Daily website, Hangzhou is the only city inChina that is the base for the national IT industry, national softwareindustry, national integrated circuit design industry, servicesoutsourcing industry and high-tech industry at the same time.
2011 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in China.
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6 | Invest Hangzhou: Inormation Technology
Scale and industrial structure
Scale
The IT industry in Hangzhou includes e-Com-merce, software and IT services, and Internetof things (IOT), as well as sectors such asintegrated circuit design, digital TV, communica-tions, etc.
In 2010, revenue from major activities in the ITindustry amounted to RMB 192.8 billion, risingby 36% over the last year, and achieving aCAGR of 10.2% from 2006 to 2010.
In 2010, there were approximately 2,000 ITenterprises with a headcount of about 165,000,which is 12,000 more than that in 2009.
Industrial structure
Software and IT services, IOT and e-Commerceare the major sectors driving the developmentof the IT industry in Hangzhou. In 2010, therevenue from major activities of each of thesesectors accounted for 62.4%, 15.6% and 5.7%respectively of the IT industry as a whole.
1,3061,457 1,432 1,417
1,928
0
500
1,000
1,500
2,000
2,500
2006 2007 2008 2009 2010
RMB100million
e-Commerce
5.7%
Software
and IT
services
62.4%IOT15.6%
Others
16.3%
Revenue from major activities in the ITindustry, 20062010
IT industrial structure, 2010
Sources: Hangzhou Municipal Information Office; cena.com.cn, 2008
2011 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in China.
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Invest Hangzhou: Inormation Technology | 7
Sources: hzstats.gov.cn; Development Plan of Internet of Things Development in Hangzhou in 20102015 ; smejs.gov.cn, 2011; xiashanet.com/
(http://www.xiasha.com/xiashaqiye/2010/07/2291.html)
Foreign investments
Increasing influx of foreign investments into Hangzhou, especially in the software and ITservices industry
In 2010, the Hangzhou Municipal Government approved the establishment of 545 enterprises withforeign investments, channeling capital of USD 4.36 billion. The CAGR of total foreign investmentsfrom 2005 to 2010 was 20.5%.
For the first six months of 2010, newly contracted foreign investments in Hangzhous services indus-try amounted to USD 2.01 billion, of which USD 1.38 billion was attributed to emerging industriessuch as information transmission, computer services and software development.
Software and IT services play a significant role in foreign invested industries. In the first six months of
2010, 53.6% of the operating revenue from the IT industry as a whole was contributed by enterpriseswith foreign investments and investments from Hong Kong, Macau and Taiwan, up 21.0% year-on-year, and 3.8 percentage points higher than that from the industry as a whole.
Almost all e-Commerce and IOT industries in Hangzhou are invested with domestic private capital
Operating
revenue fromenterprises with
foreign
investments and
investments fromHong Kong,
Macau and Taiwan
Operating
revenue fromdomestic
enterprises
46.4%
Breakdown of operating revenue from the software and IT services industry for the first sixmonths of 2010
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firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in China.
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Major industrial segments
Software and IT services
Internet of things
e-Commerce
Key areas of development
The software and IT services industry, IOT ande-Commerce are developing rapidly in Hangzhou, and playa key role in Chinas IT industry. They are three of the Top10 key emerging industries that Hangzhou supports underthe 12th Five-year Plan.
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Software and IT services
Sources: Hangzhou Municipal Information Office; Zhejiang Economic and Information Technology Commission website; Hangzhou Municipal
Government website; Three-Year Action Plan for the Restructuring and Promotion of Electronics and Information Industries in
Hangzhou from 2009 to 2011
Hangzhou is one of the most important bases of the software industry in China. The softwareand IT services industry records an annual income of RMB 120.4 billion
In 2010, the software and IT services industry recorded operating revenue of RMB 120.4 billion, rep-resenting a year-on-year growth rate of 32% and a CAGR of 21% over the last five years. The revenuefrom major activities in 2015 is targeted at RMB 150 billion.
As at the end of 2010, there were 984 officially approved software enterprises, 143 more than thenumber in 2009. Among the software enterprises, 27 were listed and 11 were named in Chinas Top100 Software Companies for 2010.
