Change and Transition in Challenging Times – A Journey Through Heilongjiang

During a twelve-day journey through Heilongjiang in January 2016, staff from the Swiss SME Research Center China (SSRCC) visited Harbin, Yabuli and Qiqihaer to learn about economic development in the region and to identify potential collaboration and partnership opportunities for Swiss companies. We saw wonders and weakness, hope and signs of trouble. Heilongjiang is clearly a province of massive potential, but needs the right investment, policies and commercial partners if it is to flourish. In many ways this is not atypical, the recent KPMG China Outlook 2016 argues that “China’s transition from an investment and export-led growth model to one driven by consumption and innovation has led to the emergence of a two-track economy. The first track, in basic manufacturing and traditional industries, is experiencing significant headwinds, while the second, in services, advanced manufacturing and consumer markets is exhibiting strong growth potential”. These two tracks were both clearly visible during our journey through Heilongjiang.

In Harbin, we visited the Provincial Government, partner organisations and our key University partner in the province, but also had detailed meetings with Wanda Dalian about their huge new Harbin Wanda Cultural Tourism City development. In Yabuli, we visited the Yabuli Ski Resort and in Qiqihaer we focussed on industry and agriculture.

Heilongjiang

Heilongjiang in winter is a remarkable place, with temperatures in falling to -35°C, it is justly famous for the Harbin Ice and Snow Festival and a wonderland for winter sport enthusiasts with Yabuli, one of Asia’s top winter sport resorts only 150 km from the city of Harbin, set in the former Qing Dynasty Royal Hunting Grounds. Qiqihaer is one of the oldest cities in the northeast of China, it was originally an important border town with excellent pastures, developed in to a military outpost and trading centre. Throughout our visit, the increasing interest in winter sports especially skiing and snowboarding was an ever-present theme.

In Harbin, the Wanda Group is investing RMB 40bn (over CHF6bn) in the ‪ Harbin Wanda Cultural Tourism City. This is a major development for the Song Bei area of Harbin and the city as a whole. The Harbin Wanda Cultural Tourism City boasts the world’s longest indoor ski slope (significantly longer than the present number one in Dubai), a competition level skating rink, a 7D cinema (Wanda is the world’s biggest cinema owner), multiple hotels from 6* to 4*, leisure facilities and parks and housing for up to 1m people, schools, healthcare…in fact, just take a couple of minutes to check out the video to get an idea of the full scope of the development.

The Harbin Wanda Cultural Tourism City is the first of eleven planned Wanda Cultural Tourism Cities across China aiming to benefit from growth in the services sector, especially in leisure and tourism activities. The City caters to a catchment area including North Eastern China, Russia and Mongolia and adds to Harbin’s tourism and leisure industry which is already highly successful through the Ice and Snow Festival, its natural resources and unique landscapes and other iconic developments such as the remarkable new Opera House designed by MAD Beijing.

Opera House in Harbin, Heilongjiang Province

Harbin Opera House http://www.archdaily.com/778933/harbin-opera-house-mad-architects

Qiqihaer is the second largest city and third largest local economic center in Heilongjiang, and enjoys a beautiful location in the fertile plains of the River Nen which are ideal for agriculture and has developed significant organic and dairy sectors. It boasts nationally important nature reserves, especially wetlands, which are home to cranes and other rare species.

Its industries range from heavy engineering, steel, mining chemicals and nuclear. Situated close to borders with Russia and Mongolia it is also an important logistics hub and the new high-speed rail links the city to Harbin, Beijing, and all major Chinese cities; Inner Mongolia as well as a planned high-speed link to the Russian railway network. The airport will soon have direct flights to Japan and Russia. It has invested significantly in energy projects with eight new wind farms as well hydroelectric and other renewables.

Delegation visits in Qiqihaer, Heilongjiang Province

Delegation visits Qiqihaer

During tour time in Qiqihaer, we visited two major industrial plants. The first producing machine tools for a range of heavy engineering clients globally. The company currently exports to Europe, South America throughout Asia and into Africa. The second was a producer of steel parts which produced bogies for Chinese high-speed trains amongst a range of other transport related products. The visits took place only two weeks before the Spring Festival celebrations, but nonetheless the quietness of parts of the factories was evident. There have been reports of a significant slowdown in heavy engineering production and in recent quarters, the China Caixin Manufacturing PMI (PMI) has not been encouraging reading.

In many ways Qiqihaer seems to embody the challenges facing China today. Its traditional heavy industry is struggling, and while there are plans to develop tourism, increase renewable energy and promote green agriculture and technologies, these new projects must find investment at a time when the existing traditional industrial base is under significant pressure.

china-manufacturing-pmi-forecast

Caixin China PMI Index http://www.tradingeconomics.com/china/manufacturing-pmi/forecast

The challenges facing Heilongjiang in particular, but also much of China, are significant, but so are its resources and capabilities. While the scare stories about stock market meltdown or looming debt crisis appear mostly overhyped (the importance of the market and the nature of the debts often being overlooked); it is clear the challenges of transitioning from an investment-led to consumption-led economic model have been greater exacerbated by the current global economic environment featuring minimal growth in Europe, Japan and many of China’s key markets; relatively fragile growth in the USA ahead of the election cycle and increasing political risk.

