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Beijing at a Glance

Published April 2006

As the political and cultural capital of China, Beijing has long been attractive to foreign investors. With the 2008 Olympic Games around the corner, construction cranes line the city's horizon, and the city is focusing much of its budget on construction, energy-conserving technologies, and tourism development.

Yet the municipality lags behind the Yangzi River Delta region, led by Shanghai, in the competition for foreign investors. In a December 2005 survey by the Beijing-based Horizon Group, Beijing fell from third to fifteenth place on the list of China's most livable cities. (Dalian and Xiamen topped the list.) Two of the likely reasons for this drop are high real estate prices and heavy pollution, both of which Beijing is taking steps to curb.

To be more competitive with the Yangzi and Pearl river delta regions, Beijing will join forces with surrounding Hebei Province and nearby Tianjin. The development plan for the Beijing-Hebei-Tianjin region is now a national priority, written into China's national 11th Five-Year Plan (FYP, 2006-10), and includes a new commuter rail line connecting the two cities, as well as another expressway to ease freight transport bottlenecks. Beijing will also be closer to the Yangzi River Delta region as a high-speed passenger link--due to be completed in 2010--will provide a faster route from the capital to Jinan, Shandong; Nanjing, Jiangsu; and Shanghai.

Investment is pouring into the three commercial districts, each with different targeted industries: information technology in the Zhongguancun Science and Technology Park; high-tech industries in the Beijing Economic-Technological Development Area; and business and financial services in the Central Business District (CBD). Located within a large area bordered by the East Third Ring Road and Jianguomenwai Avenue, CBD will be Beijing's business center, designed to attract corporate regional headquarters into an area that the government hopes will become "China's Manhattan." Other investment plans include further development of the financial district west of Tiananmen Square; a modern manufacturing base in Shunyi, northeast of the city; a logistics center in Tongzhou to the east; a tourist area that covers Beijing's two major shopping streets, Xidan and Wangfujing; and an entertainment and cuisine area to cover 50,000m2 around the Olympic Park.

Economy

Beijing's economy grew rapidly in 2005 (see Table). Manufacturing remains the biggest single industry, accounting for 26 percent of Beijing's economy in 2005, followed by financial services, which account for 11.6 percent. The service sector as a whole (the tertiary industry) accounts for 67.7 percent of the Beijing economy. The city's 11th FYP indicates a desire to build up the services sector to account for 72 percent of the economy by 2010. Key areas for development in the next five years include financial services, logistics, electronics and information technology, mobile telecom, automobile manufacturing, equipment manufacturing, and energy-efficient technologies.

Beijing, along with the rest of China, is also taking steps in its commitment to using renewable energy. The Renewable Energy Law, which took effect January 1, includes 18 pilot projects with a total investment exceeding RMB 2 billion ($249.7 million). Priorities include wind, solar, hydrogen, and geothermal energy sources. The 11th FYP sets a goal of a 20 percent reduction of the energy consumption per unit of the gross domestic product (GDP) by 2010, compared to the 10th FYP period (2001-05).

Attracting Foreign Investment

Beijing is still an attractive destination for foreign investors. The city is home to more than 15 Ministry of Commerce (MOFCOM)-certified multinational regional headquarters and more than 200 independent, foreign-invested research and development (R&D) organizations. Beijing is trying to take advantage of the 2008 Olympic Games to lure foreign firms. The city government will spend about $12 billion on construction for the Olympics and has invited foreign investors to participate in the construction of infrastructure and public transportation facilities before 2008. Many foreign companies have complained, however, that bidding processes have been less than transparent.

Proximity to the central government and the policy formation process is another advantage, and most foreign companies find a Beijing presence essential. Beijing offers companies a highly skilled workforce, a deep pool of trained managers, and a large market for consumer goods and financial transactions.

But to date, Beijing's failure to unite with Tianjin and Hebei to offer the space and support for long-term development that Shanghai and Guangdong provide impairs its ability to compete. Beijing's other shortcomings, from air pollution and high costs to poor city planning and transportation bottlenecks, also dampen foreign interest. Like many other large Chinese cities, Beijing suffers from water and electricity shortages. In 2004, the municipal government raised water prices by up to 400 percent for industrial and commercial users. Another price hike is expected in 2010 upon completion of a major water diversion project that will transfer water from the Yangtzi River to Northern China. Last year, Beijing raised the price of electricity for government and industrial use during peak hours (8:00-11:00am and 6:00-11:00pm) in the summer by 5 percent, but manufacturers did not suffer from mandatory "rest periods."

Looking Ahead

Infrastructure

Beijing will invest $34 billion in the construction of local infrastructure by 2008. In September 2003, the Beijing municipal government issued a regulation that encourages foreign investors to conduct build-operate-transfer operations in infrastructure facilities--including water, gas, and heating supply; sewage treatment; and solid waste disposal. Foreign investors can also participate in the construction of public transport infrastructure, such as highways, subways, and light rail.

City transportation

Beijing's long-term goal is to develop a "New Beijing Transport System" with special emphasis on public transportation. By 2010, Beijing plans to have 40 percent of inner city travel done on public transport. By the time of the Olympics, the city government intends to have more than 7,000 buses replaced with newer, more environmentally friendly models, including 5,000 natural gas-powered buses. Construction of a third terminal and runway at Beijing Capital Airport has begun, along with a subway line that will run from downtown to the airport in about 16 minutes. With this and Beijing's other new subway lines, the city will have put 270 km of rail into operation by the time of the Olympics. In addition, the city is planning a second international airport with project design to be completed by 2010.

Electronics and information technology

At the same time that technological innovation has become a national priority, Beijing is also beefing up its development efforts in the area of new and high technologies. Beijing is already the center of a robust software industry. Besides software, Beijing will focus on the development of research, information technology, and biological industries. The city plans to increase its expenditures on R&D to 6 percent of GDP and to make new- and high-technology products account for 38 percent of Beijing's exports by 2010.

Environmental cleanup

Beijing leaders have pledged that by 2010, 80 percent of the city's energy consumption will come from natural gas and other more environmentally friendly sources, including thermal energy, in which Beijing plans to invest $1.8 billion. The city also promises that 80 percent of its taxis will run on natural gas by 2008. Over the next five years, Beijing will focus on the development of technologies for sewage and industrial wastewater treatment, air pollution control, noise abatement, and electronic waste treatment.

Energy

By 2010, Beijing plans to add three power distribution stations in Mentougou, Shunyi, and Tongzhou to its 500-kilovolt power network around the city. Beijing hopes to reach a power generation capacity of 7.2 million kW, accounting for 40 percent of the city's demand. Beijing will also complete the Caohuidian liquefied natural gas project and supply 8 billion cubic meters of natural gas annually. According to the city's plan, coal consumption will be less than 20 million tons, and renewable energy will reach 2 percent of total energy consumption by 2010.

Logistics

Beijing hopes to develop a comprehensive logistics system that connects the Tianzhu Airport Industrial Zone, Tianjin-Tongzhou land port, and Fengtai marshalling yard. The city hopes to establish three or four large logistics bases around the Sixth Ring Road, 8 to 10 specialized logistics centers around the Fifth Ring Road, and some distribution centers around the Fourth Ring Road to foster a complete logistics network.

New town construction

Beijing plans to launch the construction of three new towns in Tongzhou, Shunyi, and Yizhuan in the next five years to house excess population from the city and foster new industrial clusters. Construction of infrastructure and public facilities of the new towns is expected to be completed by 2010.