As at the end of 2010, the headcount of Hangzhous software and IT services sector was about98,000, nearly 59,000 more than the number in 2006.
Currently there are more than 20 large software industrial parks scattered in various districts of Hang-zhou, each measuring more than 10,000 square metres.
1
6
2
5
3
4
1
6
2
5
3
4
Key
drivers
Key drivers of software and IT services development in Hangzhou
Robust market demands
Hangzhou is located in theYangtze River Delta whereGDP reached nearly RMB 7trillion, accounting for 17.6%of the national total.
There is a strong demandfor software and IT servicesfrom more than 2 millionenterprises in the YangtzeRiver Delta.
Governments support for theindustry
Initiate and guide variousforms of financial support.
Outsource more govern-ment information projects.
Build more industrial parks.
Issue more policies toattract skilled people and toencourage training and busi-ness start-up.
Adequate human and technologi-cal resources
There are about 100,000new college graduates fromHangzhou each year.
Hangzhou has a talent poolof over 1.22 million people.
There are 637 researchand development centres,as well as 501 corporatetechnology centres.
Well-protected intellectual prop-erty rights
In 2007, Hangzhou becamethe first model city for intel-lectual property rights protec-tion in China.
In 2009, Hangzhou issuedregulations on intellectualproperty rights protection inthe outsourcing serviceindustry.
In 2010, the Gaoxin (Bin-jiang)District in Hangzhou becamethe first industrial park nation-ally to pilot implementing
intellectual property rights.
Cluster effect of softwareenterprises
Software enterprises canform conglomerates to ac-cept large orders.
Large software enter-
prises can subcontract theseorders to small softwareenterprises.
Improving investment andfinancing environment
In 2009, Science and Tech-nology Bank was establishedin Hangzhou which special-izes in serving technologyenterprises.
Hangzhou has abundant pri-
vate capital and 297 venturecapital institutions
2011 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in China.
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Internet of things (IOT)
Currently, the annual output of the IOT industry in Hangzhou is about RMB 30 billion, and itwill surge to over RMB 100 billion by 2015
In 2010, the annual output of the IOT industry in Hangzhou was about RMB 30 billion, nearly 15% ofthe total output of the IOT industry in China as a whole. The output of the industry in 2012 and 2015are targeted at RMB 50 billion and RMB 100 billion respectively.
As at the end of 2010, there were more than 100 IOT enterprises in Hangzhou, forming an integralindustry chain.
Upstream Midstream Downstream
Chip design anddevelopment
Transducers/Terminaldevices manufacturing
System solutions andintegration
IOT application andoperation
Solid foundation for
the industry There is a solid foundation
for the development of
software,
communications, e-
Commerce, integrated
circuit TV and digital TV in
Hangzhou.
Support from the
Hangzhou Government Initiate and guide various
forms of financial support.
Build more industrial parks.
Promote the app lication of
IOT technologies in
Hangzhous industries and
daily life.
Integral industry
chain led by largeenterprises There are five listed
companies and over 100
IOT enterprises in
Hangzhou, forming an
integral industry chain.
Rich technological
reserve As at the end of 2009, IOT
enterprises in Hangzhou had
more than 160 relevant
patents and software
proprietary rights, 56 of which
were invention patents.
Wide applications
in industries Implement smart
grids, energy
efficiency and
emission reduction,
security monitoring,
environmental
monitoring,
intelligent medical
care, etc.
Sound network
infrastructure inHangzhou Equipped with an advanced
communication network ,
that makes use of various
technologies such as large
capacity program control
exchange, as well as optical,
digital, satellite, wireless and
3G communication networks.
1 2 3
5 64
Sources: Hangzhou Municipal Information Office; Development Plan of the IOT Industry in Hangzhou (20102015) ; Output of the IOT industry
in Hangzhou may exceed RMB 30 bill ion in 2010 (http://news.cntv.cn/20101203/102430.shtml)
IOT industry chain in Hangzhou
Key drivers of IOT development in Hangzhou
2011 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in China.