The Provincial Government are increasingly sponsoring new programmes to support entrepreneurship and new private companies while at the same time having to reduce investment non-performing SOEs. Traditional jobs are being lost, but new service sector jobs created. The economic landscape of Heilongjiang is transforming itself and in the process creating opportunities for partnership and investment for those international companies willing to invest the necessary time and expertise.

Heilongjiang is perhaps not the ideal place for first time internationalisation, but for those companies who have experience in building organisations in emerging markets and whose products or services are needed in the region, there is support and potential.


The Harbin WANDA Cultural Tourism City

The SSRCC has been asked to support the Harbin Wanda City Investment Co Ltd project in identifying potential partners for a planned “Swiss Area” of up to 10,000 square metres and at least 2000 square metres. The area is in the hotel and office building complex adjacent to the main ski slope, ice rink and shopping mall, but is designed as a separate building. The building has already attracted interest from development agencies and companies in China and beyond. The development also includes high-class residential developments and expects to attract a large number of affluent residents.

The Harbin Wanda City Investment Co Ltd has identified a number of possible sectors which may be of interest.

  • Winter Sports Equipment and Winter Holidays
  • Travel and Tourism
  • Health and Beauty
  • Watches and Luxury Brands
  • Financial Advice
  • Food and Beverages

Yabuli Ski Resort

Skiing in Yabuli, Heilongjiang Province

Skiing Yabuli

Yabuli is a truly beautiful location and one that is growing fast with new hotels (including European-owned), a growing customer-base, new housing developments and plans to create new pistes and lifts and with a growing summer tourist programme centred around cycling, hiking and a “water fun” park as well as interest in developing wellness and spa facilities. It is and will remain a premier resort for affluent Chinese. Yabuli is also a key training centre for the Chinese Olympic team.

In detailed discussion with officials and administrators from the Yabuli Ski Resort administration and local government officials, the following ideas for collaboration were presented to us.

  • Investigate Swiss suppliers of winter sport clothing and equipment for Yabuli, both as sales and potentially production base
  • Seek piste design experts for further development of Yabuli Ski Resort
  • Management training – delegation of Yabuli managers to visit Swiss resorts to learn more about Alpine management systems
  • Investigate potential partners for development of health, wellness and spa facilities

Yabuli plans to ensure its continued success through investment in infrastructure, people and events becoming a national centre of excellence for winter sport technologies and engineers. It already has the latest equipment whether lifts from Doppelmayr and the cabins produced in Olten by CWA, up to date ski cannons (over 40 units). The Yabuli China Entrepreneurs Forum (http://www.cefco.cn/index.aspx# Chinese only) has been held since 2011 and is one of the country’s most important business events.


Qiqihaer

During our meetings we spoke to the city’s Commercial Bureau, Development and Reform Commission, and Human Resources and Social Security Department. In these meetings we learnt that the city and its regions had identified a number of priorities which they believed might be relevant for potential Swiss partners including:

  • Updating and improving factory machinery and processes e.g. CNC machines and modern computer controlled production
  • Support development of processing ad value-added activities in agricultural sector especially to produce high value products for health foods, vitamin production etc.
  • Investigate export opportunities for agricultural products; oil drills and equipment; large-scale factory machines, cranes etc.;
  • Improving skills for traditional producers e.g. in organic farming methods
  • Investigate potential investors in local Qiqihaer business including production of sporting equipment, skates etc.
  • Seek potential expert advisors for planned ski resort south-west of Qiqihaer

Professor Michael Jeive

The Swiss SME Research Center China (SSRCC) acts as a service platform for Chinese SMEs from Heilongjiang respective Swiss SMEs, to provide valuable and strong business connections with possible partner companies, providing information, guidance, market research and offering a platform in introducing possible products and services. Additionally, the concept of training and research in the field of international management as well as a mutual exchange between lecturers and students of universities in Harbin and FHNW are offered as well as the possibility for mutual research projects. SSRCC is operated from Olten in Switzerland and Harbin in China.

The Swiss SME Research Center China was set up in 2013 as a joint project between the Provincial Government of Heilongjiang Province and the FHNW University of Applied Sciences and Arts Northwestern Switzerland School of Business. The roots of our cooperation lie in strong personal ties to the most senior officials including the current Party Secretary and our history of delivering programmes to support government and economic development in China. Since the launch of the Center over 300 Heilongjiang business leaders have participated in our programmes building a formidable alumni group.

Contact

Prof. Michael Jeive

Managing Director SSRCC

Swiss SME Research Center China SSRCC

University of Applied Sciences and Arts Northwestern Switzerland

FHNW School of Business

Riggenbachstrasse 16, 4600 Olten, Switzerland

ssrcc.business@fhnw.ch

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