invest hangzhou information technology 201104

7/31/2019 Invest Hangzhou Information Technology 201104

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Innovation-drivendevelopment

- Invest Hangzhou:Information Technology

kpmg.com/cn


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c | Invest Hangzhou: Inormation Technologyc | Section or Brochure name

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 | 1

Content

Preace 3

Industrial overview 5

Major industrial segments 8

Investment environment 14

About Hangzhou 20




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2 | Section or Brochure name


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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)




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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.




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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




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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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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




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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




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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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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




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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.




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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




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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




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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

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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




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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




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About Hangzhou

Overview

Economic development


Scientific research, education and

cultural environment Contact list




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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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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%




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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%




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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




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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

kpmg.com/cn

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