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Hangzhou is the only Capital of e-Commerce in China, and nearly 55% of the total revenue frome-Commerce corporate services in China is contributed by Hangzhou
In 2010, revenue from e-Commerce corporate services in Hangzhou amounted to RMB 11 billion, repre-senting a year-on-year increase of 57% and nearly 55% of the total revenue from e-Commerce corporateservices in China. The revenue in 2015 is targeted at RMB 100 billion.
As at the end of 2010, there were over 1,300 B2B and B2C e-Commerce websites in Hangzhou, more thanone-fifth of the national total. Alibaba.com and taobao.com are the B2B and B2C websites recording thehighest sales in China respectively.
In 2010, e-Commerce coverage for enterprises in Hangzhou was about 50%, higher than the national aver-age of 40%.
In 2009, e-Commerce retail sales to individual customers in Hangzhou accounted for 5% to 6% of the totalretail sales in Hangzhou, more than three times the national average of 1.8%.
e-Commerce
1
6
2
5
3
4
Key
drivers
1
2
3
4
Key drivers of e-Commerce development in Hangzhou
Sources: Hangzhou Municipal Information Office; Test Report on 2010 e-Commerce Market Data in China, China e-Business Research Center ;
sohu.com (http://it.sohu.com/20100423/n271709855.shtml); Zhejiang Economic and Information Technology Commission website
Robust market demands
Hangzhou is located inthe prosperous YangtzeRiver Delta where theGDP reached aboutRMB 7 trillion, account-ing for 17.6% of thenational total.
There is strong demandfor e-Commerce fromover two million enter-prises in the YangtzeRiver Delta.
Improving e-Commerce support systems in Hangzhou
Building an e-Commerce integrity system since 2002.
Building an e-Commerce payment platform since 2003.
Building a talent pool for e-Commerce since 2000.
Support from the Hang-zhou Government
Allocate funds insupport of the useof e-Commerce byenterprises.
Issue tax creditpolicies for thee-Commerce industry.
Allocate funds insupport of researchand development,as well as rewardleading enterprisesin e-Commerce ap-plication.
Plan for the establish-ment of the first e-Commerce universityin China.
Cluster effect of enterprises
One-third of Internet companies in China are in Hangzhou. Leading enterprises such as alibaba.com and taobao.com
provide a platform for the business development of smalland medium e-Commerce enterprises.
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firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in China.
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Key areas of development
Sources: (1)Development Plan of Hangzhous IOT Industry (20102015)
(2)Development Report on Hangzhous Software and Information Services Industry, 2009
(3)Development Plan of Hangzhous Cultural and Creative Industry (20092015)
Key areas of IOT development:1. Pilot and demonstrate smart city:
Initiate intelligent transport system, intelligent urban
and rural administration, intelligent public security,
intelligent travel, energy efficiency and intelligent
buildings.
2. Pilot and demonstrate intelligent living:Be the innovators in intelligent homes, intelligent
communities and intelligent medical care.3. Pilot and demonstrate intelligence convergence:
Use smart grids, intelligent production and logistics,
safe production, energy saving and emissionreduction, and food safety tracking.
4. Pilot and demonstrate intelligent environment
monitoring:
Implement urban water environment monitoring,
atmosphere monitoring, underground tube netmonitoring and forest ecological safety monitoring.
Key areas of software and IT services development:1. IT and industry convergence: Promote and expedite the use of computer-aided
manufacturing applications and information systems in industries, and encourage wider
application of the IT system in various processes and e-Commerce in product circulation.
2. Strengthen advantageous software industries such as corporate applications software
and communication software, and develop embedded software, network software and
video game software.3. Encourage the outsourcing of software and information services to enhance the global
exposure of the software industry.
Key areas of e-Commerce
development:1. Wider application
Apply e-Commerce in enterprises,
communities, rural areas andgovernment agencies.
2. Service enhancementAttract and develop more enterprises
to engage in e-Commerce and to
encourage online trading, businessstart-up and employment.
3. Technological upgrade and
innovation
Develop broadband wireless mobile
communication, next generationnetwork, network and information
security, wireless v ideo identification,
online payment, supply chain
management, system integration, etc.4. A sound support system
Continuously improve the network
infrastructure, and strengthen the
logistics support system, standard
system, credit system and payment
system.
Software and IT
services
2011 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in China.
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Investment environment
Auxiliary industrial parks
Investment policies
Hangzhous strengths
Comments from investors
Case study
Hangzhou has created a positive investment environmentby setting up over 20 auxiliary industrial parks fore-Commerce, software and IT services, and IOT industries,and by issuing a series of supporting policies.
2011 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in China.
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Auxiliary industrial parks
Sources: Hangzhou launches the first 17 special software parks, http://tradeinservices.mofcom.gov.cn/local/2009-10-09/77513.shtml;
Hangzhou District Government Offices websites; ssfcn.com (http://www.ssfcn.com/outs/news_detail.asp?id=390); Hangzhou Daily
website
Major IT industrial parks in Hangzhou
Name of industrial parks Core industries Floor area (in
squaremeters)
Number of
enterprisesin the park
Location
HangzhouCentra l Software Park Software 9,100 Over 80 Shangcheng
District
Xiacheng Xinghuo e-Commerce
Park
e-Commerce,
Software
200,000 124 Xiacheng District
Hangzhou East e-Commerce
Park
e-Commerce 170,000 Over 120 Jianggan District
Hangzhou North Software Park Software 500,000 400 Gongshu District
Hangzhou West Software Park Software 1 million Over 50 Xihu District
Hangzhou Digital Entertainment
Park
Software 83,000 42 Xihu District
Ego Software Park (Ego
Innovation Park)
Software 130,000 Over 700 Xihu District
Changdi Software Park Software 49,000 Over 120 Xihu District
Gaoxin District AnimationSoftware Park Software, cartoonand animation 50,000 Over 40 Gaoxin District
Hangzhou East Software Park Software Nearly 500,000 Over 330 WenjiaoDistrict,
JiangbeiDistrict
Insigma Software Park Software 460,000 10 Xihu District
Ascendas Software Park Software 800,000 Over 20 Hangzhou
Economic and
Technological
Development Area
Hangzhou South Software Park Software 155,000 16 Xiaoshan District
Hangzhou Audio and Video
Software Park
Software Under
Construction
- Xiaoshan District
Yuhang Innovation Zone
Software Park
Software, creativity,
electronic and
information
50,000 Over 50 Yuhang District
Gaoxin District (Binjiang) IOT
Industrial Park
IOT 2.8 million Over 100 Gaoxin District
2011 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in China.
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16 | Invest Hangzhou: Inormation Technology
Investment policies
2008
2009
2010
2011
2007
Policies and their content
Directory of the Way of Development for Hangzhous IT Industry 2010
Details the key areas of the IT industrys development, which isan important basis for the application and the Municipal
Governments approval of special funds for the development of
the IT services industry.
Certain Opinions from the Hangzhou Municipal Government on theFurther Promotion of the Information Services Industry
Financial support for the IT industry
Development Plan of Internet of Things Development in Hangzhou in
20102015
Five-year plan for the IOT industry
Administrative Measures on a Special Fund for the Development of the
Information Services Industry in Hangzhou (Trial)
Financial support for the IT industry
Three-Year Action Plan for the Restructuring and Promotion of theElectronic and Information Industries in Hangzhou from 2009 to 2011
Three-year plan for the electronics and information industries
Reply from the Hangzhou Municipal Government on the Resolution of
Issues Relating to Returned Overseas Students
Support and incentives for returned overseas students in terms
of business start-up, employment and living conditions
Guiding Opinions on the Implementation of a Business Start-up TrainingProgram for Ten Thousand College Students in Hangzhou
Financial support for the training of college students
Assessment Methods for Enterprises Filing under the Information PortProject in Hangzhou
Further clarify the assessment standards and reward those
enterprises with outstanding performance
Standards created in 2004 to determine rewards
Year
Sources: Hangzhou Municipal Information Office; Hangzhou Municipal Foreign Trade and Economic Cooperation Bureau website; hangzhouit.
gov.cn
Major investment policies for the IT industry issued by the Hangzhou Municipal Governmentin recent years
2011 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in China.
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Hangzhous strengths
Note: 1Neighbouring cities refers to other cities in the Yangtze River Delta, excluding Shanghai and Nanjing.
Sources: Hangzhou Municipal Information Office; Jiangsu Economic and Information Technology Commission website; Wuxi Municipal
Bureau of Information and Radio website ; Suzhou Economic and Information Technology Commission website; Ningbo Information
Industry Bureau website; China Daily (http://www.chinadaily.com.cn/dfpd/zhejiang/2010-10-27/content_1083411.html)
Hangzhou enjoys advantages over neighbouring cities in terms of its skilled people, the clus-ter effect of enterprises, and its IT infrastructure1
Hangzhou has continuously enhanced its investment environment and services to strengthen
its competitiveness
The number of new graduates from colleges
and universities in 2010
11.6
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Comments from investors
Hangzhou has improved itsenvironment and quality of
life in recent years.
--- Motorola (China) Tech-
nologies Limited, Hangzhou
branch
Hangzhou continuously
improves its infrastructureby upgrading its railways,
high-speed railways and
highways. The transportation
network is well-developed.
---Hangzhou Bianfeng Net-
working Co., Ltd.
Hangzhou has a solidfoundation and large talent
pool for industrial develop-
ment, and this is one of the
major reasons we invested in
Hangzhou.
---NetEase (Hangzhou) Net-
work Technology Co., Ltd.
Leading IT enterprises in Hangzhou
Japan and Korea
Europe and the
US Others
NEC (Japan)
Samsung (Korea)
Fuji HeavyIndustries (Japan)
Mitsubishi (Japan)
Toshiba (Japan)
Ericsson (Sweden)
Alcatel Alsthom
(France)
Scanfil (Finland)
Strategic Systems
Solutions (UK)
Motorola (US)
IBM (US)
State Street (US)
Yahoo (US)
WebEx (US)
Noez Work (US)
ArcSoft (US)
ASK (US)
VIA (Taiwan)
China Mobile
NetEase
Shanda
Interactive
Entertainment
Sources: KPMG interview; KPMG analysis
2011 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in China.
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Background
Established in 2001, Insigma has itsheadquarter in Hangzhou and presences inBeijing, Wuxi, Shenyang, Dalian, Tokyo andNew York. It has a registered capital of RMB813 million.
Insigma mainly provides services related tonetwork equipment and terminals, as well asIT system integration and software outsourc-ing services (mainly for US and Japanese cli-ents). The company has developed extensivepartnerships with technology giants such asMicrosoft, IBM and Cisco.
Tremendous growth
As a leader in Chinas outsourcing industry,Insigma is ranked by the International Associ-ation of Outsourcing Professionals as one ofthe Top 50 Worlds Best Outsourcing ServiceProviders. It is ranked second in Chinas Top20 Enterprises in Software Outsourcing andis one of the 2010 Top 10 Hangzhou OffshoreOutsourcing and Export Enterprises.
In 2009, Insigmas software park was put intouse, This park is recognized as one of the firstmodel software parks for outsourcing andadvanced software industries in Hangzhou.
In 2010, Insigmas revenue is estimated to bearound 5.8 billion, representing a 18% growthover 2009.
Why invest in Hangzhou?
Full support from the Hangzhou Government:
- The Hangzhou Government has beeninnovative and proactive in promoting theIT industry and in creating a conduciveenvironment for growth, for examplethe Hangzhou Governments promotedlocal investments and enterprises in theUS Global Outsourcing Conference. Wehave gained publicity and a platform to
develop.- Interview with the Managementof Insigma
A large talent pool in Hangzhou:
- Hangzhou has a huge talent pool, andthe cooperation between IT academia andenterprises is especially effective in raisingthe standard of labour skills.- Interviewwith the Management of Insigma
Composition of Insigmas revenue in the
first six months of 2010
Case study
Insigma Technology Company Limited ( Insigma )
IT system
integration,
software
outsourcing
services
17.8%
Network
equipment
and terminals
82.2%
Source: Interview with the management of Insigma, Insigmas corporate website, and Insigmas interim report for the first six months of 2010
2011 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in China.
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20 | Invest Hangzhou: Inormation Technology
About Hangzhou
Overview
Economic development
Industrial structure
Scientific research, education and
cultural environment Contact list
2011 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in China.
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Overview
Hangzhou is advantageously located and has a rich historical and cultural heritage
Hangzhou, the capital city of Zhejiang province, is located in the north of Chinas southeast coast. Asthe economic, transportation and cultural hub of the southern wing of the Yangtze River Delta (YRD),Hangzhou ranks second in terms of economic prosperity in the YRD.
As one of the cradles of Chinese culture and one of Chinas seven ancient capitals, Hangzhou wasonce referred to by Marco Polo as the most beautiful and elegant city in the world.
Hangzhou covers a total area of 16,596 square kilometres. Under the jurisdiction of Hangzhou are theeight districts of Shangcheng, Xiacheng, Jianggan, Gongshu, Xihu, Binjiang, Xiaoshan and Yuhang; thethree county-level cities of Jiande, Fuyang and Linan; and the two counties of Tonglu and Chunan.
As at the end of 2010, the registered population in Hangzhou was about 6,891,200.
As a transportation hub in southeast China, Hangzhou is equipped with a well-developed
transportation infrastructure
Hangzhou is conveniently connected with a network of railways and expressways. Major railwayroutes include the Shanghai-Hangzhou high-speed railway, Ningbo-Hangzhou high-speed railway,Xuancheng-Hangzhou railway, Hangzhou-Ningbo railway and Shanghai-Kunming railway. Majorhighway routes include the Shanghai-Hangzhou-Ningbo expressway, Hangzhou-Pudong express-way, Hangzhou-Jinhua-Quzhou expressway, Hangzhou-Huizhou expressway and Hangzhou-Nanjingexpressway, and 11 national and provincial highways have their centres in Hangzhou.
The Hangzhou Xiaoshan International Airport, 27 kilometres away from downtown Hangzhou, serves160 routes, including 30 international flights to Tokyo, Osaka, Pusan, Singapore, Hong Kong, Macauand Taiwan. In 2010, the airport recorded 17,068,600 passenger departures and arrivals, representinga 14.2% growth over 2009.
Hangzhous location in China
Beijing
Shanghai
Hangzhou
Hong Kong
Sources: Hangzhou Municipal Government website; Hangzhou Urban Planning Bureau website; Hangzhou National Economic and Social
Development Report 2010; Hangzhou Statistical Yearbook 2010
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Economic development
Hangzhou is highly competitive and has rapideconomic development
In 2010, Hangzhous GDP amounted to RMB594.6 billion, up 17% year-on-year. The CAGRof Hangzhous GDP from 2005 to 2010 was15.1%.
In 2010, Hangzhous annual value of importsand exports totalled RMB 344.01 billion (USD52.36 billion), growing by 30% over 2009, ofwhich imports amounted to RMB 111.82 bill ion
and exports to RMB 232.18 billion.
Hangzhou offers a consumer market withhuge potential
Disposable income for residents is growingsteadily. In 2010, Hangzhous per capita dispos-able income for urban residents reached RMB30,035, up 12% year-on-year, and exceeded thenational average by 57.2%.
In 2010, the consumer market continued togrow. Hangzhous total retail sales of consumergoods increased year-on-year by 19% to RMB
214.6 billion.
Hangzhou China
2,944 3,444
4,1044,789 5,088
5,946
0
2,000
4,000
6,000
8,000
2005 2006 2007 2008 2009 2010
RMB100million
CAGR: 15.1%
0
10,000
20,000
30,000
40,000
2005 2006 2007 2008 2009 2010
R
MB
Hangzhou CAGR: 12.6%
GDP of Hangzhou, 2005-2010Hangzhou versus national per capita dispos-
able income, 2005-2010
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firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in China.
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Industrial structure
Sources: Hangzhou Municipal Foreign Trade
and Economic Cooperation Bureau;
Hangzhou National Economic and
Social Development Report 2010;
Hangzhou Statistical Yearbook 2010;
Hangzhou Gaining Momentum for
Economic Transformation, Zhejiang
Daily, January 2011
Evolution of Hangzhous industrial structure
Hangzhou has focused on the secondaryand tertiary industries while developing theeconomy. These two industries have accountedfor more than 95% of Hangzhous GDP for thelast five years.
The tertiary industry has recently been gainingpace in Hangzhou. In 2010, the output valueof the tertiary industry totalled approximatelyRMB 289.3 billion, and the CAGR of the tertiary
industrys output value from 2005 to 2010 was17.4%.
Foreign direct investment (FDI) as the drivingforce of Hangzhous economic growth
In 2010, FDI in Hangzhou jumped by 8.5% year-on-year to RMB 28.62 billion (USD 4.36 billion)in total. The CAGR of FDI from 2005 to 2010was 20.5%.
As at the end of 2010, the number of enter-prises in Hangzhou with FDI over USD 10million grew to 2,203, of which 82 are Global500 companies, including GE, IBM, Siemens
and Ericsson.
During the 11th Five-year Plan period, Hang-zhou attracted 91 investments each valued atover USD 50 million, 429 investments valuedat over USD 30 million each and 1,538 invest-ments valued at over USD 10 million each.
Breakdown of Hangzhous GDP in 2010
Foreign direct investment, 2005-2010
Primary
industry
3%
Secondary
industry48%
Tertiaryindustry
49% 112.5
148.2 184.1 217.6
263.7 286.2
0
100
200
300
400
2005 2006 2007 2008 2009 2010
RMB100m
illion
CAGR:20.5%
2011 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in China.
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Scientific research, education and cultural environment
Hangzhous strong capability for scientificresearch and high standard of education
Hangzhou encourages corporate investmentin scientific research and the founding ofresearch institutes. In 2009, the proportion ofHangzhous total investment in research anddevelopment over GDP was 2.6%, higher thanthe national average of 1.7%. A total of 26,075patent applications were submitted and 15,507were authorized, ranking Hangzhou first amongall provincial capitals.
There are 38 general colleges and universities,317 senior and junior secondary schools, aswell as 37 vocational training schools in Hang-zhou. Major universities include the ZhejiangUniversity, the Hangzhou Dianzi University andthe Zhejiang University of Technology.
In 2009, there were approximately 107,000new graduates from colleges and universitiesin Hangzhou, of which 17.8% were recruited bythe IT industry, followed by the service indus-
try, and other industries.
Hangzhou International School is the firstschool in Zhejiang province that caters to thechildren of foreign nationals, including thosefrom Hong Kong, Taiwan and Macau. It is anAmerican-style school with English as themedium of instruction, and offers a curriculumfrom pre-school to twelfth grade.
Pleasant weather with four distinct seasons
Hangzhou has a subtropical monsoon climatewith an average annual temperature of 16.2
and annual rainfall of 1,469 millimeters. As atthe end of 2010, Hangzhou had a greenery cov-erage rate of 40% and urban per capita greenspace of 18.34 square metres.
In 2009, Hangzhou was voted the HappiestCity in China. Hangzhou has also receivedawards for National Advanced City Landscap-ing, National Garden City, National ExcellentCity in Comprehensive Improvement of UrbanEnvironment, China Habitat EnvironmentPrize, National Model City of Environmental
Protection and China Outstanding TouristCity.
Employment of Hangzhou graduates byindustry, 2009
Sources: Hangzhou Municipal Government website; Hangzhou
National Economic and Social Development Report 2010;
Development of Service Industries in Hangzhou 2009 and
Ideas and Keys of the Development of Service Industries
in Hangzhou 2010 ; hzstats.gov.cn; hzsk.com
IT industry
17.8%
Service
industry7.7%
Others
74.5%
2011 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in China.
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Hangzhou Municipal Foreign Tradeand Economic Cooperation Bureau
457 Yanan Road, Hangzhou
Telephone: +86 (571) 8515 6707
Fax: +86 (571) 8515 5825
Website: http://www.hzwjm.gov.cn
Hangzhou Municipal Centre of Inter-
national Investment Promotion
Telephone: +86 (571) 8515 9060Fax: +86 (571) 8515 9006
Email: [email protected]
Hangzhou Municipal Development
and Reform Commission
318 North Huancheng Road, Hangzhou
Telephone: +86 (571) 8525 1907
Website: http://www.hzdpc.gov.cn/
Hangzhou Municipal ConstructionCommission
9 Changsheng Road, Hangzhou
Telephone: +86 (571) 8701 2398
Website: http://www.hzjw.gov.cn
Hangzhou Municipal Information
Office
318 North Huancheng Road, Hangzhou
Telephone: +86 (571) 8525 2333
Website: http://www.hangzhouit.gov.cn
Contact List
Hangzhou Municipal Science andTechnology Bureau
Hangzhou Science & Technology Tower, 2
Huixing Road, Hangzhou
Telephone: +86 (571) 8706 0263
Website: http:// www.hzst.gov.cn
Hangzhou Municipal Administration
of Industry and Commerce
109 Fengqi East Road, HangzhouTelephone: +86 (571) 8643 9900
Website: http://www.hzaic.gov.cn
Hangzhou Municipal Land and Re-
sources Bureau
359 Wensan Road, Hangzhou
Telephone: +86 (571) 8822 7527
Website: http://www.hzgtj.gov.cn
Hangzhou Municipal State TaxationBureau
276 South Jianguo Road, Hangzhou
Telephone: +86 (571) 8716 0000
Website: http://www.hzguoshui.gov.cn
Hangzhou Local Taxation Bureau
152 Zhonghe Middle Road, Hangzhou
Telephone: +86 (571) 8780 5588
Website: http://www.hzft.gov.cn
Hangzhou Municipal Bureau of Labor
and Social Security
242 Zhonghe Middle Road, Hangzhou
Telephone: +86 (571) 12333
Website: http://www.zjhz.lss.gov.cn
2011 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member
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Hangzhou8th Floor, West Tower, JulongBuilding9 Hangda RoadHangzhou 310007, ChinaTel : +86 (571) 2803 8000Fax : +86 (571) 2803 8111
Fuzhou25th Floor, Fujian BOC Build-ing136 Wu Si RoadFuzhou 350003, ChinaTel : +86 (591) 8833 1000Fax : +86 (591) 8833 1188
Guangzhou38th Floor, Teem Tower208 Tianhe Road
Guangzhou 510620, ChinaTel : +86 (20) 3813 8000Fax : +86 (20) 3813 7000
Nanjing46th Floor, Zhujiang No.1 Plaza1 Zhujiang RoadNanjing 210008, ChinaTel : +86 (25) 8691 2888Fax : +86 (25) 8691 2828
Shanghai50th Floor, Plaza 661266 Nanjing West RoadShanghai 200040, ChinaTel : +86 (21) 2212 2888Fax : +86 (21) 6288 1889
Chengdu18th Floor, Tower 1, PlazaCentral8 Shuncheng AvenueChengdu 610016, ChinaTel : +86 (28) 8673 3888Fax : +86 (28) 8673 3838
Shenyang27th Floor, Tower E, FortunePlaza59 Beizhan RoadShenyang 110013, ChinaTel : +86 (24) 3128 3888Fax : +86 (24) 3128 3899
Qingdao4th Floor, Inter Royal Building15 Donghai West Road
Qingdao 266071, ChinaTel : +86 (532) 8907 1688Fax : +86 (532) 8907 1689
Beijing8th Floor, Tower E2, OrientalPlaza1 East Chang An AvenueBeijing 100738, ChinaTel : +86 (10) 8508 5000Fax : +86 (10) 8518 5111
Xiamen12th Floor, International Plaza8 Lujiang Road
Xiamen 361001, ChinaTel : +86 (592) 2150 888Fax : +86 (592) 2150 999
Hong Kong8th Floor, Princes Building10 Chater RoadCentral, Hong KongTel : +852 2522 6022Fax : +852 2845 2588
Shenzhen9th Floor, China ResourcesBuilding5001 Shennan East RoadShenzhen 518001, ChinaTel : +86 (755) 2547 1000Fax : +86 (755) 8266 8930
Macau24th Floor, B&C, Bank of ChinaBuildingAvenida Doutor Mario SoaresMacauTel : +853 2878 1092Fax : +853 2878 1096
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